Over the years, economists and philosophers have defined a range of choices that humans may experience in their day to day existence, including Morton’s Fork, Burdian’s Ass and Hobson’s Choice. My partner at Multicoin Capital, Kyle Samani recently wrote about the Scalability Trilemma that exists in the blockchain world too.

In this post, I’d like to propose the Value Trap Dilemma (VTD). The VTD is the conflict of interests that occurs when a project is funded by both traditional shareholders in a company and token holders in a network. The network is produced by a company funded by shareholders, so what is the nature of the responsibility the company has to token holders?

The classic theory of the firm is that it exists to maximize shareholder value — so what happens when you have to make decisions that will maximize shareholder profits but at the same time reduce value for token holders? This was a problem that we considered before conducting our token sale for Civic, back in June 2017 when the environment had comprised core blockchain and protocol proponents and supporters of pure innovation. Unfortunately, in the time since that sale during which public interest in token sales has become prevalent, I believe that we are in the minority in terms of progressive thinking around corporate governance and ethics in this space.

Civic’s concept is building a utility token (CVC) that enables companies to verify identities, in a decentralized manner. For example, this allows companies who are selling security or utility tokens to conduct KYC (Know Your Customer) verifications on individuals who are purchasing their tokens. As an example, we recently announced our partnership with Votem. Votem will use CVC utility tokens to provide ID verification for their ICO and their platform. A CVC is intended as a utility token that, as an overly brief summary, provides access, a reward or payment mechanism, prompt transferability of select data, stacked with the identity verification technologies or other technologies created by those who partner to use CVC. The mission of CVC is, for those reasons, different from a traditional security because it is intended to be useful and incentivize adoption of the technology rather than offer the goal of profitability.

For a quick primer on Security vs Utility tokens, I highly recommend reading Darren Pollock’s post at CoinDesk. That contrary goal is where the VTD arises.

Aligning interests at Civic

I co-founded Civic with my CTO, Jonathan Smith, who has spent many years in the banking world. We have a deep appreciation for compliance, regulations and governance and when we embarked on this journey together, we wanted to do things the right way and ensure that we would build a company that we could be proud of and imbue our values into the DNA of the company.

Through our years of experience operating venture backed companies, along with consultation with our board and shareholders, we determined that the best way to align interests between shareholders and token holders was to ensure that the primary goal of our company was not direct profit maximization, but instead the creation of and utility maximization for the public utility that we are building — an identity verification platform that consumes and uses CVC tokens to create a decentralized identity infrastructure for the world to use, as an alternative to the centralized identity products available today. This goal is intended to put neither shareholders nor token holders first — but rather the entire ecosystem.

For Civic, this was an obvious step forward in evolving governance in the token economy — by having a stated purpose intended to be at the intersection of interests between token holders and shareholders, you can avoid being conflicted in making decisions between maximizing profit for shareholders or utility for token holders — instead the idea is to provide for the best available utility.

In order to do this, it is important that the shareholders of the company understand the new operating paradigm is one where the focus is exploring what it means to be a crypto company, and that means experimentation to some degree. Civic, Technologies Inc., as a significant token holder, seeks to mitigate the potential conflict of interest by focusing on its product — the platform and infrastructure around its part of the larger token economy and development of new technological protocols.

We are breaking new ground in the world of corporate governance — how will shareholders make a profit or return on investment if profit maximization is not the goal. Shareholders in a company that is a token creator can be asked to accept that the company’s focus is the quality of the technological product and its widespread adoption, not the financial results. Delaying or avoiding profits in the early years when dabbling in the technology world is not a new concept. We can take a lesson out of Jeff Bezos’ book — his long term vision for Amazon which eschewed short term profits enabled all the possibilities which are foundational to Amazon today. If he had followed the route of profits first, Amazon would not be the behemoth it is today.

Kyle Samani on Twitter

Crypto is the final destination in the perpetual battle for founder/investor control In crypto, investor rights are virtually non-existant + many founders openly claim not to be fiduciaries! Of course, investors gain early liquidity Liquidity > investor protections, always

Ultimately, for our industry, the answer is unclear but the vision and mission of the company is more important than any short-term profits that would put us at conflict with token holders, who all want to help support and build the network effect that we need for CVC to be an in-demand product for those in need for a new identity verification process, those who wish to participate in technological development, those other token creators or technology developers who wish to partner with this verification service or its component parts. Building a utility token for identity is something no-one has ever done before — there are still many lessons to learn, so we need to be resourceful and thoughtful about our approach but in the end, we know we are doing something important for the world.

Our shareholders are very much aligned with us on this, but I fear that this is not always the case for the thousands of other companies out there operating with a token economy. The alignment of interests goes beyond short-term economics and into the longer-term promise of decentralization that blockchain and distributed ledgers offer.

We have spent considerable time ensuring that the token economy model is self-sufficient and can function independently of Civic as a company. I believe it is critical that token economies being built by private companies are able to stand independently of the companies that are building them today.

Rethinking Social Constructs

If we take a step back and look at the theory of the firm and start building up towards crypto assets over the centuries, it’s very clear that crypto assets represents a new type of economic social construct — in part because of the overarching non-economic elements. The nature of the firm, shareholdings, bond holdings, debentures, etc are all social constructs. They exist in structure and custom because of the evolution of laws, culture and regulations that have been created within our national and international societies over centuries. If a charter is not filed with and accepted by a government, the company might not exist at all (such as being deemed not to be validly existing). If the words used in a contract are not respected by a court (again, the government), the contract might be deemed not to exists at all (such as being deemed void or unenforceable). They are not physical things that exist outside of a legal framework, unlike, for example, gold or even Bitcoin.

Since the origins of corporations, we have built governance systems to help us ensure that shareholder and stakeholders interests were aligned and that also resulted in the creation of regulatory agencies such as the SEC and CFTC. Regulations have been built over centuries and largely to ensure that there are sufficient investor protections. History is riddled with investors losing money to Ponzi, matrix & pyramid schemes, along with the infamous pump and dumps, hence the need to provide an operating regulatory framework that punishes bad actors but still provides a fair playing field for emerging technical innovation. The problem comes into play when bad actors are purporting to be building innovative products and services, but this merely becomes a front for unsavory business practices.

In one of my prior posts, on the New Financial Revolution, I touched on the fact that capital formation is changing rapidly. The social constructs that we have today that exist within the existing legal & regulatory framework are limited, at best, as we leverage crypto to find new ways to finance projects, research and companies. Along with existing for-profit entities, we also have the notion of a foundation — the purpose of which is to deploy funds to support a cause, typically outside of the taxation frameworks that exist because the goal of the foundation is typically not to distribute profit to stakeholders, but rather to reinvest in the cause it serves. The Ethereum Foundation is a good example of how an independent organization can exist as a non-profit but fund the development of a public enterprise, without shareholders.

In the new paradigm around token economies, we are introducing a new type of stakeholder, different from any securityholder. These stakeholders must be made fully aware that they are not buying shares but rather that they are purchasing tokens that can be used in the functioning of a token economy.

There is some contention around what constitutes a security in the crypto world, but largely the Howey Test is seen as the benchmark ruling by the Supreme Court in the USA, which sets the definition of what a security is.

The SEC recently also publishes some guidelines on ICO & cryptocurrencies. These guidelines, however, are not universal — clearly not every country will accept the SEC’s guidelines and so each jurisdiction will need to create their own definition for what a token is and how their laws apply.

The nature of the firm, is that the fiduciary responsibility of the management team is ultimately to shareholders, not token holders. This applies to directors and boards worldwide, which leads us to the Value Trap Dilemma. How do you serve your fiduciary obligations to shareholders and at the same time, support a token economy for the benefit of utility token holders?

The crux of the matter is this: Where is the value that being trapped? Does it accrue to the company and their shareholders or directly to the token economy?

Navigating the Value Trap Dilemma

Let’s consider this example: Company A sells a token and receives $10m. It then uses those proceeds to continue to work on the building and enhancing of the token economy. A major partner comes in and wants to use the company’s services, but not within the framework of the token economy, but they are willing to pay $500k in fees to the company. This would require the company to slow down on building the token economy and reallocate resources to the new client in order to earn the revenue. Hypothetically, this could slow down the growth of the token economy, but the shareholders in the company benefit by having another $500k in income. That’s the Value Trap Dilemma. The company could choose to favor shareholders and profits to the detriment of the token holders.

This is one example out of many that could occur on a daily basis with token economy companies. There is probably a need for a new type of governance structure to manage this. Ultimately, it may be a poor long-term decision for the token economy but one could argue that the tokens that companies hold are akin to inventory that it will sell at a future date. So that should incentivize them to focus on contributing to the token infrastructure for the long term to ensure the value of their inventory is preserved. The reality is that as time goes on the company’s cash reserves dwindle, and they either need to sell more tokens to fund the company, or find other ways to keep going — including trading token economy resources for short term income.

The problem is exacerbated by the fact that crypto companies typically hold 80–90% of their runway in crypto. If/when there is a bear market, it becomes harder for them to pay the bills and they likely will have shorter runways to deliver value to the token economy. If a company runs out of money, and they can’t raise more, then the project fails and token holders become holders of a worthless product. It has already been reported that 46% of the ICO’s in 2017 have already failed.

Vinny Lingham on Twitter

Bitcoin was designed as a system to take on the big banks and fractional reserve system. What I'm seeing now is that a large number of funded crypto projects are only holding crypto and their runways are fluctuating every day.

Token Economy Design

In the first half of 2017 and before, there was no real public interest for tokens. Only technologists, innovators, developers, and sophisticated students of crypto knew how to read about, access, purchase, and hold tokens. The amazingly rapid developments in technology made tokens more understandable, accessible, tradable and holdable, eventually developing into public interest.

