The Bitcoin Model for Crowdfunding(startupboy.com)
startupboy.com
The Bitcoin Model for Crowdfunding
http://startupboy.com/2014/03/09/the-bitcoin-model-for-crowdfunding/
14 comments
> In Bitcoin, though the system itself is "trustless", participants trust that they are all treated equally according to the protocol & open source code.
But Bitcoin participants do not have to act on "trust" because they can inspect the protocol and open source code to verify equal treatment. In Naval's system, if the premise for participation (eg equal treatment) is equally verifiable by inspection of the protocol and open source code, is there any material difference between the two? It is true that there is nothing to "stop the network from invalidating the pre-mined amount at will", but participants will only participate in the network if it is easily verifiable that the network gives effect to the premise for participation.
> I just don't see how you can add a founder-controlled, for-profit startup to the other players in a crypto currency ecosystem (the miners, the non-profit developer foundation and the coin owners) and get something that works.
I think I agree with that statement, but only because of the words "founder-controlled". If a network like this is to succeed, the founders must forfeit control to the network. Given that it is the founders who write the protocol, they should be happy to do that, and then set it free. I don't think it would work if the founders made some attempt in the protocol to reserve to themselves a power to intervene in the operation of the network.
Can I offer another interesting hypothetical:
Is it possible for a network to incorporate some kind of mechanism for democratically amending its own protocol according to some objective characteristic (or subjective vote) of the participants? If participants are mining 'shares' in the 'company', should they have the power to act as 'shareholders' and to exercise control accordingly?
(Assume that some aspect of the protocol means that the controlling majority is always held by nodes that are not cooperating to attack the network, which I think is meant to be the case with Bitcoin.)
But Bitcoin participants do not have to act on "trust" because they can inspect the protocol and open source code to verify equal treatment. In Naval's system, if the premise for participation (eg equal treatment) is equally verifiable by inspection of the protocol and open source code, is there any material difference between the two? It is true that there is nothing to "stop the network from invalidating the pre-mined amount at will", but participants will only participate in the network if it is easily verifiable that the network gives effect to the premise for participation.
> I just don't see how you can add a founder-controlled, for-profit startup to the other players in a crypto currency ecosystem (the miners, the non-profit developer foundation and the coin owners) and get something that works.
I think I agree with that statement, but only because of the words "founder-controlled". If a network like this is to succeed, the founders must forfeit control to the network. Given that it is the founders who write the protocol, they should be happy to do that, and then set it free. I don't think it would work if the founders made some attempt in the protocol to reserve to themselves a power to intervene in the operation of the network.
Can I offer another interesting hypothetical:
Is it possible for a network to incorporate some kind of mechanism for democratically amending its own protocol according to some objective characteristic (or subjective vote) of the participants? If participants are mining 'shares' in the 'company', should they have the power to act as 'shareholders' and to exercise control accordingly?
(Assume that some aspect of the protocol means that the controlling majority is always held by nodes that are not cooperating to attack the network, which I think is meant to be the case with Bitcoin.)
> But Bitcoin participants do not have to act on "trust" because they can inspect the protocol and open source code to verify equal treatment.
Sorry I wasn't clear enough. I agree that trust is the wrong word, I should have said "participants can verify that they are all treated equally".
Perhaps I'm stuck thinking of these startups like I would think of most for-profit startups where each round of fundraising adds complexity (different "classes" of shares, etc).
One of the more important advances in startup fundraising over the last few years has been the lengthening of time where the startup is under the founders' thumb(s). Fundraising in the manner you suggest would give you the money of an angel round (or less) + the loss of control of an IPO.
Many startups severely regret going IPO, because (unless you carefully manage the process a la Facebook or Google) you immediately cede a great degree of control to the shareholders.
In this case, the only benefit to the founders (assuming their coins aren't invalidated) is monetary, while the costs are manifest. I think the pre-mined allocation will be competed out of existence, as it adds no value to the process and because as long as the currency gets adopted, the founding developers (like Satoshi and the early bitcoin devs) will still benefit greatly.
