The old saying goes: “Pioneers take the arrows, settlers take the land”.
The implication of the saying in the startup world is; beware the bleeding edge of tech or your project might well end up more of a Friendster and less of a Facebook. Or, you might invent the first cell phone, but Apple will come along years later and make all the real profits with the iPhone. Simply stated, this world view puts forth that “the first mover advantage isn’t all its cracked up to be”.
Jump On In, Participation Is The Best Way To Discover Timing
I firmly reject that world view.
I, for one, choose to live on the bleeding edge of technology and support others who do the same.
Pioneers are the ones shaping the future and most likely (if they persist at it), to win out in the end. Its only logical to conclude they are far more likely to be the ones to prefect the technology, than someone sitting on the sidelines waiting for the “right time”.
Don’t get me wrong. I would agree with Bill Gross that timing is the most critical factor in a project’s success, but its often difficult to judge timing from the outside. So as an entrepreneur and investor I find it best when I’m participating in a big trend to just jump in and add value the best I can. Its only through this process of participating in pushing the limits, where by one can actually discovery where those limits are and understand how and when a new technology will reach mass market.
Boldly Go Forth, Don’t Spend Your Life Printing License Plates
For most of my career as an entrepreneur, I’ve been drawn to projects that are pushing the limits of what is possible. I was passionately involved in the early days of the internet by building a web publishing company. I delved into the first virtual worlds (Second Life) trading digital currency and building projects based on it. I founded biotechnology and renewable energy projects in the 2000's as the economics of those industries hit their tipping points. Now I’m immersed in the world of bitcoin & blockchain technology.
Honestly, if I’m not “boldly going where no one has gone before,” I wouldn’t be that intellectually interested or bother pouring all my passion and time into the project. Some businesses / technologies are so well defined as Cryptonomicon put it “you might as well be printing license plates”. Well, I for one don’t intend to spend the rest of my life printing license plates.
Applying Early Mover Advantage To Blockchain Infrastructure
In the blockchain technology space especially during the past 3 years, I’ve backed particularly early stage and experimental decentralized technology projects. For some of these projects, I’ve taken my share flack from industry critics, questioning if the tech would pan out or if the decentralized and tokenized structure of these projects was wise, when one could have gone the well worn centralized path.
Here I intend to advocate for pioneering and early stage blockchain projects, as I firmly stand by my thesis that this decentralized and tokenized model is the best way to develop truly ground breaking open source and decentralized technology platforms.
2012 / 2013 Going All In On Bitcoin
After a friend told me about the Bitcoin Network in 2012, I immersed myself in studying the technology and soon after decided to convert all of my wealth from USD to BTC. At the time, bitcoins were going for $10 USD. I waded my way through a long and winding processes to acquire and store BTC.
My first wallet was a full bitcoin node, the Bitcoin QT wallet, which one had to download gigs of data to sync. Purchasing BTC included steps such as using Moneygram and making international wires to foreign exchanges. This was before the first FinCen guidance came out in March 2013 and many people claimed bitcoin was illegal and there was real concern that it would be ban by governments.
I began telling family and friends about bitcoin. Helping people install wallets, attending conferences, and speaking publicly about bitcoin. And while the price of BTC has been up and down since I first joined the community, I still firmly believe in the fundamentals of the technology. I see merchant adoption, user growth, and transaction growth as clear evidence that bitcoin is both here to stay and an extremely disruptive technology.
More than that, I believe the development model of open source + digital token + distributed peer to peer network + a cryptographic consensus mechanism represents a new ideal gold standard for building sustainable technology platforms and communities. I later wrote a whole whitepaper on the subject calling these “Decentralized Applications” and coined the term “Johnston’s Law” which states that “Everything that can be decentralized, will be decentralized.”
August 2013 Omni Layer (formally Mastercoin)
The deeper I got into blockchain tech during early 2013, I realized that one of the most powerful applications of the global bitcoin ledger would be to record and send a wide variety of assets. I delved into the protocols that were being proposed, at the time the most prominent of which was colored coins.
After a lot of research, I concluded that without a digital token to support its development (as in the case of colored coins) these “meta protocols” (as they became known) didn’t have a means to incentivize developers to work on the protocol or reward community members to evangelize its features.
So in August of 2013 when J.R. Willet came along with the proposal for Master Protocol to create tokens on top of the Bitcoin blockchain, I considered it the first project that had the necessary ingredients to bring a lot of talent together to actually deliver these new capabilities to the blockchain ecosystem. After lots of research, I released an informational report to the community on the protocol. I put my money where my mouth was and participated in the token sale with my bitcoin. After the token sale, I volunteered my time to serve on the transparency board and publicly advocated for the development of the protocol and for projects to create tokens on top of the Bitcoin protocol.
Omni Layer (Mastercoin at the time) had plenty of critics from the beginning. It opened a much broader discussion among developers about how to properly add data to the blockchain without bloating the ledger. It became a target for those in bitcoin that confused the project with an alt coin presuming it had its own blockchain or was seeking to compete with the functions of the bitcoin payment network. The project was criticized on economic grounds by those contending bitcoin is the only digital token that can hold its value over time.