Since, and in particular in late 2017 when demand for tokens reached new heights, Token Economy Design has been an overlooked area of focus for crypto companies. But, it doesn’t seem like companies care because, historically, the perception has been that it’s relatively easy to raise money for a token sale. In reality, if the token economics are poor, it’s unlikely that the token economy will survive in the long term .

Token Economy Design has been an overlooked area of focus for crypto companies. But, it doesn’t seem like companies care because, historically, it’s very easy to slap together a white paper and raise money. In reality, if the token economy model cannot function as a utility token, then the token is most definitely a security and it’s unclear how buyers will recoup their investment, other than Greater Fool Theory.

In addition, if the token economics are poor, it’s unlikely that the token economy will survive in the long term — and there are many examples where I’ve asked founders about their token economy design, and the answer is literally this : “We have so much demand, we haven’t really bothered to figure this out yet, so we’ll sell the token now and do it later”. Talk about red flags — if crypto enters a prolonged bear market, most of these projects are going to fail and that will give the regulators even more ammunition to regulate this industry. If you’re building a utility token, it has to have real utility — if you’re just using it to raise money, then it’s a security.

Members of a utility token community look to join an ecosystem and seek to benefit from the technology, the incentivization of developers, rewards to bona fide contributors, and interactions between a token and the globally developing crypto economy. This is why many enthusiasts do not “bet on” a particular token, but buy a variety of different tokens, with hopes that together they will usher in a universe of utilities that, in the aggregate, might add to our lives a great deal of ease and efficiency, reliability and privacy, control over our property and assurance about what we hold dear. Just as computers were once the purview of masters of technology and now can be found in everyone’s pocket, we would like that next economy to function not just for experts but for all, and so we are not proponents of prohibiting non-experts from supporting and contributing to the system.

That is not to say that the masses don’t need some protections. Like the warnings we see the accompany any consumer product, disclosures and education about what the technology is, and what the tokens are not (a traditional investment), and the risks that a token will not have sufficient adoption to become part of the crypto landscape. Proponents of the token economy need to be responsible and think about the long-term viability of what they are adding to the overall ecosystem.

When a founder is asked what they are adding to the new technology revolution, the answer must not be: “We have so much demand, we haven’t really bothered to figure this out yet, so we’ll sell the token now and do it later”. If crypto is sold solely because of a favorable economic environment, most of these projects are going to fail, the public will have bought into a false premise and the regulators will have no choice but to further regulate the overall industry. If you’re building a utility token, it has to have real utility — if you’re just using it to raise money, then it’s a security.

Vinny Lingham on Twitter

Agreed! I'm seeing an alarming number of ICOs that have raised boatloads of money that now don't care about their token economics - "we already raised the money"... 🤦‍♂️ https://t.co/UxofWsd9DE

Civic has been working with Llew Claasen, of Newtown Partners, a company I co-founded, that specializes in Token Economy Design, to improve the functioning of the CVC economy and we were excited to release the summary of those improvement last earlier this month, with the updated full white paper to follow shortly. This is another example of how Civic focuses on ensuring that a well-functioning and robust token economy is the primary goal of the company, and our long term holding of an inventory of tokens helps align our interests with other token holders.

The big question is, why would shareholders choose to forgo short term profits, in favor of an unknown outcome? From my background in startups and investing, I can attest to the theory that the investments with the most undefined outcomes, lead to the highest returns. This also means they have to accept a high level of risk — which in venture capital is usually par for the course. If the ecosystem is successful, they will benefit. In most cases, the background of your shareholders will determine how you are able to govern your startup in the crypto world.

Civic has the benefit of having some of the most forward thinking investors in the world, including Social Leverage, Propel Ventures, Pantera Capital, DCG, Blockchain Capital, Sound Ventures & Founder Collective. These investors are thinking long term and are more interested in ensuring that we can actually change the world, rather than focus on short term profits or cultivate behaviors that could lead to a conflicted management team. It is for that reason, that we are a very aligned and focused team and even though we have multiple stakeholders in the token economy, we have a shared focus on ensuring that the CVC token’s economy is resilient, useful and productive. If a token creator’s shareholders can buy in to the idea that this is not a mere profit-making endeavor but also a mechanism for plugging a new idea into the burgeoning global crypto ecosystem, the VTD — the value trap dilemma that stands between the interests of shareholders and other stakeholders — can fall aside.

This area of crypto governance is a fast growing area, and I’m excited to delve into the opportunities and pitfalls as I present my views on the importance of remembering the core role of token holders in a crypto ecosystem, at Token 2049 in Hong Kong tomorrow (20th March 2018).

If you enjoyed this post, please recommend & share it on Twitter & Facebook. You can also follow Vinny Lingham on Medium for more updates.

TOKEN2049 on Twitter

Join us in HK 20-21 March to explore the token ecosystem in depth. Our keynote @VinnyLingham (CEO @civickey) will shine light on where crypto is heading, topic: "Crypto Goldrush - Review, Future Outlook And The Importance Of Governance" #TOKEN2049 Tickets: https://t.co/R7AIhEjljh

The Value Trap Dilemma was originally published in Minessence on Medium, where people are continuing the conversation by highlighting and responding to this story.

It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way — in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only. — “A tale of two cities by Charles Dickens”

Nobody could have summed up my thoughts on 2017 any better than Charles Dickens. It was the year where the totality of eventualities that unfolded were absolutely unpredictable at the outset of the year. I have a feeling 2018 will be no different in that respect.

I decided to write this piece to establish the key differences, IMHO, between Bitcoin & Bitcoin Cash. This post is written with the intention of being neutral, and has been reviewed by supporters from both sides, who believe it is a reasonably fair representation of the arguments from each camp.

Cøbra on Twitter

Going into 2018, Bitcoin users and Bitcoin Cash users should agree on some sort of truce and peace. No more "Bcash", no more misrepresenting Bitcoin Cash as Bitcoin, no more attacking each other which only hurts us both. Only friendship and goodwill!

In early 2017, I expressed my concerns that a fast rising tide in the crypto world would result in another Bitcoin Bubble (which just means perennial overvaluations with subsequent bear markets, as has happened on 3 prior occasions to Bitcoin — it does not mean Bitcoin will die!). At the time of writing, the Bitcoin price has peaked to just below $20k in early December 2017 with a subsequent low of around $12k — and is now hovering around $13k. Not quite a bubble burst, but seems to be a correction in the making. That being said, this is still a pretty healthy state of consolidation for Bitcoin and my worst fears around unhealthy exuberance appears to be have been overcome with overall general positivity for Bitcoin by a fast growing global crypto enthused community.

The other major concern that I had written about did actually happen: Bitcoin forked into two major forks — Bitcoin & Bitcoin Cash. The success of the Bitcoin Cash fork, which resulted in a new coin being valued at around $10bn at the time of the fork (and now over $40bn), encouraged others to fork, and as a result, we have Bitcoin Gold, Bitcoin Diamond, etc. I went publicly bearish on Bitcoin earlier in 2017 because I truly believed that the market couldn’t sustain high transaction fees as a result of a higher Bitcoin price, if scaling was not resolved — but the viewpoint amongst Bitcoin supporters changed somewhat and it is now being seen as “Digital Gold” or a “Store of Value” — and not as a digital currency with low transaction fees.

When Bitcoin Cash forked out of Bitcoin, if you were holding Bitcoin — you would receive 1 Bitcoin Cash for every 1 Bitcoin you owned. The key difference is that each fork has a different set of miners and developers working on taking it in whatever direction they deem is best, with support from their respective communities. The key here is that no-one loses — you can hold both coins and see which fork of the chain becomes the best or most widely adopted. If you buy a coin after the fork, you risk that the other fork(s) wins out. For this reasons, I highly recommend that people do not sell their forked coins until we can see how all these forks play out . I believe you should maintain at least 1 Bitcoin Cash for each Bitcoin that you own, for example.

Vinny Lingham on Twitter

Bitcoin Cash isn't Bitcoin. Bitcoin is the longest chain from the Genesis block, with the most accumulated proof of work, trading at the highest price (social consensus). Anyone is free to fork & try to meet those conditions, but don't call it Bitcoin until then. Just my opinion!

I was very bearish on the idea of a fork of Bitcoin primarily for a simple reason: Nobody owns the brand “Bitcoin”. It’s a very interesting dilemma that in a trustless, global, open source environment where government resistant software is being built to decentralize value and money, that the lack of governance or controls means that anyone can fork the code and create a variation of Bitcoin, and ironically, there is no government that you could appeal to, for help.

This also leads to the problem of fork inflation (creating more coins out of thin air) — we now have multiple Bitcoins on the market, and in the case of Bitcoin Cash, there is significant market cap (c. $40bn) which reduces Bitcoin’s market dominance (as forks are classified as alts) and creates/transfers value to another chain with another set of 21m coins. The market right now is very confused with all the new forks emerging, but eventually, I think it will rationalize.

Chris Burniske on Twitter

I've been in #Bitcoin for a while now and can't tell who's right & who's wrong anymore. I suppose we're all wrong because we're all pointing fingers at one other, as opposed to uniting together.

Bitcoin:

The current Bitcoin is the longest proof of work chain, as defined by Satoshi in the white paper. This chain is what is traded under the ticker symbol BTC. The Core development team is an open source project, to which anyone can contribute and participate in.