Basically I can see very few benefits to the startup's founders for going this route vs normal fundraising. Democracy may be the least worst form of governance for a nation-state, but the point of a (good) nation-state is to preserve liberty, not to realize a particular vision (unless that vision is liberty or in the case of bitcoin, is the currency itself).*
What could work in the manner suggested is more akin to an autonomous, non-profit corporation. (Yes, individuals can profit by being early adopters or providing value-add services, but the corporation itself is self-perpetuating and not-for-profit).
I'm not saying such autonomous corporations shouldn't be built, of course they should be if they fill a need (just like non-profits). I just don't see this as a viable alternative to fundraising for a for-profit startup.
* There are of course several examples to the contrary (of a "vision" being achieved in such a manner). Wikipedia (and now bitcoin) being perhaps the most notable, but all that I can think of remain non-profit organizations.
Sorry I wasn't clear enough. I agree that trust is the wrong word, I should have said "participants can verify that they are all treated equally".
Perhaps I'm stuck thinking of these startups like I would think of most for-profit startups where each round of fundraising adds complexity (different "classes" of shares, etc).
One of the more important advances in startup fundraising over the last few years has been the lengthening of time where the startup is under the founders' thumb(s). Fundraising in the manner you suggest would give you the money of an angel round (or less) + the loss of control of an IPO.
Many startups severely regret going IPO, because (unless you carefully manage the process a la Facebook or Google) you immediately cede a great degree of control to the shareholders.
In this case, the only benefit to the founders (assuming their coins aren't invalidated) is monetary, while the costs are manifest. I think the pre-mined allocation will be competed out of existence, as it adds no value to the process and because as long as the currency gets adopted, the founding developers (like Satoshi and the early bitcoin devs) will still benefit greatly.
Basically I can see very few benefits to the startup's founders for going this route vs normal fundraising. Democracy may be the least worst form of governance for a nation-state, but the point of a (good) nation-state is to preserve liberty, not to realize a particular vision (unless that vision is liberty or in the case of bitcoin, is the currency itself).*
What could work in the manner suggested is more akin to an autonomous, non-profit corporation. (Yes, individuals can profit by being early adopters or providing value-add services, but the corporation itself is self-perpetuating and not-for-profit).
I'm not saying such autonomous corporations shouldn't be built, of course they should be if they fill a need (just like non-profits). I just don't see this as a viable alternative to fundraising for a for-profit startup.
* There are of course several examples to the contrary (of a "vision" being achieved in such a manner). Wikipedia (and now bitcoin) being perhaps the most notable, but all that I can think of remain non-profit organizations.
It seems to me that bitcoin is the wrong model for this. There are lots of other crypto-currency models that have central control as a feature. These are anathema to the bitcoin sect, but allow all sorts of other neat stuff - offline transactions for example. As they are also centrally controlled they don't require the crazy processor thrashing that is bitcoin mining, either.
> they don't require the crazy processor thrashing that is bitcoin mining, either
How do you verify someone did something worth of getting the coin?
How do you verify someone did something worth of getting the coin?
You trust the central authority
I get that part. But how would clients mine? Can't they just tell the central server that they did something, when in fact they didn't?
>> I get that part. But how would clients mine?
Why would they need to? I'm not sure I really understand why it has to be part of the model in the first place? The company in question (as central authority) could give out coin any way it saw fit.
Is it because you need their buy-in or the currency won't work? Why would that be? Miners make up a smaller and smaller proportion of BTC users all the time so. They may be needed to bootstrap a crypto currency as we understand it in the case of BTC, but it doesn't seem to be necessary that they make up a large proportion of the continuing userbase. In BTC they're also important because they secure the network, but a centrally issued crypto-currency doesn't have that problem.
Why would they need to? I'm not sure I really understand why it has to be part of the model in the first place? The company in question (as central authority) could give out coin any way it saw fit.
