Topic: Ethereum: 2nd gen cryptocurrency with contract programming, "dagger" hashing - page 3. (Read 84312 times)

The whole announcement thing was BS and it seems like this 19 year old doesn't really know which directions he's going.  Is it POW or is it POS?   

why it is hard to find any info about how many ethereum will there be?

this absurd and complex IPO for a locked inflationary currency
the maker is in high school

So in short you will be buying Wookiedoo

The founders can reduce your share (which you paid already for), only by "investing" in their own company. This is absurd.

Are they still going to lock investors' coins for a year or it was reconsidered?

What! 1000 ether for 1BTC?
I will never buy it.

this absurd and complex IPO for a locked inflationary currency
the maker is in high school

Dear Ethereum developers,
may i ask why you are fixing fee ratios instead of allowing the market to adjust them in the future?
Isn't it the same as trying to fix prices in a centrally planned economy?
What will happen if for a certain "x", DATAFEE will be too low (below real market value) and NEWCONTRACTFEE will be too high at the same time?
Don't you run the risk that some very good applications will not be built or run properly, while others "bad" applications will because of this?

What! 1000 ether for 1BTC?
I will never buy it.

There is SO much confusion here about the initial price. Molecular has explained previously that the price relative to BTC does not matter, and he is correct. The only thing that matters is the total amount of BTC that is raised. Let me try to explain, by analogy to how startups raise money in Silicon Valley and elsewhere.

When a startup raises capital, they set a "pre-money" valuation for the company. All this means is a value for the company that the founders and the investors agree on, BEFORE the new money goes in. If the company raises $2 million on an $8 million pre-money valuation, then the post-money valuation is $8+2 = $10 million, because you have the existing value of the company, plus the new cash. Since the investors paid $2 million for their stake in a $10 million company, they own 20% of the company. If the company raises more money in the future, new shares are issued, and the first set of investors owns a smaller % of the company (i.e. they get diluted, as do the founders).

Now, let's leave aside mining for a moment and look JUST at the IPO for Ethereum. After the IPO, if investors put in X BTC, there will exist a TOTAL of 1.5X BTC worth of Ether (the units don't matter, just look at it in BTC or percentage terms). Let's simplify for a second and assume the founders retain the entire extra 0.5X (they don't technically own all of it, but they do control all of it -- see (*) below). This means the investors will own 2/3 of the resulting "company," while the founders will own 1/3. So, regardless of how much money is raised, the founders are selling exactly 2/3 of their company.

But this means that the valuation they're raising at is NOT fixed. Since the post-money valuation is 1.5X BTC, and the investors put in X BTC, the pre-money valuation must be 0.5X BTC. But that's not a fixed number: the more interest in the IPO, the higher the resulting valuation they raise money at (in direct linear proportion). If 1000 BTC of money wants to get in, then investors are collectively valuing the existing company at 500 BTC. But if 10,000 BTC wants to get in, then it must mean the company was worth 5,000 BTC initially. That's definitely not the way startups typically raise money, but it is not completely absurd, either. The more VCs that are competing to put money into a startup, the higher the valuation is going to be. The difference here, though, is that all the money doesn't go in at once. Only the people who invest BTC at the very end of the 60-day window will know approximately the actual valuation at which they're investing. The people who invest early on, might think they're getting 1% of the resulting company, but end up only getting 0.1% of the company.

If they chose to, the founders could address this in two ways. One way is to have an explicit pre-money valuation cap, of, say, 5,000 BTC. Then, the founders would receive min (0.5X, 5000) BTC worth of Ether, but they could end up owning less than 1/3 of the company. The other way would be to put a cap on the amount they're willing to raise in the IPO. If they committed to raise no more than 10,000 BTC, then the pre-money valuation is capped at 5,000 BTC, but the founders also guarantee they will still own 1/3 of the resulting company. This would be easy to do: simply return investments once 10,000 BTC had been reached. The benefit of both these approaches is that ALL investors, early and late, know the maximum they are paying for the company.

I do think it would be wise for the founders to do something of this nature, since it strains the imagination that a company which hasn't actually yet launched a product should be worth more than about $10 million (and even by Silicon Valley standards, that's a stretch). There's also a limit to how much and how quickly a large amount of capital could actually be effectively used. If they somehow raise $100M of BTC, it'd be awfully tempting just to split it up and go sit on a beach in a non-extradition country somewhere...  So, just spare yourselves the temptation, guys. :-)

Ideally, the investors would also effectively have preferred shares. For instance, let's say that BTC value skyrockets, and the foundation is sitting on more BTC than they could ever use effectively. They decide to issue a BTC dividend proportionately to all Ether holders (somehow). In a perfect world, the investors would have to first get their BTC back before the founders' Ether got paid any dividend. That's exactly how it works for startups, but I'm guessing it may not really be that feasible here. However, I do think it's important that the founders can't simply pay the BTC to themselves. They should publicly commit to never use the IPO BTC to pay themselves beyond a basic salary -- but ideally, even their salaries should be almost entirely in Ether.

(*) I assumed above that the founders own 0.5X BTC, or 1/3 of the resulting company. Actually, they only own 0.225X, and 0.275X is reserved for paying employees, issuing bounties, etc. You can think of this 0.275X as more analogous to the employee stock option pool of a company. It's not actually in the hands of the employees yet, but the company can issue it later to pay for services. This doesn't really change the pre-money valuation calculations above, but it does mean that the founders themselves actually only own 15% (0.225/1.5) of the resulting company, not 1/3 as used above. The "company" owns the other 18.3%.

(**) All this is before mining starts. Think about mining as ongoing employee stock option issuance (payment for services rendered). Of course one can certainly argue whether 0.4X per year is a reasonable amount for mining or not. Or whether PoW is better than PoS, yadda yadda yadda.