The Core developers have the following philosophy around Bitcoin:

1. The ability to run a full node is important and that ability needs to be within reach of individuals. Therefore, growing the size of the blockchain by having lots of microtransactions will result in the blockchain becoming too big and expensive for the average individual to be able to run a node and validate their own transactions.
2. In order to be government resistant, Bitcoin needs to be difficult to change and so there is a process for submitting proposals and consensus changes are not meant to be debated in any more meaningful way by Core, than by the rest of the community that engages with them. Nobody can make a change unless there is a broad consensus from users/nodes.
3. Bitcoin’s security is maintained by ensuring that miners can earn enough money from mining rewards, but the belief is that the new coins being issued every block are a form of inflation and so when these coins run out (in 2140), a fee market needs to exist to ensure that there are enough transactions to mine at a fee, to keep mining profitable and ensuring that the chain is secure.
4. Nodes/Users are what matters and miners are simply paid coins to mine Bitcoins and transactions. They do not set and cannot change the rules. Soft forks (User Activated Soft Forks) is now a proven grassroots mechanism to upgrade the Bitcoin protocol, without requiring miner support.
5. Bitcoin needs layer 2 networks such as Lightning, in order to scale as that removes the dependency on increasing the block size in layer 1, and increasing the block size will lead to higher levels of centralization than is optimally desired for censorship resistance, etc. The idea behind layer 2 scaling is that transactions are handled outside the 1mb block space, which means the 1mb block space functions as a settlement layer, while layer 2 handles transactions.

Bitcoin Cash:

Bitcoin Cash is a fork that occured before Segwit was activated on Bitcoin, on 1 August 2017.

Activating Segwit through a soft fork/UASF represented a technical change to Bitcoin that was not enforced through the traditional mechanisms (a hard fork). For a number of supporters of Bitcoin, who believed that the Core development team had not steered Bitcoin in the right direction. Segwit represented an unacceptable technical change to Bitcoin and so, they took a small percentage of hashpower with them (around 10%) and created a fork of the original pre-Segwit activation codebase, called Bitcoin Cash.

Many false narratives have arisen around Bitcoin Cash and who is ultimately behind it. In reality, there have been many teams that rose up to challenge the Core development team’s implementation of Bitcoin over the years (Bitcoin Classic, Bitcoin Unlimited, Bitcoin ABC, etc). In the end, it seems they united under one banner and created Bitcoin Cash, including Gavin Andresen, who was the principal Bitcoin Core developer that Satoshi handed the reigns of Bitcoin over to when he left. Gavin had been an advocate for bigger blocks for years but was never able to get it implemented within Bitcoin.

At the time of the fork in August 2017, the fundamental changes were:

• An increase in the block size to 8mb (from 1mb) and no Segwit activation.
• Changes to the difficulty adjustment algorithm (DAA), due to it having a minority of hashpower — which required an emergency difficulty adjustment (EDA). This was changed again via a Bitcoin Cash hard fork in November 2017 and the DAA is more stable. The max limit of 21m coins was not changed, however Bitcoin Cash miners mined 100k more coins in the interim period until the new DAA kicked in. This also means that halving day for Bitcoin Cash will be sooner than Bitcoin by nearly 2 months.
• RBF (Replace by fee) was removed from Bitcoin Cash.

The Bitcoin Cash developers have the following philosophy around Bitcoin Cash:

1. Not everyone in the world should or will run a node and therefore making it economical to do so is not actually practical. Decentralization to the nth degree is a nice idea but they believe Bitcoin is a small world network. The tradeoff is that not everyone in the world will be able to run a node and so the question really is: How important is that level of centralization to trusting that the network as a whole can function? On Bitcoin, there are around 10,000 listening nodes today (so possibly 10x in terms of validating nodes), and probably over 30m people using Bitcoin worldwide, but it’s still unlikely that average users will want to run a node and would be comfortable trusting larger third parties.
2. Bitcoin was arguably designed to scale at layer 1, due to increases in computing capacity every 18 months, as per Moore’s Law. Brian Armstrong from Coinbase wrote about this a year ago. Bitcoin Cash intends to scale by increasing the block size, and not creating a layer 2 solution.
3. Nodes without mining power have no ability to contribute to the consensus mechanism of Bitcoin, so they are disregarded. The original white paper did not differentiate between the two, because it was never envisioned that you would have a node running without mining at the same time. Bitcoin Cash is using Nakamoto Consensus to determine consensus rule changes.
4. As per the original Bitcoin.org website — Satoshi said that a fee market should maybe exist, once the coins had been fully exhausted. There is no need to build a fee market today, as there is 120 years to plan for it. Keep transactions cheap and fast and ensure that there is global adoption first and foremost.
5. Anyone can submit changes to the network from any one of the multiple implementations/clients running Bitcoin Cash. If miners vote to adopt the change, a hard fork will occur and the network will continue to function using this consensus mechanism.

As many Bitcoin and Core developer supporters have indicated, the Bitcoin Cash philosophy is more closely aligned to Satoshi’s original white paper, but the centralization aspects of mining and other concerns around privacy and government resistance have come to the fore and as a result Bitcoin needs to pare back on these aspects because Satoshi could not have predicted these risks (ASIC mining, the rise of China, etc.)

Cøbra on Twitter

It's easy to understand why Bitcoin Cash supporters say their coin is the "original vision", because it probably *is* closer to the original vision. Bitcoin was obviously meant to be used for commerce and not just as a store of value. But the original vision is wrong and flawed.

At the end of the day, I believe that network effects win out and right now, Bitcoin has the largest network of users and supporters, even with high fees and slow confirmation times. The notion of layer 2 scaling is perfectly fine and it will work in the end and the Core development team are probably correct in that smaller blocks (possibly, even less than 1mb — as Luke, one of the Core devs did research that 350kb was optimal) are actually more ideally suited to fulfilling their philosophy around Bitcoin and requires moving transactions to layer 2. The reason that Bitcoin Cash split off was because they challenged Bitcoin Core’s philosophy around Bitcoin, not their technical ability. IMHO, Bitcoin Core is making the right decisions, technically, that align with the philosophy that they have.

I ran a poll on my twitter, trying to find out what aspects of Bitcoin were most appealing (only had 4 options) and unsurprisingly, 10% of people cared about censorship resistance in that they would have to run their own node and validate transactions. Mostly, they cared about saving money and making money (no surprise).

Vinny Lingham on Twitter

What do you care most about (if you have to choose one option only):

The question is: Which coin wins in the end in terms of market adoption, and by inference, market value over the next 12–24 months. If it’s based on the current network effect, Bitcoin will win hands down. If Bitcoin Cash’s philosophy proves to be superior and it can build a bigger network by attracting the businesses than can no longer run on Bitcoin due to high fees, even while sacrificing some areas of centralization, then it has a chance of building the bigger network effect and having a higher coin price as a result.

The gold market (Store of Value) is estimated at $7 trillion and the currency market (Medium of Exchange) is over $100 trillion. Both Bitcoin Cash & Bitcoin want to rule both.

It’s clear from the recent surge in Ripple (a highly centralized coin) to $2+ ($100bn+ market cap), that the market/traders definitely don’t care much about centralization.

So, what do the majority of consumers in the world really want?:

A cheap, fast global currency, or digital gold/store of value ? Time will tell.

Or, as my partner, Kyle Samani (at my crypto hedge fund, Multicoin Capital), puts it — they will converge into one, in the long term…

Kyle Samani on Twitter

This quite literally proves my point that, on a long enough time scale, SoV and MoE converge into one https://t.co/ZOSy5gK4s8

A Tale of Two Bitcoins was originally published in Minessence on Medium, where people are continuing the conversation by highlighting and responding to this story.

2017 was, without a doubt, the year that crypto trading and investing came out of the shadows and into the mainstream consciousness of everyone in the technology world, and beyond.

When my company, Civic, conducted a token sale back in June of this year, we had as many as 50,000 people waiting in a queue, to purchase our tokens, and we concluded a successful $33m token sale.

We were one of only a few dozen companies that had attempted to do anything like this, and at scale, where the tokens were sold to thousands of people, around the globe and we required everyone to use a Civic account to signup and make a purchase — which to some degree helped reduce the incidences of people buying multiple times and depriving others of the opportunity.

This resulted in around 10,000 people participating in our tokensale, which was in stark contrast to others that had maybe a few hundred. This allowed us to build a network effect for our product and engage with people who wanted to be a part of what we are building — the passion for the product has been overwhelming and we are still struggling to deal with the all the leads & opportunities that we are receiving from our network of token holders, who want to help us build the network and see the network succeed because they are a part of it.

Since then, raising money via ICO’s & token sales have reached epic proportions — over $3bn has been estimated to have been raised this year. I explained a lot of why this is just the beginning of a New Financial Revolution and Why Tokens are eating the World.

I’ve been in the fortunate position to be receiving some very exclusive deal flow in the crypto space, over the past 6 months in particular, and I have made some great investments with eye-popping returns in a short space of time. But, the space is becoming very crowded and unless you have the ability to do deep due diligence, understand the technology, the market, the team, and all of the various other factors that can impact investment success, investing in crypto is starting to look a lot more like a sport, where the professionals make money and the amateurs do not…

Vinny Lingham on Twitter

If you need a break from trading crypto currencies, I highly recommend you engage in some lower risk activities like roulette, craps and blackjack during your downtime.

Given the success of our utility token sale, and the lessons learnt, I’ve given much thought as to how Civic could democratize other areas of finance, and eventually society. One of these areas is by broadening the access & availability of investment opportunities to the broader market.

Due to a number of laws in the US and other parts of the world, crowdfunding and pooling capital into investment funds is an activity that is highly regulated and costly to execute at scale. This means that investment funds do not bother raising money from thousands of people with median wealth or income, they focus on HNWI (High Net Worth Individuals). This typically translates into a situation where the very wealthy get access to the best investment vehicles.

There are laws in the US and other parts of the world, for example, that conflate wealth with intellect. For example, in the US we have laws that require certain investment products only be offered to “Accredited Investors”.

In the United States, to be considered an accredited investor, one must have a net worth of at least $1,000,000, excluding the value of one’s primary residence, or have income at least $200,000 each year for the last two years (or $300,000 combined income if married) and have the expectation to make the same amount this year.

