UNDERSTAND THAT TOKENS ARE A PROJECT FINANCE, NOT A START UP FINANCE

[arvinabeabe]

Tokens are not stocks.

Despite their appeal, token are are not (yet) a good substitute for traditional venture capital, despite the growing buzz around Security Token Offerings, which is essentially just equity crowdfunding. Most successful utility tokens are like tradable kickstarter commitments for projects — you’re selling a future product to early buyers, and the future token has utility to the buyer.

The money you raise goes towards the project, not towards the company, and there is no reason not to raise some equity money in parallel to an ICO.

Well we are not going into the whole Bitcoin and ICO thing because it is such a broad topic to discuss but these are just some overviews on what it is and needs to be understood.

WHAT IS BITCOIN USED FOR?

It’s known as a cryptocurrency, meaning that it’s a decentralized payment system that uses cryptography (typically elliptic curve cryptography, like SHA-256) for authentication, transfer, and creation.

Therefore, it’s used on the dark web as a form of anonymous (at least in theory) payments, often for illicit goods.

Many of the dark web’s most popular sites are known as “darknet markets,” because they sell goods that are often illegal through such sites, and almost always use bitcoin or other cryptocurrencies (like Monero). A few of these markets include Dream Market, Wall Street Market, CGMC, and Point/Tochka Market - all of which are hosted on Tor.

AlphaBay Market and Hansa Market, which law enforcement recently busted, also used bitcoin.

Although it depends on the market, generally people set up a bitcoin wallet, either on the site itself or separately, on a site like Electrum, for example. When purchasing goods, they’ll select what they want on the site, and they’ll have to transfer the bitcoin to the vendor through whatever payment system the site has.

This can vary a lot from site to site, as many sites have different authentication systems to prevent scams - but one way or another, the bitcoin should end up in the vendor’s hands. For example, most darknet markets are either escrow markets or multisig markets.

On an escrow market, the bitcoins are held in escrow until the transaction is completed, to ensure that everyone holds up their end of the deal. “Multisig” means multisignature, i.e. more than one cryptographic key is required to finalize the transaction. A third option is “finalize early,” or “FE,” meaning that bitcoins are sent directly to the vendor without verification.

Some sites also support peer-to-peer (P2P) transactions, without all the safeguards in place, like two-factor authentication. This usually consists of a direct transfer of bitcoin from the buyer to the vendor, which is a lot riskier, because there’s no authentication system in place.

In some cases, markets also reward vendors for referring new buyers and/or vendors, in which case they’ll get an increase in their payments. It’s not unlike referral systems on legal businesses - the main difference is the types of goods being sold.

Anyhow, bitcoin is used on other sites besides the major markets, but it’s primarily used on them. Some of the smaller sites allegedly selling goods and services have turned out to be elaborate scams.