Belief pools — no public offering of tokens needed
What if your project didn’t have to sell its tokens in an ICO (which can be a regulatory no-no)?
What if the project token coins could get some initial value, so you could reward contributors with them in order to grow the project?
What if the believers in your project could come together collectively in a ‘belief pool’ to help make that happen?
I’m a project token believer and I have spare cash that I’d like to use to show my belief in projects, but I don’t have time to engage in ICOs or trade on token markets, nor do I desire the significant risk or volatility of a token investment. I’m probably not the only one who feels like that, too.
Additionally, I’d like to be able to withdraw at any point if I cease to believe in a project. I also don’t want my belief to be an outright donation, either — the projects should not receive my cash up front. In fact, I’d much rather give money to those who have done the work for the project (those who has received project token coins for contributing) or otherwise benefited it.
What I could do, without involving the project at all, is to state a unilateral contract (Unilateral contracts are a contract type where one party is legally obligated to uphold the terms of the contract.) that after a year has passed I will only once accept an offer from anybody to purchase 1 project token coin for 1 ETH.
Notably, the 1 ETH would stay in my possession until I’ve accepted an offer, but I’ve encumbered it.
That would mean that in a year and thereafter, there’d be possibility for somebody to sell me their 1 project token coin for 1 ETH — giving it a price of 1 ETH at that moment. You could then speculate that the price of the project token coin is at least some percentage of 1 ETH today.
Similarly, I could insert a term that I could withdraw from the contract at any point unless I’ve already accepted an offer; or add additional terms related to acceptance or withdrawal.
This unilateral contract is pretty simple to encode in a smart contract.
First, I transfer ownership of my 1 ETH to the smart contract. After a year has passed, and the caller has 1 project token coin that the smart contract can transfer away from him, he/she can call the ‘purchase’ function of the smart contract, get my 1 ETH, I get his 1 project token coin and then the smart contract self-destructs.
I can as well call the ‘withdraw’ function at any point before the purchase has been made, getting my 1 ETH back. This does not mean this is the economically right thing to do in order to factually support the project token’s value.
No public offerings, no primary market
It’s worth noting that in this setup, there would be no primary market where the issuer of the project token (the project) conducts public offerings and sells the project token coins to investors in exchange of cash or ETH — it’d be all give-away or rewards for contributing, but the recipients of the project token coins (such as the people doing work) could liquidate their project token coins on any market through speculators, including decentralised secondary markets for tokens (such as 0x).
Generally it seems, if there’s a tradable token, there can be speculators, who’ll trade them where they can, no matter what the issuer does. If it’s non-tradable, they’d buy the token using a smart contract and then trade the rights of the smart contract (like you can today purchase a share w/ a BVI and sell the shares of the BVI). Or trade the private key that holds the project token coin.
Belief pools
To finish this up — I can transparently join together with other project believers in a ‘belief pool’ and decide that in a year in a ‘liquidity event’ we’ll collectively sell our ETH in exchange for project token coins.
This could happen at a particular set price, or using a particular method (dutch auction, slow, partial release of the ETH into market, etc.), shared withdrawal conditions, or dissolving conditions (such as that the market value is higher than set price) or any other ways we desire. There could even be multiple belief pools surrounding a project. The factual belief pool implementation that would make this work economically is not yet here.
It may also very well be that nobody is interested in selling project token coins at the price a particular belief pool requests, if for example the open market price is higher and then believers can withdraw easily.
Given that we are able to come together in a public, transparent smart contract to do so, the belief pool can also function as a way for the speculators of the open market to help assess the project token coin value today (which likely would be non-zero).
The project would also be able to reward project believers for being part of belief pools with project tokens (‘paying’ a kind of interest) or other rewards (t-shirts, etc.) for the act of backing the value of the project token.
Similarly, project believers can help guide the project as they are stakeholders—as the ability for believers to withdraw from a pool provides information on the health of the project or direction. Granting ‘interest’ project tokens would also allow for co-participation in picking what contributors or project goals should receive project coins for work done.
If a project forks, also you could imagine project believers being able to vote with their beliefs on the ideal direction of the project by transferring their beliefs to a new belief pool benefiting the token holders of the new project token.
Future work
Disclaimer: This concept is not explored fully from economic or legal perspective. It’s meant as a discussion starter, but I believe there’s likely a belief pool implementation that could do the trick. Randomness on when factual ‘liquidity event’ happens could get interesting.
I can also recommend joining DecStack, a virtual co-working space for decentralised projects of any kind (2400+ member strong) and the “ICOs” channel there.
Carsten (@stskeeps) is CTO at Zipper Global Ltd., (@zipperglobal)