This means that a young adult in their twenties, who has some savings but no real wealth accumulated, is precluded from investing in funds or companies because they are not deemed to be sophisticated enough to take on the financial risk, because their wealth does not meet the requirement as stipulated by the legal framework for investing.

Now, understandably, there are good reasons for why these laws exist — and it’s really to protect the uninformed investor (so this would be grandma or grandpa, for instance) who has no idea what a cryptocurrency is, and would probably fall for any scam that walked in the door with the promises of overnight riches. These laws have their place but created unintended consequences.

My point, is that one’s wealth or income does not define their intellect or sophistication — knowledge is gained from experience, research and engagement and if we solely rely on accumulated wealth or income as a means to gate people from high growth investment opportunities, then we may see a world where the Gini co-efficient continues to rise and the youth in countries like South Africa will eventually rise up and overthrow the government because of the high levels of inequality.

Joining Multicoin Capital

I’m pleased to announce today that I’ll be joining the team at Multicoin Capital, as a General Partner. I highly recommend that you signup for their crypto research newsletter on their website. Multicoin Capital is a long term crypto hedge fund that currently can only serve wealthy High Net Worth Individuals (HNWI’s) and select corporate investors and funds.

I’ve been spending some time with the team there over the past few months discussing crypto and I must say that I’ve learnt a lot from them over this period. Tushar Jain & Kyle Samani have very deep views on the crypto ecosystem and have produced some insights which I’ve been pretty impressed by.

Kyle Samani on Twitter

Hypothesis: biggest mistake tech people make when evaluating financial markets is to think exponentially when the market acts linearly. Biggest mistake finance people make when evaluating tech is to think linearly when tech evolves exponentially

Tushar Jain on Twitter

This market makes everyone who invested in crypto look like a genius. The people who have not invested in crypto yet should know many of us were just lucky. You'll only find out who the skilled investors are after a downturn.

We’ve been spending time on the topic of democratizing crypto investing and have come to the conclusion that we could enable crypto investing, at scale, by leveraging Civic to comply with regulations, using our identity verification technology to ensure full regulatory compliance. I can’t provide too many details about what is being planned, at this stage, but I look forward to being able to announce something early next year.

This additional role will have the intended consequence of providing me with more time to focus on Civic, in that the team at Multicoin are very talented and I will be trusting them to manage the bulk of my cryptocurrency investments going forward.

Here is a link to the full press release regarding my involvement.

About Multicoin Capital

Multicoin is a thesis-driven cryptofund. We invest long-term in tokens that reshape entire sectors of the global economy.

Blockchain technologies will create trillions of dollars of value over the next decade. But investing in tokens is fundamentally different than investing in companies. New tools, heuristics, and security measures are required to responsibly invest in this ecosystem.

We believe in making decisions based solely on first principles and deep understanding of technology. We rigorously research blockchain protocols, teams, and market opportunities to deliver venture capital economics with public market liquidity.

Democratizing Crypto Investing was originally published in Minessence on Medium, where people are continuing the conversation by highlighting and responding to this story.

Cryptocurrencies such as Bitcoin & Ethereum have ushered in a new era for the world, with Bitcoin hitting highs of nearly $6,000 yesterday. Most of us in the industry have been caught off-guard by how (and why) the market capitalization of crypto currencies & assets has exceeded $150bn so quickly this year. I’ve spent a fair amount of time thinking about this and where we are going to next and so I’m going to try to weave a number of seemingly unrelated observations together in this post to, hopefully, light the way.

Chris Burniske on Twitter

7/ "#Bitcoin & #Ethereum are not just any other asset, like gold or silver or stock. They're shares in an economy." ✊ @Dan_Jeffries1

Firstly, the big question is “Are we in a bubble?”. The short answer is : “No-one knows!”. I like to point out that the total market value of cryptos are less than Yahoo alone, at the market peak. Also, the behavior of cryptos is remarkably different from stocks and bonds — these are network products, not stocks or bonds. They typically don’t have yields (unless they are a security). Their utility is derived from adoption and network utility. Network effects lead to parabolic/exponential growth and the human mind is famously inadequate at being able to see or predict parabolic value creation.

David Sacks on Twitter

Is it real or is it a bubble?" represents a false dichotomy. Internet was both, during dot-com era. Genuine revolutions create froth.

So what are the driving forces behind the sudden growth in the crypto market? First, we have to take a quick step back and understand how the world has evolved since the last two market collapses (2000 & 2008):

• Governments have been printing money, effectively inflating assets and driving yields down. If you want to create wealth, it’s very hard to find hard assets that aren’t overvalued and that will deliver a yield that makes it worth your while. The risks adjusted prices of stocks and bonds, in my opinion, are incongruent. In almost all cases, you’re chasing single digit returns unless you’re taking on asymmetric risk.
• Crypto-tokens are supercharging network effects by aligning incentives like never seen before. These “DApp” tokens are going to enable the next wave of business models, where micro-incentives and rewards will share the value that a business generates with their users. A business model where early token holders are rewarded for being early adopters, spreading the word, and spending the coin, where companies can change consumer behaviour through incentives. These features are opening business up to customers who were previously excluded, such as the underbanked. Wala is an interesting project that I have invested in, that is makes use of this principle.
• Public utilities are being built using blockchain technology, as I described in a previous post, “Why tokens are eating the world”. These public utilities will fundamentally change the way we design the world that we live in for decades to come. We’re building networks and public utilities which function with their own currency (such as Civic), but instead of rampant and unfettered inflation —we now have cryptographically guaranteed caps on currency issuance, unlike governments who can print new money ad infinitum. It perversely does the opposite of what governments have done to businesses and society over centuries, in that value is preserved and not eroded.
• The stock market has been largely closed to small cap, high opportunity IPO’s. Even when companies do IPO, venture capital & private equity funds have already loaded the companies up with so much capital pre-IPO, that the general public doesn’t really get to participate in the growth of company once it’s public. Companies do this to maintain control for longer, but by the time they go public the risks are mitigated to such an extent that you’re not going to get a mediocre returns, with albeit lower risks. Low risk, low reward.
• Millennials, who saw how the financial system destroyed their parents savings and wealth in 2008, are eschewing it. Banks are unable to cater to this sector adequately and are quickly trying to attract this generation, but with products that are not serving the needs of the market.
• Tech savvy millennials typically have high disposable incomes, and are happy to throw it all into projects that even have a slim chance of creating real wealth for them. It’s the mindset of younger folks who are trying to create asset bases for themselves — they don’t have kids or high overhead lifestyles, and don’t care if they lose their shirts as much as if they were 40+ with families, college savings, etc.
• Global capital formation is changing, rapidly. Companies can do an ICO and raise tens or hundreds of millions of dollars within hours or days, without needing to be backed by a VC fund. So, where is this money coming from? It’s coming, in part, from millions of young, tech savvy kids worldwide who previously did not have any opportunity to participate in the high risk, high reward technology that has upside which could be life changing, like the value creation effects of Ethereum or Bitcoin.
• People, anywhere in the world, are now able to build high upside crypto portfolios with hundreds or maybe thousands of dollars. These portfolios give them the opportunity to make hundreds of thousands or even millions of dollars. They don’t care if they lose the money, they don’t want 5% a year return either. They’re happy to buy hope, and take the risk because 5% won’t change their lives, but this could. The reality is that single digit returns are not going to help those who don’t have much to invest — so the mentality is akin to the notion of buying a lottery ticket when you don’t have enough to buy a single share of a quality company. Yes, it does start to look to more like gambling and not investing, but that’s pretty much what crypto has become, for now.
• With enough high risk crypto assets, you can begin to construct an Efficient Frontier portfolio, that can eliminate much of the risk as a sector and still offer sufficient alpha. How much of your portfolio you choose to allocate to crypto is still your choice, but the point is that we need lots of high risks bets with the hopes that 1/10 or 1/50 pay off at a rate of more than 100–1 to make it all worthwhile. In some ways, this is what VC is supposed to do, but the shape and structure of VC prevents this as partners can only take on so many investments, nor do they have the ability to make smaller bets and spread them out more (although accelerator firms like YCombinator have managed to do something like this).
• The global financial system has meant that stock markets and investment opportunities have been very regionalized for decades. When I was a 20 year old living in South Africa, I could only invest my money on the Johannesburg Stock Exchange and into South African technology companies. I couldn’t open a US account and invest in US stocks or bonds like Yahoo or AOL. The crypto world doesn’t work like that — crypto assets now have global audiences instead of regional ones, which means there is more money chasing these assets — through vehicles that don’t operate like traditional stock exchanges.
• It’s not all going to be roses. There are questions around scams & ponzi schemes, along with corporate governance and giving money to people who are just incapable of running or scaling an organization — but this is why the winners have to pay off at a higher rate — to cover the cost of the losers and generate net positive returns. If you’re smart and diligent (and lucky), you’ll hopefully be able to avoid more mines than ones you stand on!
• Wealth transference from the older generation is happening as the Baby Boomers generation fades gracefully. The younger kids are far more tech savvy and have witnessed so much tech disruption that they are looking for “The Next Big Thing”. This wealth transference is already finding it’s way into Bitcoin and other areas that previously would have been overlooked by less tech savvy, high net worth individuals.
• The other thing that the younger generation has, is time. They have the time to educate themselves on crypto. Open accounts. Monitor trades and chat rooms and be part of the ecosystem and learn about new opportunities before those who are settled and on the road to retirement. By investing the time and energy to absorb themselves in this space, they immediately have an edge and will trade the markets in a far more agile and profitable way.

Vinny Lingham on Twitter

Crazy prediction: I think we will see, within the next decade, a political party funded by an ICO will win a national election!