Despite all the push back and digital ink spilled by critics, the team of developers that came together to build out the Omni Layer delivered solid working software in April 2014. The “Omni Core” software for the first time ever was able to issue and send digital tokens on top of the bitcoin blockchain. Today, there are tens of millions of dollars in assets and a wide variety of projects that use the Omni protocol including Tether, Synereo, La’Zooz, and the Safe Network.
In addition, the Omni Protocol has the lasting legacy of having inspired a whole new wave of projects seeking to create new features on blockchains including Ethereum, CounterParty, NXT and many others.
April 2014 The SAFE Network by MAIDSAFE
In early 2014, a robust system for decentralized data storage (among the applications I had been eagerly anticipating) came onto the scene in the form of Maid Safe’s SAFE Network.
My investment partners and I reached out to the developers of project and began a dialog with them about the structure and incentives they had in place for their decentralized network. After in depth talks, they decided to issue a token for their network in order to create an incentive system that would drive developer interest and adoption.
On April 22nd 2014, the MaidSafe token sale took place and to everyone’s surprise sold out in only a matter for 5 hours. I participated heavily myself given my deep passion for the project.
However, a convergence of factors changed this incredible outcome from something to be celebrated, to something of a sour note in many people’s minds. Many have written and analyzed the event from different angles, but here were the core issues.
- Given the event started during the morning hours in the U.K. time zone 9:00 a.m. (where the MaidSafe team is based) many potential participants in the United States that wanted to take part missed the opportunity, because the event was over by time they woke up (3:00 a.m. to 8 a.m.).
- The MaidSafe tokens were issued on the Omni Layer and at the time the process was manual, where one had to have MSC tokens to send to the token creation address (this created a lot of confusion along those not familiar with the Omni Layer).
- For those that used BTC in the token sale, because of the huge participation it took days to manually process all of the contributions from BTC to MSC to MSAFE tokens (leaving many wondering if their transactions had gone through correctly).
- Since both BTC and MSC tokens were accepted in the token sale, market actors began arbitrating the difference between the prices. Thus more MSC came into the sale that was anticipated due to a price gap between the two.
In the end of the day, there were a lot of confused and frustrated participants. However in those hectic and sleepless hours immediately during and after the sale, I’m proud to say that I and my partners took two big steps to help win back community trust for the project.
- Understanding that building a big community was key to success of the project, I offered to trade anyone who messaged me, MSAFE for MSC that they had bought to participate in the event. Lots of requests poured in and it took weeks for me to complete all the sends manually to each person, but at the end of the day many people were able to participate and didn’t miss out.
- The Maid Safe team wanting to balance out the MSC and BTC they had collected in the token sale requested I sell back a portion of my MSAFE tokens for MSC, so that more BTC participants could buy MSAFE. I honored the request and sent back a significant part of my MSAFE purchase, and combined with the individuals I helped, it reduced my MSAFE holding by 40%.
Fortunately, the steps had the intended effect. The sale went from the 500 initial participants to more than 3,000 participants, because Maid Safe was able to continue reselling MSAFE for BTC for several more days and allow those that had missed the start of the sale to still take part.
Today, the MaidSafe tokens are worth significantly more than during the original token sale (200% more as of July 2015), the technology has made great strides and forms the back bone of many new applications using decentralized data storage. The process was experimental and messy, but I’d do it all over again to get the same outcome of such a powerful new platform that has the right incentive system in place to succeed.
July 2014 Ethereum Launches Its Token Sale
I played a smaller role in Ethereum than with the Omni Layer or SAFE Network. The project set an ambitious goal of being a platform for developers to create smart contracts and build fully decentralized applications on a brand new blockchain custom built for powering a whole new class of programs.
I had the opportunity to have early conversations with Vitalik about the incentive system and rewarding not just miners but those adding a range of values to the network including developers and token sale participants. Vitalik was kind enough to recognize this contribution publicly at Coin Summit in San Fransisco during 2014.
I followed Ethereum’s development closely and created an informational report about the opportunity which I released to the community.
The project set a new high bar for community participation with more than 9,000 buyers in the token sale and an active world wide group of developers building on the new experimental platform.
While there we still a few issues with the Ethereum token sale event around the diversifying / hedging the BTC collected, over all their no limit sale and 45 day duration proved a strong model for future projects to use.
Arrows Taken, But We Have Come A Long Way
So while I’ve taken a few arrows, along side some other brave pioneers, with each major project new lessons have been learned and already we have come incredibly far in the process of developing best practices (see my whitepaper on best practices here).
In less than 12 months (August 2013 to July 2014), as a community we evolved from J.R.’s Willet’s simple Bitcoin Talk Forum post attracting 500 Omni buyers, to a dedicated token sale website for MaidSafe attracting 3,000 buyers, to Ethereum’s fully developed user agreements, disclosures, multiple websites and 9,000 buyers of their token.
We are certainly getting closer to Facebook and a lot further from Friendster when it comes to Decentralized Applications.
I’ll likely keep taking arrows for a while. Some from critics of decentralized systems, some from skeptical pundits, and from zealots of particular projects. But that’s ok with me. I’ve got a thick skin and I’m in this battle for the long term.
I’ll be very happy if 10 years from now, people come to say I played a meaningful role along side this amazing community of pioneers, in laying the foundations for some of the most important new technology created in a generation.
Long live the pioneers.