Epicenter - Learn about Crypto, Blockchain, Ethereum, Bitcoin and Distributed Technologies - Daniel Peled & Tom Kysar: Gems – The Social Messaging App That Pays You for Your Attention

Episode Date: November 24, 2014

Daniel Peled, CEO of Gems, and Tom Kysar, Marketing Lead at Koinify, join us to talk about a project that aims to revolutionize social messaging. As one of the first decentralized social networks built on blockchain technology, Gems hopes to put the ownership of the network back in the hands of its users. While large centralized social networks collect your information and sell it to advertisers, Gems is building on a different model in which users only receive solicited messages and get paid when companies advertise to them. Gems is also a cryptocurrency which can be traded between users within its mobile app. The initial crowdsale, organized by Koinify, will run from December 1st to January 5th. Episode links: Gems Koinify Gems Token Sale Details & Update on the Koinify blog This episode is hosted by Brian Fabian Crain and Sébastien Couture. Show notes and listening options: epicenter.tv/054

This episode of Epicenter Bitcoin is brought to you by Fairlay. Fairlay is a Bitcoin prediction market where you can place predictions on the likelihood of sporting events, the Bitcoin price, or current affairs. You earn money if your predictions are correct. Head over to Fairlay.com slash epicenter, that's F-A-R-L-A-Y.com slash epicenter, to place your first bet today. Hello, welcome to Epicenter Bitcoin, the show which talks about the technologies, projects, and startups driving decentralization and the global cryptocurrency revolution.

My name is Sebastian Couture. And I'm Brian Calvin Crane. We're here today with Daniel Pellet of Gems and Tom, of Coinify. Now, I'm really excited about today's episode. I spend quite a bit of time reading my gems today. And I think it's particularly interesting because having anyone who's been in Bitcoin for a while

has heard the idea of a killer app and the idea is to have something that people really want to use that maybe don't care about creating new world currency or something and that perhaps could fuel that mainstream adoption. And reading about gems, thinking about James, I think this is one of the best candidates for that, perhaps the best that I've come across. So I'm really excited about going into that today. It's a super interesting project and it's great to have you guys on.

Thanks for joining us. So perhaps Daniel, do you want to get started before introducing yourself and also the project, GEMS? Sure. Thank you for having me. I'm happy to be here. My name is Daniel Pellard. I'm 28. I'm located in Israel in Tel Aviv.

I wasn't one of the early adopters. I joined the Bitcoin ecosystem a little bit more. a year ago when it was getting a lot of traction. And after understanding the potential of blockchain technology, I was really fascinated with it and started learning everything I could about it and regarding other altcoins also, which have innovations in them. We started a project, Gems, right after a counterparty crowd fund period, the proof of burn period.

Their protocol of building a secondary platform on top of the Bitcoin blockchain and opening a lot of new innovating options really inspired us. And we wanted to make a product that can utilize counterparty platform in order to bring Bitcoin to a wider audience. So we had two goals in mind.

Our first goal when we started with this, we thought, what is the best way to bring Bitcoin and cryptocurrency to mainstream users? And after thinking about that, we realized that in order for that to happen, the user experience has to be very, very simple, very, very intuitive. and the best example of that is WhatsApp, it's instant messaging. If I try currently to bring a new user to the Bitcoin ecosystem, it's not easy. I go to blockchain info, I open them a Bitcoin wallet, I need to explain about the public key and private key, about security, about Google Authenticator.

It's not an intuitive process, even to people our age, and trying to explain it to all the people to my younger brother or my parents is very difficult. But instant messaging, social media, WhatsApp, it's something everybody is used to. All of us are already using it. So if we can take Bitcoin into a mobile application, it's something that can be viral and usable very easily. So we copied WhatsApp model. Our application looks very similar to it.

WhatsApp was successful because the username is your mobile number. So they were able to grow very quickly. Everybody was able to invite their friends to join the network and see when they join because of that. So with gems, your username is your mobile number, but it's also alias to your Bitcoin wallet. So the registration process takes only 10 seconds. you get a passphrase to your Bitcoin wallet, which is also a gems wallet, obviously, because we build it on top of a counterparty.

And automatically you can start using gems just by participating in the network, you receive gems which you can start sending to your friends, just like we do with Bitcoin or any other cryptocurrency. So it makes this process of opening an account very, very simple. The second thing we had in mind is because we went to social messaging and social network, is how can we actually incentivize users to join our network? Obviously, WhatsApp is very successful, and same with the telegram and WeChat and other application. So we had to have an edge.