Lastly, in a world of chaos, let’s not forget about “Hope”. Many of us are hoping for a better world. We’re willing to take risks and bet the farm in the face of all likelihood of failure. We do this because we know that it’s on us to make the world a better place for the next generation. With the same breath, we are finding that there are others out there with the same dream that have never been given the chance to participate in the changing world because of the previous boundaries of the financial system. That world is gone. This is the New Financial Revolution. It’s going to be a rough ride — it may look like it won’t work at some point. Some will give up. Those who persevere will be rewarded. We’re going to have to change everything — starting from regulations to the public utilities to government systems and even democracy. In the end it will be worth it. I “Hope”.

The New Financial Revolution was originally published in Minessence on Medium, where people are continuing the conversation by highlighting and responding to this story.

Since the Civic Token Sale in June, I’ve been inundated with questions from friends, VC’s, fellow entrepreneurs and just about anyone else out there who wants to do a Token Sale. My previous blog post on “Tokens are eating the World” surpassed all the views, likes and shares of every previous post I have written! It’s seems “so easy” to slap together a Token Sale with a white paper, pivot your business model ever so slightly and then raise tens or even hundreds of millions of dollars within seconds. Everyone else is doing it, so why shouldn’t I?!

In reality, it’s not that simple. This process takes months (not weeks), and we’re talking about working 24/7 around the clock to get it done once you decide to go this route. I decided to write this practical guide, which is by no means exhaustive, but should answer all the basic questions and hopefully a lot more, so let’s get right into it. For a more detailed primer on Blockchains, Protocols and Token Sales, I suggest this post .

Firstly, you have to ask yourself, what is your token good for and why will people buy it? Since 2015, we were developing technology to fill what we saw as a major gap in online technologies: Identity Verification Services.

Online interactions happen countless times a day amongst people who could claim to be someone, while being someone else, or a consumer who has to fill out paperwork and then a company has to figure out how to confirm its accuracy, whilst protecting the privacy of the consumer the how their data is handled. With the purposes of preventing fraud, stopping identity theft, easing administrative hassles for both consumers and service providers, and making online interactions frictionless, we believe we have created something special with our token and the underlying technology. We plan to continue to evolve it along with the development of new use cases for blockchain technology, and we seek to let our token users meet the future on their terms.

Secondly, you have to design your token in such a way that it makes sense to prospective users, and be as clear as you can when you describe the terms and functionality in connection with the sale of the tokens. A token sale is essentially the same as a crypto currency — e.g., Bitcoin or Ether — but the distinct difference is that you’re not offering a crypto coin that is mined with consensus rules, instead you’re offering a token, for example Civic (CVC), which might have a special purpose (smart contracting, etc). Tokens are typically not mined — they merely sit on top of the crypto platform they are issued upon.

What are the requirements for a token sale?

In theory, the requirements are very low for a token sale in that anyone can “technically” create and sell a token. The reality though is that there are hundreds of token sales now happening every month — competition is stiff. Unless you put a lot of work and effort into preparing for your token sale and producing an excellent white paper, you’re probably not going to be able to sell as many tokens as you may want or need to. You need to put together the white paper, and other information in order to properly describe the technology protocols and ecosystem in which the token can be used.

What is a “White Paper”?

Here is an example of the white paper that Civic produced. This details how our technology and ecosystem are intended to work, how we designed the tokens within it, and how users could acquire and use the tokens. You will need to find a technical firm to work with to assist in writing and designing the use case for your token.

A white paper is critical to show that you have thought through your project and you have clearly defined use cases around your tokens. Tokens are effectively becoming a means to produce and disseminate technology and so you need to plot a course for buyers to show them how these utilities will help them solve a problem or offer access to valuable tools.

Who can help me conduct a token sale?

Civic worked with 3 entities to conduct the token sale:

Token Market: Providing community support, token sale infrastructure and helping potential buyers understand the nature of the token and its underlying technology. Providing technical support around all aspects of the sale and issuance of the actual tokens.

Argon Group: We worked with Argon Group to provide advisory services.

Perkins Coie : Critical part of conducting the sale was having excellent legal advice and Perkins is one of the most reputable firms in this space. We worked with Lior Zorea & Jacob Farber, both of them are excellent and understand this space intimately.

Marketing:

Tokens are best sold to technology enthusiasts who wish to support and use the latest technological developments. Since word of mouth is so strong in the crypto community, advertising is an area that we steered clear of. We wanted the vision and value of the product to stand on it’s own two feet and we didn’t believe that we needed to advertise.

Outside of thought leadership articles posted on my blog and tweets I posted, intended to attract just the hardcore crypto community, we largely did not market our token sale. Granted, I have a large following so a limited marketing campaign may not apply to you, but there is need to balance the fact that if people don’t know that you are running a token sale, you’re not going to get any buyers, with targeting those in the community who really understand the purpose of the token.

Another tactic that gets used to is offer bonuses to early participants in order to build momentum and attract buyers. This has the same impact as discounts, which I discuss below.

Eat your own dogfood:

The core of Civic’s technology is the ability to create unique digital ID’s using mobile devices. We employed this technology in our token sale and required every person in the crowdsale to download and register using the Civic app. This ensured that we did not have the same person making multiple purchases. This model worked for us and others, like ZRX and now Doc.ai will be using Civic to ensure broader distribution of tokens.

Token pricing & structure of the sale:

We decided to create a supply of 1bn tokens. The simple reason is that, in order to be used for their stated purpose over time and across the industries that may find the tokens useful, 100m did not seem like enough and 10bn seemed like too much. You can use any number you wish. We priced the tokens at 10c, with the goal of selling 330m tokens, for an amount of virtual currency that approximated $33m.

Discounts:

Civic was in the enviable position that we didn’t need to offer any discounts to any buyers at all. Demand greatly exceeded supply and so we placed everyone on a level playing field. I highly recommend that if you do need to offer discounts to buyers, that it comes with a lock-in period where they cannot sell the tokens (e.g. 20% discount, but can’t sell for 12 months). Offering early buyers bonuses or discounts without a lock-in can cause a disconnect between the ongoing pricing of the tokens from what users would otherwise pay.

Distribution:

In order to ensure that the full $33m was sold, Civic decided to pre-sell all the tokens to large buyers ($50k minimum, up to a maximum of $500k), with the stipulated provision that we make 1/3 of the tokens available for sale to the crowd. We wanted to ensure that we had a big network of major users and technology supporters behind Civic, but also ensure that we sold out. We sold up to $33m to just under 500 buyers.

Once this portion of the sale was completed, we opened up the token sale to the public, with a maximum price allocation of $25,000 and minimum of $50 and we made 1/3 of the offering available in the crowdsale. We used Civic’s technology to ensure that buyers were not purchasing multiple times. We also used a queuing system on the day to ensure that our servers didn’t break. It’s a good thing that we did, as we had over 50,000 people waiting in line on the day we launched the token sale!

It was very difficult to predict who was first in line at precisely 6am PST — with 10,000+ people refreshing their browser at exactly 6am PST, we were forced to give a random number allocation, since demand greatly exceeded supply and there is no way to determine who was “first”. We managed to sell all the tokens out within 24 hours, and refunded 1/3 to the larger buyers. In retrospect, we would have done what 0X did, using Civic technology, to distribute their tokens to even more people had we known how big the demand was.

One of the problems we experienced was the Ethereum network was clogged and many payments expired past the 6 hour window. This created a lot of frustration for everyone involved. Bitcoin was seamless. Ethereum has some interesting and powerful applications but payment is certainly Bitcoin’s strength.

I spent some time on this blog post, discussing how we were optimizing the token sale for network success. I think that in the end, everything went pretty much according to plan.

Token Allocation:

We allocated 33% of the tokens to the company, 33% for the token sale and 33% to give away to partners to activate the network. I detailed most of this in my prior blog post. When building a network effect, you need to incentivize the network, hence the need for a large allocation to our partners. We have been very successful in signing up partners to the network with this model, as detailed here.

All the tokens that were allocated to the company are vesting over 3 years, 1/3 per year. No tokens were given to employees or founders.

Existing investors, shareholders and employees of the company still own stock in Civic which owns 33% of the tokens.

We did this to align interests — everyone is focusing on ensuring that Civic executes and build an amazing ecosystem and we will ensure that the benefits accrue to all CVC token holders, of which Civic is the largest.

Exchanges and listing tokens:

We didn’t pay or get any exchanges to list the token. Also, the distribution curve makes it difficult for any one entity to control the token pricing because no individual or entity was able to purchase more than 0.33% of the total tokens issued. CVCs are now being traded on a number exchanges, including Bittrex.

Corporate Governance:

Civic, Inc. is a VC backed, Delaware “C” Corporation. We recognized the token sale as a sale of software tokens/licenses which we are treating as revenue and paying taxes accordingly. This is in stark contrast to what many companies are doing in setting up offshore entities & trusts to avoid taxes and bypass the regulatory environments they are in. We don’t believe you can build credibility as a company by adopting that view and exposing stakeholders to potential regulatory risks and liabilities.

In closing, this was by no means meant to be the ultimate guidebook, but hopefully it’s a good start. This is not legal advice or meant to be used as a template for your own process. Each company and product offering is unique and has a different set of circumstances. I highly encourage you to seek the correct legal, business and technical advice before embarking on a token sale.

If you’re considering doing a token sale, contact us at partners@civic.com and see how you can use our technology to ensure that you have a fair and transparent sale process.

A Brief Introduction to Token Sales was originally published in Minessence on Medium, where people are continuing the conversation by highlighting and responding to this story.

The title of this post pays homage to Marc Andreessen’s epic post in 2012, “Why Software is Eating the World.” Marc made some very interesting observations in that seminal post where he succinctly forecasts much of what has transpired over the past half-decade. Software has been the leading driver of change in the world and the software giants such as Google, Amazon, Facebook, Salesforce and the like have only continued to grow in size and scale — leading much of the world into a new era and forcing companies and industries to transform, in order to keep up with the pace of innovation.

