An Ethereum Journey to Decentralize All Things
An Ethereum Journey to Decentralize All Things
From the DAO to the CODE (Centrally Organized Distributed Entity)
Written by Zach LeBeau
The events that inspired the creation of SingularDTV and its tokenized organizational structure — the CODE.
2013 — Altcoins & Intermediaries
The altcoin boom swept across the crypto industry in 2013. New coins hit the market on a daily basis, hundreds of bitcoin and litecoin clones, nearly all of them vehicles to pump and dump. Very few actually tried to do something with utility or purpose. I took the red pill, and dove deep down that rabbit hole, bought coins like candy, and spent countless hours on various exchanges trading all types of coins — litecoin, quark, feathercoin, namecoin, even something called android tokens.
At about the same time film producer Kim Jackson — now the Chief Creative Officer of SingularDTV — was doing the press circuit for her latest film, Blue Caprice. An indie about the beltway sniper shootings of 2002 starring Isaiah Washington. You never know how a film is going to turn out until it’s finished, and even harder to judge is how it will be received by critics and the audience. Kim had been the driving force behind several independent films — some successful, others not as much — but the critics, from Rolling Stone to The New York Times, embraced Blue Caprice and helped fuel its momentum. Its release grew wider and wider. Rave reviews and an effective marketing campaign drove box office receipts, on-demand sales and licensing deals. Material revenue was being generated.
The elation soon faded as the distribution reports came in. Hollywood is notorious for its creative accounting practices and it’s a fair statement that only the distributors were making money from Blue Caprice. Even the on-demand numbers — which are digitally tracked and recorded — were not forthcoming.
I wasn’t just an altcoin junkie and trollbox addict throughout 2013, I had thoroughly bought into the concept of “decentralization”. It was the revolution I had waited for my entire life. Its tenets of transparency, peer-to-peer interaction and the empowerment of its distributed methodologies were concepts I was determined to apply to every aspect of life — to see the world through ‘eyes of decentralization’. Later in 2014, when I met Joe Lubin for the first time, his words “Decentralize All The Things” became my mantra.
It didn’t take long for Kim and I to start understanding how decentralized methodologies and processes could disintermediate the obfuscated and monopolistic practices of the film industry. But where do we start? Ethereum didn’t exist yet. At that time, late 2013/early 2014, Vitalik and his whispers of Ethereum were just rumors on reddit and trollbox fodder to someone like myself who was on the outskirts of the decentralization movement.
The pains of the creative accounting practices shrouding Blue Caprice were eased by the red carpet of award ceremonies and producorial esteem. Often times that’s all working producers are left with, credit and professional bragging rights — if they’re lucky.
There’s nothing glamorous about being an indie film producer. Crew have more professional options and security than producers. Crew have unions, they have health and pension plans. Producers don’t have any of that. It’s do or die.
It wasn’t long before the wounds wrought by a malevolent centralized film industry were ripped open once again when Kim shopped her latest film to distributors. It was a light-hearted romantic comedy called Truth About Lies. As hard as the film industry is, it gets even harder when selling romantic comedies. Nobody wants them unless they have big name actors, and the storylines are always the same — boy meets girl, they fall in love, boy messes it up, boy wins her back. But the film had charm, festival audiences loved it and a momentum of its own began to take over. A courting period with sales agents (intermediaries!) took place and it was love at first site — the seemingly perfect sales partner emerged. There was elation and celebration. All that money and energy and time spent was not in vain — every filmmaker’s hope. But the positive energy and momentum was suddenly halted as the producers, investors, sales agents — and the lawyers — started hashing out the specifics of the deal. Many a film has died at the negotiation table. Everyone needed their piece of the pie and everyone needed to put their mark on it. Weeks turned into months until finally a bloated mess of a deal emerged. By then the thrill was gone and everyone suffered from negotiation fatigue. Kim moved on to her next project, the distributors did whatever they did and the film disappeared into obscurity.
I watched the process unfold thinking, “There’s got to be a better way!” If only we can remove human ego and vanity from the process.
2014 — FUD, the SEC, Joe Lubin & the Ethereum Crowdsale
It was early 2014 and the first storylines of Singular were coming to be, inspired by all the lively happenings of the crypto world — Silk Road and Mt. Gox to name just a few. At that time Singular was called “San Pedro”, named after the fictional island nation where Season 1 takes place. San Pedro becomes the epicenter of an unprecedented technological boom brought on by the decentralization revolution that starts a domino effect hurtling the human race toward a technological singularity.
It was an exciting time, lots of kinetic energy in the air — lots of FUD too. The bitcoin community was sifting through the ashes of Mt. Gox — the overall feeling was still that of shock. I even remember buying some coins at $190 during a bitfinex flash crash. At the same time millions upon millions of dollars were being invested into the bitcoin infrastructure. There was a palpable feeling of a changing-of-the-guard. Bitcoin was maturing, transitioning from its wild west days into something more… corporate. The regulatory climate was helping to facilitate this by growing more hostile by the week.
