Filecoin could potentially change the cryptocurrency space. It’s one of the few well-thought-out projects built by an amazing team that’s actually needed.

Furthermore, they created a new proof mechanism and there is a legitimate need for blockchain. In other words, this might be the best thing the crypto community has seen in a while. Of course, it’s one of the few I expected.

But then two things happened :

1. They released some information about the token sale.

2. They released some more information in response to anonymous questions from investors.

Man, I wouldn't expect that from a stable of teams. The response felt particularly dismissive. I'm extremely disappointed right now and will probably not be attending this sale.

I’ll probably lose a lot of friends who were investors in the company and/or pre-sale, but in this new era of fully public fundraising, I think the public deserves to be heard from all sides.

Flaws in Filecoin Token Sale:

1. A few weeks ago, Filecoin gave their friends an amazing deal

2. Filecoin is crazy greedy and has raised more than $700 million

3. Encourage early clickers, price unknown, network congestion update, see below

4. Protocol Labs and the Filecoin Foundation will retain 2x the tokens that investors will receive

There's nothing stopping them from coming here, but a lot of people are very angry about it.

Until July 24, Filecoin’s advisor sale raised $52 million. The sale was reserved for people closely associated with the company and the industry. Many very high-profile people participated, with a total check of 150.

These investors will pay a maximum of $0.75 per coin. They can also opt for a discount ranging from 0% to 30% depending on when the tokens vest.

These investors have no more risk than the investors who would be participating in a public token sale. In fact, one could argue that they even take on less risk because they know the price is always changing (which is not the case for public investors)

Their explanation:

(a) All of these people and organizations have been working with us for years to make IPFS and Filecoin successful

This is absolutely not true. Some people were just recently introduced to the team and entered sales a week ago and paid the $0.75 price.

(b) fully commit to working with us and the Filecoin network for many years to come,

Of course, but you, dear reader, would commit to it too, wouldn’t you?

(c) provide highly valuable advice, hands-on help, knowledge, skills, resources, contacts, etc.

This is the real reason they pay 2 to 20 times less than you. You be the judge. Usually vested interests have good behavior, but here anyone can promise great advice and help, then disappear and still make money.

After raising $52 million in pre-sales for their pre-order product, they wanted to go out and raise an effective fund.

Their response:

Our token sale has no cap . It is capped at the amount of Filecoin sold: 200M FIL.

Over the past few years, Protocol Labs has proven to the world that we know how to use capital to create valuable projects , valuable technology, and valuable software.

To date, all the work you’ve seen — IPFS, libp2p, IPLD, Multiformats, Filecoin, CoinList, and all of our research — all of our work has been funded by under $3.5M. We know how to deploy funds effectively.

But aside from trusting to deploy at $3.5M and $500M+, let’s analyze the USD cap of its token sale.

Some numbers

1. $52 million raised in presale

2. The minimum amount of Filecoins sold in the ICO is 69M and the maximum is 99M

3. Consultant Maximum Price $0.75

4. 131M-101M Filecoins are reserved for the public

5. Starting price of ICO: $1.3 (52M/40M), almost 2 times of the advisor price.

6. Price for $100 million raised = $2.5

7. $200 million raised at $5

Unfortunately, their price function is not clear. It does not state whether trading volume affects the total raised before or after the price calculation. In any case, assuming a normal average investment of eg. $100k, the difference is not much.

The dollar cap will vary based on the average purchase amount and the average discount selected by the buyer.

Let’s Calculate the Filecoin ICO USD Cap

I wrote a small piece of code to calculate the dollars raised under different assumptions.

You can see it here:

And you can run it on the amazing Repl.it (plugins for mission and market portfolio companies! Oh, and by the way, I deployed $3 million with my first funding, maybe I should raise a second billion.)

Assumptions:

Total Filecoin sold in the Advisor Presale: 85 million (minimum sale is 69 million if everyone pays $0.75, maximum is 99 million if everyone chooses the 30% discount, so I chose a price in between)

Average investment = $100,00 0.00

Average discount chosen by investors: 10% (discounts are 0%, 7.5% with 1 year vesting, 15% with 2 years vesting, and 20% with 3 years vesting — I’m assuming many choose 0 and a few choose the rest, so 10% sounds okay.)

result:

Therefore, the Filecoin ICO cap is actually about $700 million.

For fun, let's assume that no one chooses the discount:

The real cap is $1.37B.

And, the maximum discount per person:

Highly unlikely, but that's the minimum upper limit.

Let’s remember that the token will also come out when the network launches, which Protocol Labs estimates will be launched after a year.

Given that the price grows as investment increases, early clickers are encouraged to get in as quickly as possible – the obvious thing is to raise as much money as possible.

Users paying with BTC and ETH also have to wait for their transactions to be confirmed before they know how much they paid, which has the potential to be disastrous given the high probability that the network will be clogged.

I recommend reading their explanation in the replies. It's both funny and scary.

Update: The rules have changed . Prices will be averaged over the first hour, with a maximum price of $6 for the first hour.

This means that no one is willing to pay the minimum price of $1.31, and buyers will not know how much to pay within the price range of $1.31 to $6 during the first hour.

Once the first hour is over, people will want to click quickly because they will get information about prices and total raises.

The update was intended so that there wouldn't be any price difference for clickers in the first hour, which was good, but it didn't work out well. The price is still unknown (and crazy high compared to advisors).

Protocol Labs and the Filecoin Foundation are keeping twice as many tokens as investors will receive, which is incredible to me .

In contrast, the ETH genesis sale minted 10% of ETH to early contributors and 10% to the Ethereum Foundation. 80% went to investors.

In the case of Filecoin, Protocol Labs will get all the cash plus 50% more coins than investors, so 1.5x. The Foundation will get 50% of the number of coins "minted" by investors. Total: 66.6% for them, 33.3% for you.

Assuming the total raise is “$250M,” Protocol Labs and a foundation will receive $250M in cash, plus an additional $250-300M in tokens (remember the discount?).

Likewise, 70% of the tokens that will ever exist will be mined. This means that investors will only get 10% of the total supply .

In comparison, Ethereum sold 60,108,506.26 ether at genesis, and today there are 93,775,666.

Bet accordingly.

Filecoin is something we look forward to having.

A true game-changing project, it is working to raise $700 million and keep twice as many tokens.

I think this will probably be remembered and written in the history books about how crazy this all was and how major innovations like crypto tokens were not realized to their full potential before people actually used them to raise funds.