In a similar fashion, Bitcoin & blockchain technologies are slowly but steadily gaining momentum with a breakout year in 2017. As I write this post, the markets have cooled off significantly from their highs when Bitcoin touched $3,000 last month and Ethereum reached $400. They are now respectively hitting lows of $1,800 and $140 within weeks of touching their all time highs. Those of us who have been around the crypto world for a while will be quick to point out that we will continue to see higher highs and higher lows over time. This is due in no small part to human psychology, and the resultant bubbles and busts which are part of the cycle of crypto, and technology adoption curves in general.

The recent momentum in the crypto markets has also opened a door to a new world — allowing companies and projects to conduct large scale ICO’s (Initial Coin Offerings) or token sales. With the recent cooling off, it may take time for the market to determine if it can support both the volume and size of these offerings, but it’s certainly been an eye-opening experience for me. I was privileged to participate in this industry and complete a $33m token sale for Civic. We also just announced our partnerships with over 20 companies, representing over 250m Monthly Active Users, to begin to accept Civic Logins and 2Factor Authentication services. This may become the first large scale usage for blockchain by the public (who won’t even know it’s built on Bitcoin technology).

The main reason for my post today, is that I feel we’re entering a new era within the crypto world. Civic opted for a token sale rather than an ICO for a number of reasons. The difference is that rather than creating a mineable cryptocurrency, we sold a token that sits on top of the existing crypto networks. We’re not relying on miners to mine our token, and we are not building the network around this — instead we are deriving a use case from the infrastructure that has been built up by the crypto community over many years. We didn’t need to create a cryptocurrency, we just needed to create a token on top of an existing cryptocurrency. We are now entering a realm where its possible for applications to be built on top of blockchain technology, and this is enabling new use cases and, more importantly, the ability to create “private economies”. Balaji S. Srinivasan does a great job of summarizing how tokens are beginning to permeate every facet of our society.

Private economies

I spent a lot of time at my previous startup, Gyft, thinking about what we termed “Merchant Issued Currencies”. When I analyzed the volumes & statistics behind the gift cards that Amazon, Starbucks and others issued, I was staggered at the scale they were operating at. We’re talking about billions of dollars, stored in (unsecure) gift card codes, but which are reasonably liquid and tradeable on open markets and secondary exchanges for gift cards. These companies utilize the gift card metaphor to issue their own currencies, but ultimately, they are still denominated and pegged to fiat currencies.

This means that any inflation of those fiat currencies effectively also destroys the underlying value of the gift card that was issued and, as a result, even if these companies create products that retain their value, if the value of their currency is debased (for example, if they were based in Zimbabwe during hyperinflation), then the value stored within the underlying gift card would also diminish.

Does this have to be the case? Maybe, but could we have a situation where companies can issue their own private currencies that trade against fiat currencies ? This would allow companies to control the value creation and expectation by participants in the network that utilize the currency, without unpredictable inflationary pressures. This is not dissimilar to the way that Bitcoin and Ethereum functions within their respective economies — there is an issued currency and a cryptographically guaranteed inflation rate. These currencies then trade on exchanges based upon these known factors.

The cost to setup a virtual currency, with the security of mining, processing of transactions and the need for a team of cryptographers is prohibitive for most companies, even if only from an economies of scale perspective (every company does not have to run a blockchain). Luckily today, with the advent of token technology, this becomes more straightforward and cheaper by building on top of pre-existing crypto infrastructure.

Civic has created 1 billion utility tokens that provide access to identity verification-related services in a decentralized, token-based ecosystem. These tokens represent a unit of account for the network. The bigger the network grows, the more utility in the token — and because the number of tokens are fixed (no inflation in the total supply, although they will be released over time). As the size of the network and transaction volumes within it grows, this will create demand for the tokens.

A proprietary, uniform token like the Civic token (CVC) can minimize traditional transaction costs & speeds up settlement for all participants in the ecosystem. It also allows us to enforce privacy and effectively creates what is really a public utility for identity based transactions.

Uncorrelated Token Assets

I find it notable that when Ethereum & Bitcoin crash, that the prices of other cryptocurrencies tend to follow them downward too. The reality, right now, is that most of these other assets are highly correlated to market sentiment.

In times of volatility, traders tend to swap their crytocurrencies from risky ones (like newer coins) to safer ones (like Bitcoin) — and the easiest way to do this, is by converting into another asset traded on cryptocurrency exchanges. So, when Bitcoin/Ethereum has large gains, traders look for opportunities to increase their footprint across the cryptocurrency sector. However, if Bitcoin/Ethereum drops, holders will trade the other cryptos into “cheaper” Bitcoin/Ethereum.

What will happen when a highly liquid & tangible asset, let’s say for instance Gold, gets a token? Let’s assume we bought 1,000,000 ounces of gold and created 1,000,000 tokens — each pegged to the gold price and redeemable for the actual ounce of gold. The token price should trade against the gold price — assuming there was enough liquidity, so if Bitcoin/Ether gyrated, it would not impact the token price of gold, even though technically, the token is a cryptocurrency. The gold price is uncorrelated to the cryptocurrency prices.

We’re currently in a world where the belief is that the majority of crypto tokens and coins are all highly correlated with each other, but these fluctuations distort the reality of what’s happening underneath. Not all cryptocurrencies or tokens are created equal.

Delaware, where the majority of tech companies in the US are registered, has led the way with its new bill to recognize Blockchain Stocks. I will predict that within the next 2–3 years we will have a slew of companies listing their shares on blockchains— and these shares will not correlate to the price of Bitcoin/Ethereum — even though they are token based assets. So on a day when the Ethereum price crashes, it is unlikely that you will see that crash impacting the price of a token that has an underlying asset.

The value that is derived from cryptocurrency networks powering these stock issuances will purely be a function of supply/demand, and the transaction fees for mining smart contracts. Placing 1m units of gold onto the Ethereum Blockchain, for example, will not have a different impact from 1m units of Magic The Gathering trading cards — the only value driver being the demand for trading those items on the blockchain and not the actual value of the underlying assets themselves.

The primary value of the token infrastructure provided by blockchain technologies will be related to the adoption of the infrastructure, the cost of transactions and network security. It will not be pegged to the value of the underlying assets on that network, but rather the activity levels for trading those assets.

When we look at Civic, we don’t see how the value of Civic tokens is correlated to the cryptocurrency ecosystem, except that there is demand from crypto buyers/traders. We aren’t dependent on the price of Bitcoin, Ethereum or any other crypto. The value of our network is solely dependent on the nodes within our network and the demand that we are driving in creating real world use cases — functional applications and use cases for consumers, businesses and the public sector. We are leveraging blockchain technology to build real world solutions that demands the use of a token. In the same way that Starbucks could issue their own CoffeeCoin, this coin would be uncorrelated to the price of Ethereum, even if it relied on the ERC20 token standard.

Vinny Lingham on Twitter

Civic Grows Identity Verification Ecosystem by Allocating Millions in Tokens to Strategic Partners https://t.co/vfAxus2gVt

The only caveat here is this: Given that these token assets can typically only be purchased on exchanges that accept cryptocurrencies like Bitcoin, the demand for Bitcoin & Ethereum will rise at the fiat onramps (exchanges that accept fiat). However, once the token economy grows and becomes more mainstream, it’s not far fetched to believe that you could one day buy a CoffeeCoin, blockchain-based stock or Civic token directly via your bank or brokerage account.

Blockchain technologies are changing the way the world functions and tokens appear to be yet another killer app, for now. If we’re able to move land registry & title deeds, identity, commodities and stocks to the blockchain, we will succeed in making the world far more efficient and secure. I believe this is just the beginning of the token economy, but it’s early days and we are all still learning.

If you enjoyed reading this, please take a second to recommend it and share with your friends! You can also follow me on Twitter for regular Bitcoin & Blockchain related commentary.

Why Tokens are Eating the World was originally published in Minessence on Medium, where people are continuing the conversation by highlighting and responding to this story.

My previous post about Vanity Headlines not being the goal for Civic’s upcoming Token Sale at 6am PDT on Wednesday 21 June was well received from the community as the right way to conduct a crowd sale of tokens. We are breaking new ground here and there are no best practices yet in our industry, but we hope that our learnings will be adopted and improved upon by other companies, and even better —hopefully our technology will be used to develop closer relationships with other buyers of token sales.

I wanted to follow it up with an explanation of the thinking behind some of the decisions that we have made. Tammy Camp gave an excellent writeup about how we have already sold $33m in tokens, without spending any money on marketing or advertising!

We also just released our terms, FAQ & Android app.

Civic’s token sale is very different from any other token sale out there. By design. We wanted to focus on optimizing the network for success — not headlines, so every decision is made in the best interest of the network.