It's not enough to have a messaging app with a Bitcoin wallet. We wanted to give our users something extra. So in order to do that, we reward the users for their participation. If you compare it to WhatsApp, which have more than 400 million users, and they sold for 19 billion, the users didn't get a lot out of it. Obviously, we get a good product, a free product, which we are happy to use. The same with Facebook, but all the regulations. revenue and all the success goes to a small group of founders or creators, even though the

users are the one that producing all the content. Users are worth a lot to any social network. We can see it with Instagram and WhatsApp and Snapchat and all the rest. So under our model, when you invite people to the network, you get rewarded with gems. And when you participate in the network, you get rewarded with gems. So the value goes straight to the user and not to the company. We don't cut a profit from the share there. So before we kind of go deeper into Chams,

I just wanted to give Tom a brief chance to introduce himself. We'll come back to Tom later, especially when we talk about the crowd sale. But Tom, do you want to very briefly introduce yourself and maybe also quantify, although for those who are more interesting quantified, you can also check out an episode we did about six weeks ago, perhaps, with the CEO of Qaify, Tom Dane. Yeah, yeah, most definitely. Yeah, I'd like to, you know, thank you guys for, you know, having me here as well.

Yeah, so we're from Coinify where we will be hosting the GEMS token sale, launching December 1st. So, as they were saying, you know, as we get further into the show and talk about some more of the details of the crowd sale, I'll be happy to fill in and explain anything. But we'll be hosting the Gems sale, starting December 1st. We have some invites rolling out beforehand,

so get in touch with us if that interests you. But yeah, we'll get into more details afterwards. Cool. Thanks so much for joining us as well. So there's one thing I thought was interesting, Daniel, about what you were saying, is that you came from this idea of facilitating Bitcoin adoption. So when you came up with the idea of gems, is that way you started?

is you really ask, like, how can we bring Bitcoin to the masses? And then it's like, oh, maybe WhatsApp and a social messaging tool versus how can I build, for example, a great Bitcoin startup or a great startup in general, and then you sort of add the cryptocurrency on top of it. But you really, the original motivation for you was the achieving adoption of cryptocurrencies. Is that correct? Yes, definitely, because I was following, we were following a lot of coins, especially in the altcoins.

Every one, two days, there's a new altcoin with a new blockchain. Some of them do add innovation, which is important because it's hard to innovate right now in the Bitcoin blockchain because the big market cap, so the core developers, are very careful with their changes. So it's good to have altcoins that try to do innovative stuff. But a lot of the different altcoins don't bring a lot of innovations

and don't add too much to the Bitcoin ecosystem. So we wanted to be different. We especially wanted to build on top of counterparty to utilize the Bitcoin blockchain. If you compare counterparty tokens to other altcoins, every new altcoins that create a new blockchain, they have to protect it. And in order to protect it, they have to incentivize the miners.

So all the inflation of their currency is going towards the protection. But because we are using counterparty and the Bitcoin blockchain, we can use the inflation in our model to incentivize users for the things we actually want, and not just for mining. If we take example, Lightcoin, they have more than 1,100 gigash of mining. It's a lot of money being wasted to protect the blockchain. But I'm not sure how much it helps for light coin adoption or for increasing the user base. So under our model, we're utilizing the Bitcoin blockchain security in order to protect the James ecosystem.

but we can actually reward users for their participation and for increase adoption of our token. So you mentioned you guys are using counterparty. Can you go a little bit into that? Because is the gems currency running on top of counterparty or is it just a crowd sale? Yeah. So there's actually a token which is called gems, which is run. running on top of a counterparty and counterparty is on top of the Bitcoin blockchain. Counterparty provides you the possibility to create an asset over the counterparty, over Bitcoin.

And then you can utilize it by giving it value and building a product around it. So this is what we are doing. It's important to note that gems and Bitcoins inside the gems application have different use case because Bitcoin users that download the JEMS application, the utility that they will enjoy is obviously a Bitcoin wallet and the ability to send Bitcoins to their friends, username and not Bitcoin addresses which makes everything much much simpler and more easy user-friendly. But gems are more directed to the new audience entering the Bitcoin ecosystem.