Is it because you need their buy-in or the currency won't work? Why would that be? Miners make up a smaller and smaller proportion of BTC users all the time so. They may be needed to bootstrap a crypto currency as we understand it in the case of BTC, but it doesn't seem to be necessary that they make up a large proportion of the continuing userbase. In BTC they're also important because they secure the network, but a centrally issued crypto-currency doesn't have that problem.
This idea in this blog post is not novel...it is actually an idea called "Distributed Anonymous Corporation" which was described in this blog post last september: http://letstalkbitcoin.com/bitcoin-and-the-three-laws-of-rob...
That's how Ethereum will be launched, too, and once it's launched thousands of others can do the same on top of Ethereum, without having to reinvent their own "coin" from scratch. Building their own DAO's will also be much easier.
https://www.ethereum.org/
https://www.ethereum.org/
Exactly what I've been thinking over the past week as I've watched some cause-themed coins start to take off.
Most people try to squeeze their mental model of what cryptocoins are into something like a currency, but there are really interesting equity / p2p database aspects too.
Most people try to squeeze their mental model of what cryptocoins are into something like a currency, but there are really interesting equity / p2p database aspects too.
would you mind elaborating?
this addresses the p2p database aspect http://expectedpayoff.com/blog/2013/03/22/bitcoin-and-the-by...
This is exactly what I'm trying to do with Coinpunk (in addition to doing a classic crowdfund): http://igg.me/at/coinpunk
If this is used for proprietary business models, that's completely backwards. The future involves recognizing that digital works are NOT scarce, only development time or server bandwidth is.
Paying this way for server bandwidth is fine. Otherwise, this is about excluding poorer people from accessing resources, just like the traditional broken proprietary business model.
I hope this idea dies quickly. We don't need anything that further extends proprietization, we need systems to fund Open projects.
Paying this way for server bandwidth is fine. Otherwise, this is about excluding poorer people from accessing resources, just like the traditional broken proprietary business model.
I hope this idea dies quickly. We don't need anything that further extends proprietization, we need systems to fund Open projects.
If digital works are not scarce, where are all the great public domain licensed movies, TV shows, and video games?
It's copies that aren't scarce.
You're still paying for the service. Basically this is talking about making free services non-free to support the creation and growth of the service.
> this is talking about making free services non-free to support the creation and growth of the service
Naval (author of post) already did this with Angellist, in a way. They systematized the introduction of founders->angels. Which was happening freely over email beforehand. The service inbetween can add value over free methods.
Nothing wrong with that really as a starting point. Centralization is sometimes needed for trust. The angels may need to trust some escrow, dispute process, or software stability if they want to invest money this way.
But agreed it could technically be decentralized/free.
Naval (author of post) already did this with Angellist, in a way. They systematized the introduction of founders->angels. Which was happening freely over email beforehand. The service inbetween can add value over free methods.
Nothing wrong with that really as a starting point. Centralization is sometimes needed for trust. The angels may need to trust some escrow, dispute process, or software stability if they want to invest money this way.
But agreed it could technically be decentralized/free.
Isn't that exactly what Marscoin (www.marscoin.org) does - trying to privately fund space exploration by letting people buy into the altcoin.
He mentions FastCoin as a fast-clearing currency. Bitcoin's confirmations are slow for the sake of security. There's a new method that makes it possible to get fast confirmations with good security, but I don't see any indication that FastCoin is using it. For details and a link to the academic paper, see here: https://bitcointalk.org/index.php?topic=359582.0
Ethereum is the only new coin I know of that's planning to use this protocol, though I'm sure there are others.
Ethereum is the only new coin I know of that's planning to use this protocol, though I'm sure there are others.
Bitcoin's confirmations are slow because it takes several new blocks to be generated before a transactions is considered really confirmed. A block takes about 10 minutes.
If you speed up the block time, you speed up the confirmation time, no?
If you speed up the block time, you speed up the confirmation time, no?
The value of the confirmations roughly corresponds with the amount of computation wasted on them.