We started looking into the possibilities of creating an altcoin to launch Singular. The first ever crypto representation of an entertainment enterprise — a television show the audience could both own and benefit from by bearing its coin. We started interviewing programmers to create the ultimate altcoin but the learning curve for us was costly and steep. It was then we discovered the company Counterparty. Their platform would allow us to create and distribute tokens.
The vision of a crypto-IPO for Singular was becoming a reality. But just days after we created our tokens, Counterparty disabled certain critical exchange functions on its platform for US users. The SEC was sending warning letters to several companies involved in the crypto space at that time. Charges were being handed out to various operators and trials were forthcoming. We consulted several SEC lawyers and experts who strongly advised us against our current course of action.
The functionality we hoped our programmers could add to our tokens proved to not be possible. The timing wasn’t right… But the summer of 2014 brought with it whispers of “Ethereum’s coming”…
A defining moment was our first meeting with Joe Lubin in August of 2014, just after the Ethereum crowdsale. At that time he was a one man show in a makeshift office in Times Square — a far cry from the 2 floor, 80+ people working at ConsenSys now. It’s important to note — especially coming from the entertainment industry — what an eye opening pleasure it is to interact and deal with people in the tech space. Why? Because you’re dealing with some of the smartest people in the world. The ego, vanity and -”isms” one has to deal with in the entertainment industry are not prevalent in tech, especially in the decentralization space. Working with ConsenSys could restore the most hardened cynic’s faith in the human race. It is an example of people coming together to collaborate, creatively and reciprocally. We sat down with Joe that first meeting, pitched him San Pedro and our tokenized aspirations — it was later his idea to change the name to Singular — and it was from that day we found our first partner.
As we dove into the creative outlining and script writing of Singular, the international film industry was going through a series of alarming crashes. Netflix and entities like it were driving down the foreign market value of films. Foreign pre-sale value and distribution deals were dropping in many territories by as much as 75%. Catastrophic to a large range of film production. Things were getting worse here in the United States as well. Typically indie film deals start at a 50/50 balance, half of a project’s points going to the producers and the other half going to the investors. That ratio started to shift, with many of our fellow producers forced to do deals that favored the investors 80/20. Lots of producers work under unfavorable terms just to survive. They take their production fee, grind out a film, let it go, on to the next one. It’s grueling work that requires youth and a passionate love of making movies.
2015 — Shrem, Ulbrecht, Title 3 & 4, SingularDTV
Everything started to change post-Ethereum crowdsale. The tide was turning. The regulatory tension was releasing as operators were found guilty of various crimes and sentenced to prison, Charlie Shrem and Ross Ulbrecht are two of the higher profile examples. I remember sitting in the back row at Charlie’s sentencing. It was like a courtroom drama. High priced attorneys delivering eloquent speeches. The judge postulating legal theory. Even Charlie delivered a heart-felt and impassioned speech, the gist of which centered around him being young and foolish and how he shouldn’t go to prison because he wanted to dedicate his energy to making the world a better place.
The judge basically replied how he didn’t want to hear that kind of talk and hoped Charlie would disappear into obscurity never to be heard from again. Change the world?! Talk like that bodes well in televised courtroom dramas but not in the real world sitting in front of a real judge.
With several convictions under the government’s belt the hostility of the regulatory climate seemed to ease dramatically, due partly to the release of tension from making examples of the above mentioned but also because the SEC started to become overwhelmed by decentralized enterprises springing up left and right. A limited budget demands prioritization of “bad actors” and the worst had come and gone. Additionally, technological progress was happening too fast for regulators to keep up with even though then New York State Department of Financial Services (NYDFS) superintendent Benjamin Lawsky tried to slow it down by architecting the BitLicense. It’s important to note after his BitLicense went active Lawsky left public service to start his own private consulting firm to advise clients on matters involving bitcoin and digital currencies.
Another example of the government being two steps behind came with the arrival of the Jobs Act and the benefits of equity crowdfunding as afforded by Title 3 and Title 4. What was seemingly a revelatory and much needed piece of legislation, a power-to-the-people type moment, upon closer examination revealed significant barriers to entry and funding structures soon to be made obsolete through applications launching on Ethereum. Would this piece of regulation allow Singular to launch a crowdsale directly from it’s own website? Upon discovering the government’s plans to open equity crowdfunding to unaccredited investors for small businesses looking to raise $1M or less, it seemed worth considering for elements of Singular. We opened an official dialogue with FINRA and I carefully read all 685 pages of the SEC Final Rule document. I discovered that not only does a crowdfunding portal need to navigate through what amounts to several hundreds of thousands of dollars of compliance requirements, the new set of regulations do not allow a funding portal to also be the issuer of equity. That ruled us out.
