ICOed Ethereum Tokens are Equities, not Currencies

Ethereum ERC20 tokens are all the rage and we will tokenize everything! Property, stocks, company stake, voting rights, vehicles, tickets, everything will be tokenized with a UUID on a blockchain. This is because that makes the asset ownership easily traded, asset data globally available, and it allows for permissionless innovation and even allows for legally binding agreements associated with the tokens due to the permanent and immutable nature of Ethereum.

However, there is some confusion. Are ERC20 tokens ‘cryptocurrencies’ like Bitcoin or Litecoin or Dogecoin? The answer may surprise you. If you are an advanced Ethereum user, it won’t.

https://theethereum.wiki/w/index.php/ERC20_Token_Standard

Using the highlighted line of code, typical ERC20 token contracts (95%+ of all ERC20 tokens) assign all tokens to the ‘deployer’ (creator) of the smart contract initially. This means that, as far as the contract is concerned, that one ethereum account (one person or company) has ultimate control of all of the tokens. This is a Monarchy and is a telltale sign of a ‘Monarchy Token’ which is a token contract ruled by a single human .

Now, even if these tokens are ‘fairly distributed’ in an ICO or airdrop onchain or offchain, we will have no idea if they were ACTUALLY failry distributed or if the deployer airdropped tons to many secondary accounts they control. We also don’t know if they are buying into their own ICO with secondary accounts, acquiring the tokens for free since the ETH they pay ends up in their own back pocket anyways.

Contrast this to Bitcoin mining in which NO human ever started with all of the coins. Every coin was mined using proof of work and Satoshi had to work just as hard to acquire BTC as any other human. A fair level playing field based on pure math, not on a monarch.

Therefore, a company starts with all these tokens so these ERC20 standard tokens operate more like an equity, not like a cryptocurrency. They are not currency. Instead, they are a utility representing some sort of mechanic: voting, an ‘arcade token’ to be used in exchange for a service (why not use a real currency?), or maybe even nothing at all besides blatant speculation!

Therefore be aware, perform research. Real cryptocurrency is mined. Proof of Work Mining is the only method for creating fair decentralized currency. Tokens which are non-mined are equities. There is a big difference.