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When you invest in an ICO, you get a bunch of tokens in return. From what I understand, these tokens don't generate any dividends, hence they are essentially worthless. Why should one buy them?

Let's compare with buying stocks in a company: The reason company shares have any value is because of dividends (or other profit sharing methods). If a company promises to never distribute any profit to its shareholders, the stock is worth exactly zero. No one would buy them.

I'm trying to make sense of this and I'm certainly missing something here.

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    "The reason company shares have any value is because of dividends." well no, as not all stock generates dividends. – weston Sep 11 '17 at 16:42
  • "Notable companies that don't pay dividends include Berkshire Hathaway (BRK.B), Facebook (FB), Alphabet (GOOG), Amazon (AMZN), and Tesla (TSLA)." Why do some companies pay a dividend, while other companies do not? – weston Sep 11 '17 at 16:49
  • @weston Lots of stocks don't give dividends today, but the prospect of future profit distribution is why stocks have any value. Otherwise, there would be no point of buying stocks (apart from curiosity and stuff like voting rights etc). If the company never plans to issue a dividend, it's just a game of the greater fool. Unfortunately far too many people have bought into the game. – Martin Wickman Sep 12 '17 at 7:11
  • So you are saying that people are only are happy to invest today, tying up thousands of dollars in these companies, in the vague hope that they might get, maybe 5%, return in future years? If that's true, why wouldn't those same people just invest in companies that already are paying dividends today? Because they hope the company will grow and their return is from later investors willing to pay more for the same stake. Investors always don't want dividends, they have to pay income tax on it, and like I said, the % is low in investment terms. – weston Sep 12 '17 at 12:22
  • One buys a no-dividends company today when you think it will (a) start doing it soon, (b) are in growth and eventually will do it, (c) will close down and liquidate assets to shareholders or (d) is bought out. If you do (b) then you're betting profits will increase in the future. If you weather it, you'll not get a measly 5%. This is why stocks prices increases. Btw, this is the reason companies end up with 5% ('ish). If a company would give you 50%, then people would buy shares like crazy until the price goes up so the net return is 5% or whatever. – Martin Wickman Sep 13 '17 at 10:30
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From a investors perspective, : You buy them because you speculate that the tokens will go up in value over time, as the company behind it develops the usecase of said "Product/Token".

Or, because they suspect that the Token/Coin/Blockchain will get adapted by alot of people/users, and used as a Currency.

For example, Ethereum.

It was first launched as an ICO, and collected ~$17.3M USD (24000 bitcoin at the time.).

Almost nothing worked when it was first launched, but the coin/token developed over time, adding more features such as the smart contracts, all the apps build on Ethereum, and resolving many other issues.

Thus it became more popular, and was used more, and value went up.

(Ethereum currently has a ROI of ~85714.2857143%, if you kept holding since the ICO.)

This is why ICO's are hyped up so much currently, which is both bad and good.

There's token sales for anything you can think of, "decentralized this, decentralized that", you have to ask yourself how legit that is, and if it is worth investing your time and money in, because afterall, it is still a huge risk.

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  • Ok, that makes more sense. Would you care to elaborate in your answer? Maybe give an example? – Martin Wickman Sep 12 '17 at 6:19
  • Done. Hope this eleborates it a bit more. – Zacharin Sep 12 '17 at 15:38
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Do crypto-coins themselves (bitcoin, litecoin, ethereum and 100500 other shitcoins) generate dividends? :))))))))

the answer is: ponzi pyramid scheme. point.

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  • Well, the perceived value of BTC is that it could possibly be useful in the future for buying stuff (ie replacing fiat). So I see the potential for value here at least. – Martin Wickman Sep 11 '17 at 15:29
  • so your answer is "ponzi pyramid scheme. point." Those are not even sentences. Are you saying that bitcoin/eth should be grouped in with ICOs? – weston Sep 11 '17 at 17:37
  • of course. bitcoin/altcoins/ico/tokens/etc - are the similar things. you buy something and should wait for the next buyer to sell him your "digits" for higher price. people involved in pyramid are very angry listening this, because they are afraid about their "inversments". so they downvote the truth answers – amaclin Sep 11 '17 at 19:15
  • I downvoted because it's a poor answer. I'm surprised a user with your rep actually believes this, but I would respect it, even upvote it if you gave some body to back up your answer. As it is, I don't think you know what those terms mean. In a Pyramid scheme, your personal income relies on recruitment, that's not the case with any coins. In a Ponzi scheme, returns are given from new investors to old investors, which is closer, but no one is promising or dishing out returns here and transactions are completely transparent on the blockchain, a Ponzi relies on hiding the source of the returns. – weston Sep 12 '17 at 11:14
  • That said, 99% of ICOs are scams IMO. Not anything as elaborate as Ponzi or Pyramid, just a simple grab and run. – weston Sep 12 '17 at 11:15
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The only reason to buy a currency is you think you'll be able to buy stuff with it in future, or sell it for more than you bought it in future. If you invest in an ICO, it should be on the hope there's a viably large future group of people trading it. In one way, investing in cryptocurrencies is like investing in gold. The big difference is there's only one gold - but new cryptocurrencies are popping up every week. I've seen ICOs marketed as "bitcoin for dentists". This puzzles me. Most dentists I know use the same money as everyone else.

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By buying ICOs you do not buy a part of a company or similar. You are buying a part of a product of the company, thereby helping the company to further develop this product.
You invest in the technology* of the ICO.
If you think the technology is better than the technology used by BTC, ETH, ... in some way and you think it is good enough to become a solid Altcoin or even good enough to replace some of the big ones, you invest in it because you expect its value to rise.

*technology: better block size, POS instead of POW, ...

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  • So I should buy it for charity? Makes no sense. – Martin Wickman Sep 11 '17 at 15:32
  • This answers assumes a wrong definition of better technology. – sanket1729 Sep 13 '17 at 6:43

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