On Our Initial Community Offering
Offering Community >>> Offering Coins
If you’re following Holo’s mission to “take back the Internet”, you’ll know a celebration is in order. Our launch, which began with a crowdfund (still running!), has been quite successful! After reaching our initial goal in 72 hours, we decided to continue expanding possibilities for participation. The atmosphere in Holo world has been an especially flavorful cocktail — one part celebration, one part frenetic group work, one part networking, and a dash of self-reflexivity. That last dash is where I chime in most often, and to my eyes, we’ve been in a continuous process of articulating ourselves. We’re becoming what we are.
For some time our definition was determined by a horizon. The uncharted territory, the particular criss-crossing of innovations in tech, business, and currency created a dazzling air of purpose that allowed us to hunker down, fully immersed in just getting there. But the continuous outward extension of our vision for widely adopted distributed computing requires frequent narration about our craftsmanship of a timely, inclusive ecosystem for such a purpose. On this note, this post takes a shot at describing our next push to make Holo — and its world of distributed applications — a reality.
It’s called an ICO: Initial Community Offering.
The pitfalls of blockchain and the crypto-organizations to which they give rise is slowly becoming more obvious. The exclusive use of this technology for operating decentralized networks shows preliminary results of environmental unsustainability and centralization of power (though not necessarily holdings). If the experimental space of blockchain organizations was a vaporous incarnation of the power of technology to disrupt society’s broken institutions, then we hope that Holochain organizations, the first of which being Holo and its community offering, will be an evolutionary step in this process.
That’s why we’re more concerned with creating conditions for community, over making coins…even if it’s pretty safe to say that the latter attract more sure-fire participation from wide-eyed gamblers. Err…umm…investors. Conscious as we are of this pivotal moment in the decentralized computing movement, our strategy for forming a lasting community of folks, brought together out of desire for an empowering Internet, is a complex blend of acknowledging what has worked and what has not worked so far.
Even though we are not selling a security (defined as ownership shares in an enterprise created through entrepreneurial and managerial clout), we are alert to, and frankly very appreciative of, the SEC’s advice related to all things crypto. Moreover, against cries of ICO party crashing, the U.S. Securities and Exchange Commission’s vision for cryptocurrencies and ICOs is actually pretty forward thinking. They have the potential, they say, to be disruptive, transformative, and efficiency enhancing. The SEC also touts an unwavering commitment to radical inquiry, transparency, and truthfulness. In many ways this lays the groundwork for the type of offering we wanted to see in the world. To be extra safe and secure, though, our ICO does not operate in the United States where securities laws are still in process of fleshing out fully, or in China where they’ve been banned entirely.
Initial Community Offering 101
What are the details of the organization doing the ICO?
Holo is an organization incorporated in Gibraltar. Why? Because Gibraltar has the most clear, definitive, and pointed existing framework for ICOs and cryptocurrencies. Excuse the brag, but we actually worked with the legal team writing the regulations there to dually ensure compliance and to put in our two cents about what makes an Ethical ICO. You’ll know if you’ve been following Holochain’s ongoing development that Holo sprouted very recently out of the need to create the conditions in which a *truly agent-centric* computing system might be adopted, thwarting *truly creepy* fully-automated systems that want to wipe out trust rather than taking more responsibility for its organic growth. So in a nutshell, when you participate in the Initial Community Offering, you support Holo’s development of the network and of the tech that makes it work.
Accordingly, Holo fuel is akin to a utility token for the Holo app which pairs developers and other digital citizens with a distributed network of hosts and their services. Holo creates a community that fulfills on its responsibility to provide those who participate in the ICO with hosting services. The capital raised in the process of the community creation directly seeds it through maintenance of software and infrastructure that connects it. Fuel is a promise of hosting and participation without ownership or say in the direction of the company. We haven’t taken venture capital yet, and we certainly aren’t interested in the equivalent, but flashier, Coin Offering version.
An initial community offering makes it possible for the Holo organization to have a small central footprint, and to create value in two forms (reputation, money) for hosts, developers, and users rather than the network owner. As the first large-scale distributed app on Holochain, it also represents the intent that the power of governance resides within the ecosystem rather than the organization when the time is right.
Hosting P2P Apps for Mainstream Users
So how is this community structured? To create conditions that allows multiple actors, not only thrive, but to create a new meta-social organism, we’ve had to take into account all facets of a highly innovative economy. Sharing economy principles have taught us about excess capacity. Since Holochain’s architecture abandons the need for consensus algorithms that hog most of the network’s capacity, the network’s capacity can actually be used to make mainstream adoption possible! Where full nodes on different blockchains had to churn and burn in order to keep track of every transaction on the chain, full Holochain nodes are freed up to dedicate their capacity to hosting distributed apps so that they can be accessed by a web browser.
