In defense of the slim protocol
(AKA: we’re not doing an ICO)
“Why not do a token sale?”
I’ve been asked this question countless times since beginning work on Althea, as have my co-founders. This question became more emphasized, however, when we began our funding stage. As the first question interested investors asked, we realized Althea needed to clarify why our answer to that question is no, we will not be holding a global token sale
Vitalik wrote an excellent blog post about the ideal valuation for an exchange token back in October. I strongly suggest you read it, but the point is this: the less general purpose a token is, the shorter its usefulness for users; but for speculators, the longer they hold the token, the higher the price.
This conflict in goals pushes users to competing protocols or protocol forks as outlined in Teemu Paivinen’s blog post on thin protocols.
For Althea, our focus is providing cheap, fast, free (as in freedom from internet monopolies) internet service to communities globally. As a result, we tried looking at a token sale through the lens of an Althea user, and to the end user, a token sale would need to provide them with something significant that couldn’t have been achieved otherwise.
The internet is such a universal platform that any attempt to capture significant value would be immediately forked and replaced unless that value was in some way returned to the user.
What is the value?
The value to the customer is internet service, delivered well and paid for directly.
We spent a good deal of time considering the ‘mine for bandwidth’ problem. In principle it’s perfect, it provides a speculative incentive to contribute and encourages even small nodes to participate.
Unfortunately, it turns out to be inordinately complicated. To prove that useful bandwidth was actually provided on chain, information about the entire mesh needed to make several round trips to the blockchain to complete a single round of payments. Building this technology out is currently not feasible and will not be for many years to come.
So going back to the end-users, we then realized that they didn’t care if they could ‘mine for bandwidth’. If they can be paid for bandwidth contributions directly, to them, it makes no difference. This meant we could simplify many parts of the system if cryptocurrency became a simple payment. This also means that interest in mining bandwidth wasn’t to provide better service to end users but rather because of the prevailing ‘token first’ thinking.
We are big fans of Open Source, because everyone, including the developer and end user win. The Open Source community is one where existing contributors are encouraged to mentor new members in exchange for receiving new contributors and new ways of thinking.
The technology sector has avoided stagnation because of technologies that have come out of the Open Source community. It gives individuals everywhere the ability to compete with industry giants on equal footing enabling them in some cases to disrupt monopolies that had been in existence for decades.
Sadly, token projects don’t enable this type of joint community participation. When huge value is delivered by early speculation, developers are not incentivized to develop the code. Instead, they may find their time spent pumping the token or building new token features to wow speculators.
Issuing a token or asset for a project as it pertains to the project’s functionality, isn’t a flawed idea. The problem comes when huge incentives are given to shoehorn a token sale into projects that then compromise or complicate the core function of the project and impede users.
There are a few problems in Althea that may be good targets for a token curated registry or some sort of on chain governance model for local mesh groups. But a rushed global ICO would be counterproductive such future measures, putting on chain work before we even knew what a working deployment looks like.
When everything is a race to issue a token the only winning move is not to play.
What does this mean for Althea?
We decided to make Althea a cryptocurrency agnostic platform. Starting out, we will use Ethereum and ERC20 for token support. But as we grow, we will add payment plugins for other cryptocurrency platforms in order of demand. As an open project anyone is free to contribute support for any cryptocurrency into mainline Althea.
We’ve spent time thinking about what it would take to really decentralize internet service, provide real value communities, and how to align our business model with that.
This is our plan:
- Create a strong open source community to decentralize development
- Use commodity hardware to reduce costs and increase user freedom
- Run a lean, mean series of auxiliary services
- Phone service and in home support for end customers
- Sell pre-flashed re-branded consumer devices
- Run a trusted exit node (takes a small fee) for these devices
- Provide various information to mesh entrepreneurs about network state and status.
I’m sure we would have raised massive amount of funding through a token sale. However, by keeping our focus on open communities and real customer value, we create awesome technology for our customers using the same amount of effort we would have used to appease speculators. In the end, our investors not only get their money back, but see real utility delivered to millions of homes using blockchain technology.
Also, our investors, like all our customers, won’t ever have to call Comcast again.