Let’s go through what these key decisions were, and why:

1. Unlike other crowd sales, you will need to use the Civic app to make a purchase. This gives us unique advantage as this ensures that we can track purchases to a Civic account — linked to a valid mobile number and more importantly, to the email address, which gives us a direct line of communication back to the purchaser. This is important when building a network — the last thing we want is a bunch of disengaged holders of our tokens that we cannot contact. The success of the network is going to be dependent on us engaging and leveraging the network — why would anyone want an army of anonymous, uncontactable buyers versus a group of engaged ones? Yes, there is more friction but it gets people using our app and creates a communication line with them going forward. We are also in the enviable position where we know that demand > supply so we don’t believe the friction will hurt us in terms of sales, and we would rather do it right.
2. One of the principal complaints of tokens sales is that a single buyer can create/run automated bots and scripts, making multiple or excessively large purchases and skewing network ownership. Even the largest buyers were limited to just $500k in our pre-sale, of which only $333k is guaranteed in the event of a sellout of the crowdsale — this would amount to only 1% of the tokens being sold. This means that the network will be highly distributed. By forcing smaller buyers to now use the Civic app, we are also leveraging our technology and methods to ensure that if the same user tries to abuse the system, that it would be considered a breach of our terms and we will disallow their purchases and refund their coins after a review. The incentives to cheat are now substantially reduced.
3. Encouraging wide distribution is something that we have really focused on because we are trying to build network effects. We have carved out $11m from the total token sale and make it available to the public during the crowdsale. We have set a limit of $25k per purchase, BUT we have also created a distribution schedule of purchase tiers from $50-$25,000. There are only a limited number of $10,000-$25,000 packages for sale, and the majority of the allocation of tokens will fall in the under $10,000 bracket, down to as little as $50. The reasoning behind this is that we have to consider people in countries like South Africa, where $50 is R700 — and as a global network, we believe that everyone in the world should have some level of access to participate in what we are building. With this model, we won’t sell out in 30 seconds either — by design!
4. In order to make sure the tiers aren’t abused, we have hidden the caps on them. So we are not disclosing how many $25k, $10k, $1k, etc packages there are. Once they are gone, it will display as sold out and users can choose to purchase a different tier. This is also important because it’s not a mad rush to hope the Bitcoin or Ethereum network will clear your transaction on a first come, first serve basis. Once you have purchased a package, as long as you send the funds within 6 hours, it will be kept for you. This is fair, we believe as it also doesn’t require people to pair high transaction fees in order to make a small purchase and it also allows us to manage the total cap efficiently.
5. Buyers who participated in the presale ($50k-$500k tiers) will not be allowed to participate in the crowdsale. This is in the interest of fairness again, as these buyers were given guaranteed allocations of 66% of the total tokens on sale. In order for the network to succeed, it needs to be widely adopted and this is why broader distribution in the crowdsale is so important, and we believe that the presale buyers in particular understand this.

By participating in the crowdsale, you will be signing up to be a part of the Civic Network and we hope that you see the vision for the future as we do. Identity is very personal to all of us, and at Civic, we are making it our goal to ensure that our network is global & inclusive of everyone!

Optimizing for Network Success was originally published in Minessence on Medium, where people are continuing the conversation by highlighting and responding to this story.

Today, at Civic, we’re releasing our much anticipated whitepaper, on our Token Sale page. We’ve done things a bit differently, but for very good reasons which I outline later in this post. We’ve decided to create a model for doing a token sale that is fair & innovative, and we hope others will follow in our footsteps. Before I delve straight in, I felt the need to identify an area of concern in the crypto ecosystem around how the current media attention to token sales are leading us down a path where we are no longer focusing on the goal, but instead following a narrative that is harmful to the ecosystem.

In the startup world, we’ve become very familiar with the term “Vanity Metrics”. In the crypto world, this is just beginning to rear it’s ugly head in a new format — “Vanity Headlines”. This is typical for a new industry that emerges — vanity headlines attract more clicks (aka clickbait) and this gets more pageviews and more people excited about where the industry is going. It stirs the imaginations of the readers, makes the impossible seem possible, and attempts to convert skeptics into believers.

The reality is that these headlines are very damaging and misleading to even some of the most educated in an industry. It sets the tone that the goal is to one up the previous headline. We’ve had token sales end in days, then hours, then minutes to now seconds in the past couple of months — with millions of dollars in crypto being exchanged. These headlines have gone from being misleading to becoming just outright lies.

The Gnosis token sale did not raise $312.8m. That was the value of the outstanding tokens, and the website indicated as much — the reality is that the website that published the story decided that writing a false headline because that would be better at attracting clicks than the truth.

The reality is that even if you look at the $12.5m in tokens that were sold, most of those were spoken for already in the pre-sale. The smaller buyers didn’t have a fair chance to buy tokens once the crowdsale went live.

What makes Civic different is that we believe in delivering the truth, transparency and always doing what’s right —we believe our values shouldn’t be relative. We have a strong sense of purpose, with our ultimate goal and mission being to change the world by creating a platform for democracy — with creating digital identities being just the very beginning of a long journey for us. When we decided to embark on doing a token sale, we decided to take the road less traveled and do what we believed would be a fair and inclusive token sale that would leave everyone feeling included.

Solving the Chicken & Egg Problem

Primarily, the problem we are trying to solve in doing a token sale for Civic is the proverbial chicken and egg problem. When trying to build a network effect business, you have the cold start problem: How do you get users if you don’t have companies on board, and if you don’t have companies on board, why would users use your service. By creating a token where the utility increases the larger the network becomes, the early participants in the network begin to benefit from enhanced network effects.

The opportunity to use a crypto token to build a network service is quickly being recognized. Civic is building an identity network which will connect companies and users and we’re creating 1bn tokens in order to achieve this goal. We’re selling 1/3 of the tokens via a token sale for $33m, 1/3 will be given away to companies and users to accelerate network growth, and 1/3 will remain in the company’s inventory. We believe this model will bridge the gap between having to buy users which are expensive in the beginning of creating a network and onboarding companies, eventually getting to the point where the incremental cost per user drops below the value that the network receives from each user.

This model only works if there is participation by thousands of users and hundreds of companies. In fact, this is counter to the way that many token sales are run today — where a few buyers dominate the landscape and buy the majority of the tokens from a crowd sale, preventing it from being truly community driven & supported network.

A better model for Token Sales

I don’t want to compare us to other token sales as everyone has different reason and logic, but I’m going to outline our terms of sale, to give some insight into our thinking:

We’re creating a fixed supply of 1 billion tokens. We are pricing them at $0.10 each. We felt that we needed enough tokens to power the smart contracting system for years to come and we could go to 2 decimal places for fractional smart contract execution. 1bn felt like the right number — no crazy scientific reason here.

We decided not to offer any discounts on tokens sold to anyone, pre-sale or during the crowdsale. Like any premium product, we felt that discounts cheapen the product and also gives certain buyers an advantage over others which we didn’t feel was fair. No discounts to anyone, not even friends and family.

Vinny Lingham on Twitter

If you have to discount your product in order to sell it, then you aren't operating in a market where you are a premium product! #tokensales

The 1/3 of the tokens that Civic as a company will retain, will be available for sale only after 3 years, with 1/3 being released per year.

After we announced that we were doing a token sale and published the summary whitepaper, we received a ton of interest. It was very clear that we had hit a nerve and there was strong demand for our tokens. The goal for us to do a pre-sale was to ensure that we could place all 330m tokens — and we’re on track for that. Theoretically, all tokens could be sold in the pre-sale and we wouldn’t need to do a crowd sale — so what’s the point of doing one? We asked the same question but we had a different goal.

From a company perspective, if you can sell all your inventory to one or two buyers, it makes life a lot simpler — why hassle with hundreds or thousands of buyers if you don’t need to. Many companies have adopted this approach to “crowd sales” and sell their tokens out before it even goes to the “crowd”, resulting in highly concentrated holdings of tokens by a few hundred people/entities. To be fair, it’s never been easy to control who can buy your tokens. In the crypto world, it’s very easy to setup a bot or script and auto purchase multiple times, so how do you set a limit on purchases? This is also how we get wind up with these spectacular headlines showing how token sales are over in minutes or seconds.

Enter Civic. Our product is a digital identity service. We uniquely have the ability to ensure that each buyer is somewhat unique — so we decided to flip the model around and prevent big buyers from squeezing out smaller buyers. The pre-sale will allow us to ensure that all 330m tokens are spoken for, but we’re still going to allow smaller buyers to buy up to 110m of the 330m allocation because the bigger buyers are only guaranteed up to 66% of the purchase order they have requested. When the smaller buyers show up on the day the crowd sale goes live (21 June), using a Civic account will be required to allow them to purchase up to $25,000. This will ensure that we do not sell out in 30 seconds because of a few big buyers, and even smaller buyers can get access to the tokens during the crowd sale — and without discounts to either small or bigger buyers, which is an even playing field. Bigger buyers have been very supportive of this model, because they understand the value of distributed ownership of tokens in order to create and build network effects.

So, by design, we’re not going to sell out in 30 seconds and the smaller buyers, who have been emailing us, will all get a fair chance to own some of the tokens we are selling even if they just want to buy a few hundred dollars. If we sell all 110m tokens, then it’s a win-win, in that we will have a much broader base of supporters to help kickstart the network and we would have still sold all 330m tokens. If for some reason we don’t sell the full 110m allocation sold during the crowd sale, then the bigger buyers would have effectively agreed to buy the difference, so our goal of ensuring that all 330m tokens are sold will have been achieved.

Vinny Lingham on Twitter

The whole point of crowd sales is there's a crowd buying the tokens! Makes no sense if bought only by a few folks, kinda like democracy!

We believe that this was the fairest way of creating a token sale — giving the little guy an even playing field with the big guys. The more people using Civic Tokens and Civic the better. We want broad adoption and support — and that’s really why we are doing the sale. We felt there was a better way. We’re not chasing vanity headlines, we’re chasing results and adoption. We believe there is a better way to conduct a token sale and we think we’re leading by example. In the future, we hope more companies will rely on Civic for identification of buyers, to ensure a broader ecosystem of token holders.

The vanity headline is not the goal: Introducing the Civic Token Sale was originally published in Minessence on Medium, where people are continuing the conversation by highlighting and responding to this story.

When we introduced Civic last year, we were very careful to not overplay our hand. We wanted to start by building trust and creating an Identity Protection Network where consumers could signup for free identity theft protection services and, in the process, allow us to verify and authenticate who they are. This strategy has helped us build and create systems for ID Verification that will be the underpinning of a much larger vision that we have been working on in the background — creating Digital Identities for everyone.

I’m proud to announce that after over 18 months of development, Civic’s Digital Identity wallet is now available on the Apple App Store (Android coming later this month)!