Say I’ve created a community ride share application. What happens when tourists come into town who aren’t privy to the lovely locale-enhancing power of p2p apps (run like cooperatives rather than corporations)? Rather than being gauged by travel companies, the spare device capacity of folks running Holochain can be shared to allow tourists to participate in, and thus create value for, local economic circuits. Understandably, developers and community activists who plan on making apps that are scalable and highly inter-operable with other apps of the same nature would want to pre-purchase hosting services that become available with the rise of the network.
This is why we consider what we’re doing an “Initial Community Offering”. We are trying to ensure that the asset we are offering, that we recognize is valuable, underused, and already in existence, is characterized by a community currency designed to promote trust, and that it is used to build a better Internet for and by those who use it. For example, in our crowdfund we offer app design consultation so that the people who use the asset/service of hosting and computational resources is the very community that intends to use those resources.
Introducing Double-Entry Crypto-Accounting
The first thing you should know about Holo is that, despite the fact that we offer credits to be exchanged for services in the form of ERC20 tokens (smart contracts on the Ethereum blockchain), our cryptocurrency is actually a crypto-accounting engine that uses NO COINS and NO TOKENS. The creation of the Holo community in question involves a purchase using Ether, the currency native to the Ethereum blockchain. However, almost as quickly as they’re purchased, these tokens are destroyed and replaced with Holo fuel credits.
Holo’s fuel acts as a medium of exchange for the network’s resources of computing and processing power needed for hosting distributed apps (dApps) — a medium of exchange between users, hosts, developers, application providers, infrastructure provider, and a reserve account.
It’s more accurately a crypto-accounting engine that represents an unprecedented turn, in the crypto world, to mutual credit currency design. Not only are people deterred from hoarding coins, exactly what creates wealth disparities and brittle economies, but spenders and counter-parties have mutual responsibility accounting for the transaction. This is a stark contrast to cryptocurrency that only records and authorizes the transaction from the spender’s perspective.
Mutual credit, whether or not it uses cryptography or even computers, is managed through many accounts with small credit limits and some with larger credit limits. We’ve been using a bridge analogy to explain this: The Reserve Accounts are like stanchions suspending the weight of what’s to come, Infrastructure Providers also have a larger limit because they’re like engineers and construction crews that need to maintain and secure the network. Stepping further into our role as travelers beyond blockchain, we’re in the position of acknowledging: “Hey! It takes some holding, some accountability for setting conditions, and some responsibility for maintenance to create a distributed computing network!” It would be lovely if algorithms could take care of this on their own. But, we envision a more integral relationship between human and automated control is more likely to lead to a responsive, regenerative digital economy.
Something that probably stood out in the graph above is transaction fees. Seem too traditional for you? Well…in order to keep our credits circulating, again, the condition of a thriving economy, our revenue model is tied to transaction fees rather than outside trading value of some token. What this means is that it is our labor to attract applications, hosts, and to maintain value -stability to encourage a more generalized use of Holo fuel (we delight in envisioning crypto-assets backed by electricity, food, etc.).
Security Law Compliance
Even though we’re not selling tokens or coins, we’re still quite obviously swimming in the seas of cryptocurrency. For the SEC, what defines whether or not a cryptocurrency is a security depends on the characteristics and use of that particular asset. The ERC-20 Tokens that we issue in the short-term, those that are exchangeable for the decentralized hosting service Holo provides, are not securities because you don’t hold rights or equity in the Holo organization. At the end of the day, Holo is accountable for providing hosting whether or not it is capable of growing the network.
A key question for all ICO market participants: “Is the coin or token a security?” As securities law practitioners know well, the answer depends on the facts. For example, a token that represents a participation interest in a book-of-the-month club may not implicate our securities laws, and may well be an efficient way for the club’s operators to fund the future acquisition of books and facilitate the distribution of those books to token holders.
Holo fuel represents a participation interest to share in the network’s resources. Is participating in the creation an Internet that uses distributed apps a similar intention for community? I think this point depends on your philosophical orientation, your belief in the power of coordinating data, and of increasingly struggling for greater expressive capacity. As I’ve outlined in past posts, the potential for distributed apps to disrupt the highly exploitative digital economy is plainly visible. But what’s not readily apparent is what happens in the mass redistribution of the power of collective knowledge — of language itself. If the aim of a book club is (likely?) a shared joy in expanding one’s senses through language, a distributed Internet offers a similarly captivating abyss of potential.
Potential that we’re boldly wagering is fitting of the notion “community”.