
The Bitcoin Model for Crowdfunding - jakobmarovt
http://startupboy.com/2014/03/09/the-bitcoin-model-for-crowdfunding/
======
argumentum
I've been thinking about this for a while, particularly with bandwidth as the
scarce resource. I don't _quite_ grok the connections between the crypto
aspect, the stock aspect and the currency aspect.

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.

~~~
jamesk_au
> _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.)

~~~
argumentum
> 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.

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em3rgent0rdr
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...](http://letstalkbitcoin.com/bitcoin-and-the-three-laws-of-robotics/)

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devx
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/)

------
compare
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.

~~~
panabee
would you mind elaborating?

~~~
torbjorn
this addresses the p2p database aspect
[http://expectedpayoff.com/blog/2013/03/22/bitcoin-and-the-
by...](http://expectedpayoff.com/blog/2013/03/22/bitcoin-and-the-byzantine-
generals-problem/)

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kyledrake
This is exactly what I'm trying to do with Coinpunk (in addition to doing a
classic crowdfund): [http://igg.me/at/coinpunk](http://igg.me/at/coinpunk)

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quadrangle
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.

~~~
rayiner
If digital works are not scarce, where are all the great public domain
licensed movies, TV shows, and video games?

~~~
quadrangle
It's _copies_ that aren't scarce.

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orasis
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.

~~~
dmix
> 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.

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novalis78
Isn't that exactly what Marscoin (www.marscoin.org) does - trying to privately
fund space exploration by letting people buy into the altcoin.

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DennisP
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](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.

~~~
Nursie
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?

~~~
maxerickson
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)

~~~
Nursie
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...

~~~
DennisP
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.

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jackgavigan
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.

~~~
ThomPete
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.

~~~
minhnt
>> The value in a crypto-currency is determined by how much the "nodes" trust
the network.

Could someone explain it clearer?

~~~
Nursie
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.

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drawkbox
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.

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alaskamiller
Micropayments has come to pass.

And with that, Charlie Brooker's scifi television show becomes more apparent.

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jabgrabdthrow
This is what Invictus has been doing to raise money for their DACs via
AngelShares

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mpg33
crowd equity will be huge

