What Is the Nature of a Digital Coin? Paris Hilton Might Know, but the S.E.C. Doesn’t
his week, the Securities and Exchange Commission made an odd, veiled threat, in the form of a short notice on its Web site, “Statement on Potentially Unlawful Promotion of Initial Coin Offerings and Other Investments by Celebrities and Others.” The commission didn’t use any names, but those in the know had little doubt: its warning was meant for Paris Hilton.
Hilton had hardly acted like Bernie Madoff. She sent a tweet. It has since been deleted, but on September 3, 2017, she posted, “Looking forward to participating in the new @LydianCoinLtd Token! #ThisIsNotAnAd #CryptoCurrency #BitCoin #ETH #BlockChain.”
The Lydian Coin token that Hilton touted is one of hundreds of new digital coins that are being offered for purchase. The most famous is bitcoin, though it is now joined by countless others, such as Ethereum, Ripple, Litecoin, and more. Most of these are designed to act much like any currency; they can be bought and sold, used for all sorts of purchases, and stored for the long term. (Whether or not they are any good at these roles is continuously debated.)
Paris Hilton’s favorite, Lydian Coin, is a newer, second-order type of digital currency, over which the S.E.C. and other governments have expressed profound concern. It is part of an initial coin offering, which is a new way for companies to raise money: rather than pitch to a venture capitalist or get a loan from a bank, the company simply announces that it is creating its own digital currency, and offers it for sale to anybody who wants it. In the case of Lydian, the company is Gravity4, whose tagline wins the award for most buzzwords in a sentence: “the world’s first A.I. big data marketing cloud.” Gravity4 offers a suite of digital-marketing products that somehow involve “neural nets” and “Bayesian belief nets” to engage an “omni-channel demand side platform,” which delivers a “personalized, always on, brand messaging experience.” I have yet to make sense of these words, other than that they seem to invoke a computer program that sends ads to people. (Gravity4 did not respond to requests for clarification.)
The firm’s newly launched Lydian Coins can be used solely to pay Gravity4 for its marketing services…