The ability for an enterprise to create its own smart contract system and issue its own programmable tokens on Ethereum is a much less costly and more efficient affair than the proposed crowdfunding portals being built under Title 3/Title 4. Trying to explain tokens to FINRA was an exercise in futility. They suggested we become an issuer on one of the newly formed legacy crowdfunding portals (intermediaries!). For Singular specifically, crowdfunding portals are an unnecessary encumbrance which create an additional strata that decentralization is supposed to free us from. There is no need for a crowdfunding portal when an enterprise can operate one from its own independent site. The marketing and brand awareness an enterprise must face when operating its own token sale is the same a crowdfunding portal must execute in order to bring users to its platform, attention that is then diluted between several issuers. The tools being made for Ethereum grant the freedom and liberty of any enterprise to launch their own independent crowdfunding portal.
2015 was the year Singular became SingularDTV. Extensive creative and technical planning unfolded. It became apparent that Singular would need to build a comprehensive rights/revenue/royalty management platform around its film and television properties as well as an on-demand portal to truly lay the foundation for a decentralized entertainment industry.
SingularDTV’s rights management platform and TVOD portal are necessary to ensure that Blue Caprice/Truth About Lies scenarios never happen to any SingularDTV film and television property. A decentralized rights/revenue/royalty management system outfitting every property ensures quick and efficient formulation of terms and conditions as well as instantaneous revenue flow to all contractually relevant parties. This management system also represent the world’s first universal IP network unencumbered by the regionalization and extensive strata the legacy entertainment industry suffers from. Furthermore, as evidenced by Ethereum, Augur and Digix, the most progressive, cutting edge and efficient way to raise funds is through a tokenized crowdfund. As long as a suitable organizational structure — legal, tax and technical — can be devised to facilitate the execution of the above mentioned, there is no other consideration that is equal.
2016 — The CODE
In April of 2016, SingularDTV issued a private alpha token sale to test the beginnings of our smart contract system and tokenized entity. It laid the framework for a more robust and complete smart contract system to launch our public world-wide token sale. With the funds raised from our alpha sale and with the regulatory climate becoming more friendly, enter Luka Müller and Swiss crypto valley law firm MME.
The CODE (Centrally Organized Distributed Entity) structure could not have happened any earlier. We pushed and pushed to no avail, but timing always trumps money, contacts and quality every time. MME created the legal and tax infrastructure for the Ethereum Foundation and in doing so set a historic precedent- the legal framework for a decentralized entity.
SingularDTV needed a hybridized — centralized/decentralized — structure to act as a conduit of “two way traffic” between the two paradigms for the purpose of moving assets and resources — fiat currency and IP — onto the blockchain.
The combination of a Centrally Organized (CO) governance component in the form of a Swiss GmbH and a Decentralized Entity (DE) component in the form of a tokenized ecosystem built on Ethereum allows for this to happen. There is no tokenized voting mechanism in the CODE structure. All governance is Centrally Organized, the responsibility of SingularDTV’s executive and management teams. It is crucial for the success of SingularDTV’s mission that all operational and strategic governance concerns are dependent on the decision making ability of those experienced in entertainment, technology and finance. The lack of a decentralized governance component also greatly increases the security of the CODE’s smart contract system as it substantially reduces attack vectors.
The CODE structure finds a way to build a bridge between the centralized legacy world and the decentralized paradigm of Ethereum that is regulatory and tax compliant and that protects both the token issuer and the token holder from potential liability.
Furthermore, the structure needed to decentralize real world IP, as well as enable the collection of decentralized assets/stores of value to be subcontracted to the CO. These decentralized assets are then used to build projects in the legacy world. These projects generate revenue in both paradigms with fiat revenue being transformed into both ETH and tokens and then assimilated into the Ethereum ecosystem, contributing to its growth. One important function of SingularDTV is to build an entertainment industry that is decentralized and can one day operate independently of the centralized, legacy entertainment industry. This would not be possible without the CODE structure to facilitate the two-way flow of assets between both paradigms.
The next great tech boom will be the world rushing to decentralize centralized assets.
It’s important to note that the SingularDTV CODE is not a reaction to the events surrounding “The DAO”. SingularDTV developed the CODE concept in April/May 2016 with MME and input from ConsenSys. During this organizational process we recognized the term DAO was insufficient to properly describe what SingularDTV is. DAO only describes the DE (Distributed Entity) aspect of our CODE. Also important to note that SingularDTV does not see the legacy entertainment industry as competition. Nor do we have any want or desire to be destructive toward their industry. We are wholly focused on the creation of SingularDTV and a decentralized entertainment industry. We are not looking to change Hollywood or the studio system in anyway. We are building an alternative.
The CODE structure allows SingularDTV and our tokenized ecosystem to adapt and evolve with the Ethereum ecosystem to build a multi-billion dollar/ETH decentralized entertainment industry. For more information on the specifics of how the SingularDTV CODE works, please see our article, “The Anatomy of the CODE”.
@singularDTV