So, what’s so special about Civic and how does it work? We’ve been developing a new type of authentication service, called ChainAuth™, which uses the Bitcoin Blockchain to validate your identity credentials — your personal information is never stored on the blockchain, but we utilize the cryptographic infrastructure to ensure that the data on your device is never changed or compromised.

Basically, Civic validates your personal information and identity, stores it on your mobile phone and only you can see or use that information. It is never stored on our servers! This means that if Civic was to ever get hacked, your information would never be released because we just don’t have it.

Now that your information is secured on your device (and backed up to whatever backup provider you use for your phone), you can use this information to do any of the following:

1. Open new accounts with banks & other institutions, or just websites & apps.
2. Passwordless-entry into websites and apps & built-in 2-factor authentication
3. Private signups to sites and apps (they can let you signup without taking ANY personal information)
4. Store your cryptographic keys and any other personal information, like health records, etc
5. Generate digital ID’s and passports (eventually, once governments start accepting Civic)

Websites and apps that accept this information from Civic can be assured that you are a real person, and that any information transferred is fully verified — which reduces fake accounts, fraud and even trolls.

There is a good reason why banks, government and other secure sites do not accept social logins — the information is not secure or verified. Today, with Civic, that changes.

Websites and apps can also request that you verify additional information that they need, on demand. The best part is that once you have done it once for one service, you can re-use it with other services.

Civic is launched yesterday in US for verified accounts (verified name, address & social security number) and also worldwide, but only for basic accounts (verified email & phone number) at first. We will be adding additional countries for verified accounts later this year, but this was a good start and gives everyone in the world the opportunity to use Civic.

For Civic, privacy and security is paramount, and we have ensured that the architecture of the system is such that you are always in control of all your personal information and can choose whom to share it with at all times. Eventually, we have plans to take this to an even greater level, but I’ll leave that for another post.

Thanks to our launch partners, TokenMarket & BnkToTheFuture — download Civic today and test it out by signing up for their services.

If you are a developer and want to integrate with Civic, head over to our developer docs here and get started. We will be doing a token sale (more info to follow tomorrow).

For those of you who are technically inclined, here is the comparison architecture of ChainAuth vs OAuth.

This is just the beginning…

Civic: Enabling the future of privacy & digital security with ChainAuth™ was originally published in Minessence on Medium, where people are continuing the conversation by highlighting and responding to this story.

My prior posts have tended to be largely focused on the economics of Bitcoin. Lately, I’ve been paying more attention to the psychology and sociology of Bitcoin. I’m not a cultist or a religious zealot. Never have, never will be. I do, however, find it fascinating to see how many people have adopted a cult-like approach to the debate about “Scaling Bitcoin.”

I consider myself a free-thinker. If & when the facts change, I will change my mind. I abhor labels and avoid groupthink. I have found in my experience that even in the most heated of debates, maintaining composure and mutual respect will almost always lead to a positive outcome, if so desired. I like to think of myself as a calm and levelheaded individualist, who seeks out solutions that serve the greater good, but are still aligned with my core beliefs and principles.

Vinny Lingham on Twitter

Upon deep reflection, I've come to the conclusion that Bitcoin doesn't need to change. First, we do.

But, I’m afraid that as a broader community, we are so far away from adopting this type of mindset, that finding a resolution to the current impasse is very unlikely in the short term, without exogenous pricing pressure being applied or another external catalyst for change emerging.

One only has to look at the emotive (and often insulting) replies to many of my tweets to realize how heated this debate is, and in fact, how emotional people become when placed under the effects of long term fatigue around the current situation. When emotions get the better of us and we can no longer respond with the requisite amount of decorum, our judgement becomes impaired. And when that happens, bad decisions are often made in favor of progress and alleviating the emotional strain, not the greater good.

Most people I encounter in the Bitcoin world largely care about the price of Bitcoin and whether it’s going up or down. They are emotionally invested in its future as a store of value and a digital currency. I think I covered my views on this pretty well, in my previous piece, For The Love of Bitcoin, so I’m not going to recycle that content here.

That said, I still believe that only a Bitcoin price below $875 would force parties to reach an agreement, which was my thesis when I wrote The Power of the Invisible Hand. I did not expect that market forces would keep the Bitcoin price above $1,000 for long because I believed that the incentive to move forward was not there and therefore the market would adjust. Clearly I was wrong in that expectation, but the direction for Bitcoin is still clearly being indicated by the invisible forces of the market — viz. maintaining the status quo. And maybe, that’s not a bad thing, at least for a while.

Eric Lombrozo on Twitter

Bitcoin by design makes it much easier to block consensus rule change than to force it. This is an important feature, not a bug.

I’ve taken a step back and decided to educate myself broadly with all the options for Bitcoin around this debate, and in particular on many of the details which people overlook in cursory conversations. My findings are that this is not an easy situation and will take time to resolve. I spoke with people on all sides of the scaling debate and there are pros and cons, regardless of which path we take, if we even take one at all.

I have been vocal about the fact that I believe that a contentious hard fork which results in a minority chain would be disastrous for Bitcoin. Regardless of the path we choose, we must avoid this at all costs.

Remember, as a community, we are still constantly trying to prove and vindicate ourselves to the world, which largely has no idea about the details of our industry. Bitcoin is seen as the renegade. We’re the firestarters pushing this industry forward. We’re the unproven ones trying to upend everything around us because we believe that Bitcoin can make a difference. But, in the eyes of many, Bitcoin is still associated with Silk Road and other negative connotations coming from within the banking community and broader, and we’re still seeing the implications of that with the current issues of getting fiat in and out of Bitcoin exchanges. This is a long road still.

When things go well for Bitcoin, doubters doubt less but haters still hate more. Just imagine what would happen when things went badly… A contentious hard fork and a branding split/dilution is not an option in my opinion, as a consumer tech guy with experience in branding, PR, marketing, UX and all the other softer issues — trust me when I say that a contentious hard fork should be avoided at all costs.

So what does this all have to do with the title of my post, Satoshi’s Choice?

What would Satoshi do? I didn’t reference Satoshi’s Choice in the title as a reference to the path that Bitcoin should take, but instead the fact that he made a choice. He made the choice to leave the community to our own devices, for better or worse. He made the choice to give us a gift that came with a curse — the more we grew to love Bitcoin, the more that greed reared its ugly head both within our community and the outside world.

We are at a crossroads now, because Satoshi has made the choice to remain silent, in the sense that there is no definitive proof that he/they still exist. Maybe he isn’t alive anymore. Or, maybe he is Craig Wright, or Dorian Nakamoto, or Scronty or Bali Satoshi, etc. Maybe we’ll never know. We do know, however, that we don’t have a Charlie Lee right now.

The big question is: Why do we need a leader if Bitcoin is a decentralized, peer to peer currency? The answer is simple — because it’s not, yet.

For Bitcoin to reach the point where it’s leaderless and immune from manipulation from any one person, party or group of individuals, it truly needs to be decentralized at every layer, and quite frankly, as a community we’ve done a shitty job of doing it. We’ve been so focused on the price, or scaling, or a number of other things that we’ve created a monster in that Bitcoin is probably the least innovative (but, unquestionably, the most secure) of the major cryptocurrencies out there today in terms of what functionality is available right now. Some argue that this immutability gives Bitcoin its strength, and I would agree if it was immutable by distributed choice (i.e. broader decentralized views) — not by default because the decisions are centralized and we’re at an impasse.

It’s clear that we’re not going to have decentralized mining, decentralized exchanges with significant volumes, or even multiple Bitcoin clients with significant share of voice anytime soon. Instead, we have a few exchanges that are at the mercy of the banking system, large mining pools controlled by a few operators, chip manufacturing controlled by two companies and Bitcoin development run by largely one group of individuals (for better or worse). Even Silicon Valley is now facing the challenges that come with monopolization. In a world where capital formation has been decentralized greatly over time, we’re still not making progress in terms of investing in breaking down monopolies within our own ecosystem.

How do we get to a place where true decentralization occurs within the ecosystem, and at a global scale?

In my experience, diversification of people leads to optimal outcomes in business, and life. Diversity is a sign of progress in society. This is why I believe in Bitcoin. However, this is not a technical bug, it’s a social one.

The world I want to live in has a choice of a number of chip manufacturing & mining hardware companies, each competing for the business of thousands of miners and maybe even millions of individuals distributed around the globe. The world I want to live in has a choice of dozens of mining pools, each with their own philosophies on Bitcoin, but all focusing on the long term greater good and can act under their own free will. The world I want to live in has multiple Bitcoin clients all working in unison to improve Bitcoin.

Some clients would be written in C++, some in Javascript, some in Go and others in whatever language people want to use and each team would operate with whatever philosophy they have around software development — the market will choose the best clients and BIPS and they can all compete for market share on a relatively even playing field. People would gravitate to the groups that they felt most welcomed and connected to. Dissenting voices would join other groups and not feel ostracized. Talent would be preserved within our community instead of alienating each other, forcing people to join alternative crypto projects.

And, instead of fighting, each layer of decentralization isn’t trying to fork Bitcoin contentiously — it is trying to make it more accessible to people around the world, more young people in particular from different backgrounds, more women (Bitcoin is pretty male dominated (95%+?), which is clearly to our detriment), more diversity, more opinions and all with the common goal of contributing to the ecosystem and furthering the advancement of the Bitcoin Blockchain for the good of all mankind. This is not the world I live in today. Maybe it will be one day. I look forward to that day.

For now, maybe we can just start the next chapter by treating each other with a bit more respect, irrespective of our views and opinions on Bitcoin.

I’ll start by showing respect for Satoshi’s decision to leave — that was his choice, but what happens next is ours…

Satoshi’s Choice was originally published in Minessence on Medium, where people are continuing the conversation by highlighting and responding to this story.