Most of them don't have Bitcoins, obviously. So just by downloading the app and inviting their friends, and using it, they get rewarded with gems, which they can start using to send each other unsolicited messages or to pay for products or anything we want to do. Same as we do with Bitcoins, but they get rewarded just for their participation. So it's much easier for them to start using cryptocurrency. We all know that once you do the first transaction, that you see how fast it is,

and there is no boundaries, and the fee is minimal, and everything we are not used to with normal fiat currency, and then your attraction towards cryptocurrency becomes much, much bigger. And because your wallet is also a Bitcoin wallet, it's not a problem. problem for people to start sending you Bitcoin to the same wallet address. So you can use gems and Bitcoins for the different use cases. So I think what's important to take away here is that what Gems really creates is a currency that really has value because it brings a feature set to its users, which other altcoins perhaps don't like, like Lightcoin like you mentioned or other coins that aren't used very much.

don't in fact. Yes, exactly. The way we bring value to the token is by inside the application utility. Most of al-coins, their only use is as a payment. But a gem token is much more. It's much more. It's actually a product. It's being used inside the application for sending unsolicited messages.

and advertising to people that are not your friends. So it's very simple. It actually solves a lot of spam problems that social networks usually have. So to make things clear, sending messages to your friends is obviously free because they are your friends. You want to contact them.

But sending messages to people that are not on your friends list will actually cost your gems. And this opens a very interesting possibility in use cases, which we can go into later. Just before we go into that, and I agree it's super interesting, let's talk a little bit more about the technical side. So as far as I understand, normal gems transactions,

so I say my friends and gems, et cetera, those are off-chain transactions. So can you explain a bit when are transactions on-chain, when are they off-chain? As a user, let's say I have a substantial amount of gems. Maybe I invest a lot or I help a lot of people sign up for the network in the beginning. Is there a way for me, for example, to save my gems out of the app? Let's say, are there going to be paper wallets or could you put it in a normal counter wallet,

send it somewhere else, or are they sort of in that closed ecosystem of the GEMs app? No, so basically what we did, we took a counter-wallet and we modified it in order for it to walk inside our JEM's mobile application. So the password you get for your JEMS wallet, James Bitcoin wallet, can be usable also on a counter-wadlet, on the web wallet. So you'll be able to transfer your gems to the Jams application or to hold. them inside counter wallet or to hold them inside Coinify website. They also have a built-in token wallet which is much more simplistic than a counterparty because counterparty are giving users a lot of other features which are not specifically relevant to tokens.

So you're able to hold them anywhere you want. So that's a HD wallet, correct? Yes. Okay. curate your wallet, you're the only one holding your passphrase. It's not saved anywhere on our servers or anything like that. It's your responsibility to write it down and to save it in a safe location. You don't have to enter it every time you enter the JEMS application. It's enough to put a pin inside. But let's say you lose your iPhone or your mobile phone, you will need that

passphrase in order to create the wallet under a new iPhone. And then the other one, your other phone will get locked because it's closed a specific phone. And once you open the new one with the passphrase, you'll be able to redeem your gems there. Would there be some way to do some sort of a multi-signature model where you would hold one key and the user would hold his personal key and a backup key? I asked this because last week we interviewed BitGo, who's doing this for Bitcoin holdings. Is this something that you could implement

as an added layer of security to basically eliminate, reduce the chance of someone losing their keys and not having access to their wallet? It's definitely something we can explore. We know a couple of companies in this, field that are specifically expertizing in multi-sig wallets

and they are selling their technology as white label. Right now we are concentrating on our own things like advertising and giving value and use to the gems tokens inside the application. But it is something we are looking into

or we can look into with other companies in order to have maximum security to our users. Yeah, I mean, I think it's a security thing, but it's also a usability thing. Because having a key phrase is something that perhaps not a lot of people are used to in the sense that most people are used to using passwords. And I agree that it is best practice to enforce people to use a higher level of security password than like something that you normally use on every website. But I think that for a lot of people

coming into the GEMS ecosystem, having never had to touch cryptocurrency or, you know, or having to deal with a wallet or a counter wallet or how that works and being used to the passphrase thing, that might be a little jarring for some people? Yeah, for sure. What are your thoughts on that? For sure. And that's why logging into your phone once you created your wallet, it's only with a pin. It's not comfortable to write down the passphrase every time and it's not needed because it's a physical phone that adds protection to the.

user, somebody will actually need to steal the phone and enter the pin-cord. If they want to try to steal the money using a web wallet, they will have to know the passwords. But it's important to note that the way I see web wallet, mobile wallets, is just like how I see see wallets that are holding cash in our everyday life. I will put most of my savings in a cold storage, and then I will put a little bit of bit of bitcoins maybe on an online wallet, and then I will put the list in an actual mobile wallet.

It's because each wallet adds more protection. So the same with regular users. They will download the gems application, they will start using it, they will start earning gems which have value, but it's not their life-saving, obviously. And as long as they start learning about the crypto and the ecosystem, they will realize that once they get a bigger amount of gems or once they want to buy some Bitcoin, they get some Bitcoin from their friends, they will need to learn more about those other most secure options.

