Thing Tokens: Crowdfunding Physical Goods

How Boson Protocol’s Thing tokens can create an entirely new business model for crowdfunding physical goods

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BosonProtocol

5 min readDec 8, 2021

Crowdfunding sites like Kickstarter and Indiegogo created a huge new opportunity for entrepreneurs with a great idea to raise money directly from individuals who wanted to buy their product. This model allowed startups who were simply too small or niche to attract interest from typical venture capital backers to go direct to their potential customers.

Perhaps the best known Kickstarter campaign ever was the $2.5 million raised by Oculus, who shipped the first version of their Rift headset to their backers before being acquired by Facebook for $2 billion.

While Kickstarter and similar platforms have doubtless ensured that many products have been built that would not otherwise have seen the light of day, there have also been considerable downsides to this approach. Buyers who put up the money for the first generation of Oculus headsets were justifiably aggrieved that they did not receive any share of the proceeds from the Facebook sale.

Other projects, meanwhile, suffered from a lack of accountability which caused frustration as makers missed deadlines and failed to produce the goods. While backers may eventually receive their money back in such cases, the opportunity cost of having cash tied up in an unsuccessful venture and the lack of transparency around decision-making can lead to undesired outcomes.

The Boson Protocol solution: Thing tokens

As is the case with many other web 2.0 platforms, Web3 can provide a solution to these problems — and this is where Boson Protocol comes in. Our Thing tokens enable the following benefits for crowdfunding physical goods and services:

On-chain governance and rules for funders and fundees
Enables price discovery for innovative products
High liquidity, enabling markets for a physical product to plug directly into the wider DeFi ecosystem

While our NFT vouchers handle the game theoretic rules around exchanging physical goods in a trust-minimised way, it is our fungible ERC20 Thing tokens that are the secret sauce for potential crowdfunding use cases.

By setting goals and milestones that are administered online, Thing tokens can improve accountability and also allow for shared ownership and decision-making by the whole community, rather than by a single person or organization.

We call these fundraising efforts Initial Thing Offerings (ITOs). Unlike Initial Coin Offerings (ICOs), which were the most common way for decentralized projects to fund-raise during the crypto boom of 2017, or Initial DEX Offerings (IDOs) which succeeded them, the genuine utility of the physical item that is being funded means that the price of the token is more likely to find a realistic level than those that are bought purely for their speculative value. Beyond that, Thing tokens allow to create liquid markets, where people own and trade assets that have intrinsic utility.

What is an Initial Thing Offering?

So, how might an ITO work in practical terms?

Let’s consider Gitcoin grants. These ensure that funds flow to projects that the Web3 community finds valuable by harnessing the power of quadratic voting. Unlike a grants scheme that is judged by a few people in a centralized manner, Gitcoin reflects the views of as many potential funders as possible. If you think of Thing tokens as a kind of Gitcoin for the real world (because everyone who buys them in order to invest in a project is showing their support for and belief in the project), imagine someone has an idea for a new type of games console, hoverboard or other innovative product.

They decide how many units they are going to produce in their initial manufacturing run, and this informs the decision of how many Thing tokens to mint. If a product is too expensive, Thing tokens may be fractionalized to unlock a price for a product with a discount equal to the fraction of a token.

When the product is finally available, the funders will be able to exchange their Thing tokens for an NFT voucher that entitles them to receive the product itself (read Boson Protocol’s Lightpaper for an in-depth description of the game theory used in the NFTs).

However, until the point this exchange happens, the possession of one or more Thing tokens grants the funder access to:

Improved governance and visibility of the project. Milestones and KPIs may be defined in a smart contract at the project’s inception to force accountability towards those who have put up the money
The ability to financialize their stake in the project. The interoperability of Thing tokens with the wider DeFi ecosystem means that they can put their investment to work for them, rather than having it tied up in ‘dead money’, which is the case on centralized crowdfunding platforms
Ownership of Thing tokens may confer extra benefits and loyalty-based programs for early recognition of a project potential.

Ecosystem benefits

Not only do Thing tokens enable a new type of relationship between brands and creators and the people who buy their products, but they also have wider ecosystem benefits for the innovation economy and its supply chain.

The ability to stake a Thing token or to add it to a liquidity pool on a DEX means that good ideas should be rewarded by more capital flowing in, and bad ones will not be funded. This valuable price discovery is important for efficient capital allocation as it means that only the best and most genuine projects will receive funding.

A potential benefit for the fundee is that this process allows them to test market sentiment before wasting raw materials and effort, and effectively managing supply chain risk by ensuring that resources are distributed only where they are needed. One only has to look at the mountains of waste generated by existing, outdated supply and demand flows to see that this is a significant improvement.

The transparency of these new processes also mean that there are new opportunities for brands to form a different type of relationship with their customers that is based on two-way dialogue and which improves their product-market fit.

And this may also mean a greater chance of co-operation between brands and innovators as the transparency of their market activity provides an improved information flow and incentivizes brands to work together in new verticals rather than engage in wasteful competition.

About Boson

At Boson Protocol, we are creating a decentralized commerce ecosystem that everyone can use and anyone can trust.

Boson Protocol is a decentralized infrastructure for enabling autonomous commercial exchanges of anyThing, specifically off-chain items. Boson is a peer-to-peer system which replicates the benefits of a market intermediary, without the disbenefits of centralized systems.