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Wolf of Wall Street: Cryptocurrency ICOs Are 'the Biggest Scam Ever' (betanews.com)
An anonymous reader shares an article: Jordan Belfort -- the real-life Wolf of Wall Street -- has warned that ICOs (or "token sales" or "coin sales") are "the biggest scam ever" and will "blow up in so many people's faces." The former stockbroker, who spent nearly two years in prison for fraud and financial scams, says that the Initial Coin Offerings used to raise money for cryptocurrencies are "far worse than anything I was ever doing." His fears seem to stem from the way ICOs differ from the more traditional IPO. With IPOs investors gain shares in whatever company they plough money into, and profits can be easily shared. With ICOs, however, there is no mechanism in place for distributing any profits that may be made, profits are reliant on the value of a given cryptocurrency increasing and, perhaps more worrying, ICOs are not regulated in the way IPOs are. Aside from the fact that some ICOs are out-and-out scams, many people believe that the cryptocurrency bubble is just that -- a currently growing bubble that will eventually pop, leading many people to lose out.
A crypto currency is a very convenient way to store and move money. Banks will charge 5% or more to convert your money from one currency to another and wire transfers are a pain and usually cost $10. Other money transfers often come with 1 or 2% fees and banks in some countries are corrupt and incompetent. Crypto currencies could replace a good portion of M2 since they work better than most traditional money. M2 world wide is equivalent to almost 30 Trillion USD. One day one crypto currency will likely approach this amount.
ICOs are a scam. They replace shares but are inferior in almost every way except they by-pass the traditional stock markets. (I suppose some conspiracy people might think this is a good idea). ICOs also don't allow high frequency trading since trades can only take place as fast as blocks are added to the block chain and buried to a sufficient depth to be trusted.
Not all crypto currencies are created equal but common sense hints that most of them will certainly pop because obscurity will kill them: 1192 are far too many.
Pump and dump is all it can be. A currencies maximum cash out cant be any more than whats been put into the system to start with. So somebody somewhere is just going make the right choices and walk out at the right time, and blam, theres no US dollars supporting the digibucks and everyones investment just evaporated.
This includes Bitcoin too, by the way, however the relative size of the pool and how distributed it is means its probably fairly safe from that, for now.
When people point out that "fiat" currencies are only backed up by government promises, they forget to note that cryptocurrencies are only backed up by "fiat" currency, and when those real dollars are gone, its fundamental to the equasion that the exchange rate would then be zero.
Its a blockchain backed ponzi scheme
Excuse the Unicode crap in my posts. That's an apostrophe, and slashdot is busted.
It's not the technology that makes it a scam, but the economics behind it. He's mostly pointing out the issues with ICOs: no oversight, no"coinholder" rights, and no regulations, which make them a powerful magnet for all manner of scammers.
If construction was anything like programming, an incorrectly fitted lock would bring down the entire building...