(or whatever word you want to swap in for wasted; it's the difficulty of matching the computation that is interesting, not the number of blocks)
(or whatever word you want to swap in for wasted; it's the difficulty of matching the computation that is interesting, not the number of blocks)
Ah, fair enough. I had assumed it was to do with having a few block set in stone and propagated around the network, but it sounds like its more entwined with the 51% question and that sort of stuff...
Max is correct, but the new idea is basically to incorporate all the computation that goes into side branches that end up abandoned, so you get equivalent security in a much shorter time.
I think it's one reason we won't really see a huge proliferation of alt coins (even here you regularly have dreamers posting 'there should be cryptocoin for that').
Naval's model isn't a million miles away from ASICMiner's "corporate" structure. It's also a step in the general direction of a commodity future-like cryptocurrency, with computing services as the underlying commodity.
A crytocurrency can't succeed, in my opinion, unless it has intrinsic value or exists as a means of exchanging value within a closed ecosystem where fiat currencies are impractical for whatever reason.
A crytocurrency can't succeed, in my opinion, unless it has intrinsic value or exists as a means of exchanging value within a closed ecosystem where fiat currencies are impractical for whatever reason.
There is no such thing as intrinsic values in any currency Fiat, digital or crypto.
The value in a crypto-currency is determined by how much the "nodes" trust the network. This trust takes time to build as we are seeing with the various alternative CCs coming out these days and thats just ok.
But keep in mind that the currency is only one way to use the technology. You could in theory have an ebook be based on the technology.
The value in a crypto-currency is determined by how much the "nodes" trust the network. This trust takes time to build as we are seeing with the various alternative CCs coming out these days and thats just ok.
But keep in mind that the currency is only one way to use the technology. You could in theory have an ebook be based on the technology.
>> The value in a crypto-currency is determined by how much the "nodes" trust the network.
Could someone explain it clearer?
Could someone explain it clearer?
The value, like with anything else, is simply what someone will give you for it. It's psychology. There is no hard calculation you can do to arrive at the 'value' of a bitcoin.
The trust between the nodes and the network may be a factor that informs some people. Some people will use it because they consider it to be free from central control, or anonymous, or because "Hey! Computer Money!", or simply because they have a gut feeling it's the next big thing.
HTH.
The trust between the nodes and the network may be a factor that informs some people. Some people will use it because they consider it to be free from central control, or anonymous, or because "Hey! Computer Money!", or simply because they have a gut feeling it's the next big thing.
HTH.
As long as the entire internet isn't tolled because it is a new way to tax. Crypto coins have been branded for all types of needs, pay it forward is a big part of many coins. What would suck is if it became pay to use everywhere if biz runs away with it. We might be entering a bad era of tolls and tiers if we aren't smart.
Micropayments has come to pass.
And with that, Charlie Brooker's scifi television show becomes more apparent.
And with that, Charlie Brooker's scifi television show becomes more apparent.
This is what Invictus has been doing to raise money for their DACs via AngelShares
crowd equity will be huge
The problem is that (the way Naval treats them) each of the main variables seem arbitrary, but could easily determine whether the economy you create is viable.
> Pre-mine or early-mine Appcoins and keep some non-threatening amount.
In Bitcoin, though the system itself is "trustless", participants trust that they are all treated equally according to the protocol & open source code.
In the case of a startup raising funds, you wouldn't get the same sense of altruism. The incentives are not aligned for the major players: the startup founders, the protocol developers, the other coin owners/shareholders and the miners.
Should an arbitrary pre-mined amount be set (as the founders' equity), and simultaneously be non-threatening, what is to stop the network from invalidating the pre-mined amount at will?
If it were instead threatening, why would miners be interested in spending compute power?
Naval also writes of supporting the open source developers with transaction fees. Unlike the commodity on which the coins are based, these are not easy values to calculate.
Certainly there are a lot of possible new models, and autonomous corporations are very exciting. I just don't see how you can add a founder-controlled, for-profit startup to the other players in a crypto currency ecosystem (the miners, the non-profit developer foundation and the coin owners) and get something that works.