Crowdfunding a Global Unique Identity Network
Being a public good is hard. Free-riding, apathy and tragedy abound.
But maybe BrightID can leverage its one-account-per-person capabilities to overcome these classic issues.
Let’s explore some ways in which the BrightID network might be funded, before I pin down the one I feel is best.
A utility token needs to be used to pay for something.
Here are some possible places to collect payment:
- Pay to sign up for BrightID.
The risk is that it will slow adoption.
- Pay to make a connection
We’re taxing people to do something that benefits the network. If anything, we should be paying people to make connections.
- Pay to look up a score
This goes against the principle that anyone should be able to run a node and calculate their own scores. The best scoring algorithms will probably be open-source.
Security or Equity Token?
As a public service, there are no profits to distribute to investors, so issuing a security makes little sense.
Okay, so Donations?
Yes, donations, but the goal is to create an environment where those who benefit from BrightID will donate a small amount or risk missing out on something of value.
The donation is better termed a (non-tax-deductible) “contribution” because contributors will be getting something in return— not shares, not a utility token, but an asset — a gift token.
About the Gift Token
The value of the gift token (let’s call it BIO, short for BrightID offering) is completely decided by the open market. It has to do with the inherent properties of the token, not the management of BrightID. This is what makes it an asset, not a security.
A BIO token represents a once-in-a-lifetime gift for a fixed contribution amount. A person can only use the smart contract once, and BrightID is used to enforce this.
Properties of BIO
What are the properties that give BIO inherent value?
Smart contracts distributing BIO would restrict each person to buy one BIO per lifetime. Such a restriction is achievable with BrightID.
How would the supply of BIO compare with other assets that are considered scarce?
As a once-per-lifetime purchase opportunity, the supply of BIO is tied to the global birth rate.
BIO will exist as a smart contract token on several platforms.
A general perception of fairness about how a cryptocurrency is initially distributed is crucial to its value.
Proof-of-work is essentially one-CPU-one-vote. — Bitcoin Whitepaper
It was fair enough that Bitcoin began with miners to get people interested, especially when anyone with a computer could mine.
If instead, Satoshi had pre-mined most or all of the bitcoins into his own account, the experiment would have failed.
Would an initial distribution of one token per person per lifetime be seen as less or more fair than “one-CPU-one-vote?”
Trading BIO on the Open Market
Rather than donating directly to the BrightID Foundation, the gift token allows partners or contributors another way to incentivize the growth of the network by putting a buy order on an exchange.
To make a greater impact than just buying a single BIO token through the smart contract, someone could place a buy order for multiple BIO tokens at a price above the smart contract price. This creates an incentive for new users to sign up for BrightID, buy their single BIO token from a smart contract and then sell it for a profit on an exchange.
BIO Smart Contract
The BIO smart contract uses BrightID to ensure that a person can only contribute once. The contribution amount needed to get a BIO token is a fixed amount we’ll call scp (for smart contract price).
There are several issues that could arise if scp is set incorrectly:
- The difference between the market price of BIO and scp is so small that it’s not worth people’s time to collect their BIO token from the smart contract.
- scp is so large that those buying BIO on the open market can’t entice enough of the public to join the network.
- The market price of BIO is a multiple of scp that makes larger contributors feel that too small of a fraction of their contribution is supporting BrightID.
The third issue is less of a concern if contributors are also satisfied by the network growth caused by a rise in the asset price. For instance, if I contribute $100 and only $10 goes to BrightID, but the other $90 brings in 10 new users, maybe I’m happy with that.
Fortunately, we don’t have to pick just one scp. We can sell several tokens, each with a different scp. We can even have tokens on different platforms; we just need a way to prove that each verified person can buy at most one token out of all possible tokens. BrightID can do this: it can allow a user to register one (and only one) user and token address, and the underlying smart contract can authorize a BrightID node (identified by its key) to submit user addresses that are authorized to make a purchase.
This way, a user can look at markets and different values of scp and collect their one BIO on the platform that makes the most sense.
Users are taking a risk deciding which version of BIO to buy—maybe the one they choose never gets traction, but scp is small enough (we could try different values in the range of $.10 to $10) that it’s never a big loss for anyone.
Haven’t you heard of Token Bonding Curves?
Yes, but I want every person to get the same token for the same contribution whether they’re an early or late adopter. It just feels right.
I also want larger contributors to go to the open market (only), for reasons I’ve described earlier.
The token received as a gift to every user of BrightID who wishes to make a once-in-a-lifetime contribution will be just that: a gift, a provably-scarce asset with a fair distribution, secured by and coexisting on multiple platforms, whose value will be determined in the open market.
Anyone that buys BIO for a higher price on exchanges will be driving more people to get verified as unique individuals by BrightID and make their own once-in-a-lifetime contributions.
Thanks to Rick Stefanowski for providing some of the text in the “Trading BIO on the Open Market” section.