Obviously, you're not going to have $1,000 in your wallet when you walk in the street. the same shouldn't be with your Bitcoin mobile wallet. Absolutely. This is all very interesting, and we'll get to talk about a lot more in just a minute. But before we do that, we'd like to mention good friends at Farley. Fairleigh is a Bitcoin prediction market where you can place predictions on the likelihood of sporting events, the Bitcoin price, current affairs, and a lot more of things. And if your predictions are correct, well, you actually earn money. and so Brian can perhaps go into some detail as to how Fairleigh works.

Yeah, so the basic idea of Fairleigh, it's of course it comes a little bit from the sort of Bitcoin side and that it's a peer to peer marketplace. So it's a marketplace for predictions where like you're not taking a position against the house but against other people. So it's interesting because one can look at a lot of actually events are happening and when we can see what are people thinking what positions they are taking so we asked them just before this episode that they create also a prediction on gems so you can actually take a position on the success of the gems crowd sale so i hope that

at the end of this episode you will be better informed than most people and perhaps you will be able to take a better prediction on that well so the the statement there is the chem's presale will raise more than 1,500 BTC. That's exactly 50% of the goal. And yeah, you can take that prediction. I think there's been about 40 predictions made. And actually, it's also slightly in favor of no, which I don't know. I think they will reach it.

So I took the other prediction, but we'll see. So if you're interested, and of course there are a lot of other things, like the Bitcoin Prize, mining difficulty, sporting events, things like that. So if you are interested, head over to Fairlay. So the domain is F-A-I-R-L-A-Y.com. You can sign up there, deposit some Bitcoin and give it a try. So we want to thank them a lot for their support of WebSend of Bitcoin. It's coming back to the marketing aspect of Fairlay, because I mean, I want to kind of bring in marketing, user experience, product design, and that whole thing. For those of you listening, we're having a bit of a delay, so sometimes Brian comes in a few seconds late.

I'm interested. What are some of the selling points that you plan to put forth to sell, in a sense, gems as a superior alternative to Facebook and WhatsApp? I mean, I think we could probably, there are probably some that are obvious, but there are network effects, and I think those are going to be hard to break up. I mean, like people use Facebook, people use WebSap. How do you plan on getting people to come into this ecosystem in masses? Yeah. So obviously we can't compare ourselves even closely to WhatsApp or Facebook or Wechat user base. and we are not trying to.

Obviously, we'll be more than happy to, you know, in the future, to maybe, you know, have a threat on them. But what we're looking at right now is actually the Bitcoin ecosystem and other alternative currencies. Most altcoins out there, they don't have a big user base, I think, except for Dogecoin, and NXT, XCP, maybe. A lot of the other outcoins

having a very hard time to build their user base. And even Bitcoin is still in the very, very early stages of maturity and becoming mainstream. So our goal is to really reach for gems, 100,000s of users, if you can get to a few million users, that will be a huge success for the Bitcoin ecosystem and for cryptocurrency. So our goals, you know, we know there will be a lot of difficulties and harder along the way, but we are very committed to this project.

The other values that we bring the users compared to those applications is, one, putting them in the same. You know, there is a famous saying that if a product is completely free, usually you are the product. And because WhatsApp and Facebook are making money and a lot of money out of their users because they can take their content and the users and the users' information and to use it for the advertising, which they are the beneficiaries. So we are trying to take it to a different location of actually rewarding the users themselves. And I think there is a big trend in that direction. And it's something users relate to.

We can see that with the LOW, which started a social network not built around advertising at all. They have signed a contract saying they will not be any advertising. And they're getting a very big support. And same with the Sue, we started social networking also paying the users. and they're getting a lot of support. So users are looking for something different than the normal status quo, which is that they get a free product,

but they're not a part of the network, of the social network. Users relate to if they're in a partnership with the network they use, it brings them a lot of added value. That's one, and the second thing is actually bringing the blockchain advantages to the users. For us, we are very used to it that sending value between our friends and overseas is very simple, the fee is minimal and so on using a Bitcoin, but most users haven't experienced this feeling yet.

And we think that once they do it, it will actually have a big, benefit of using our mobile application compared to even Snapchat that, you know, they introduce payments, but you have to connect your bank account and you have to pay higher fees and you have to give your anonymous, you have to be completely public and so on about it. In the end, there isn't any value sending an ecosystem as good as Bitcoins. And we just need to introduce it to main people. So I agree with you that there perhaps was a trend towards, well, a trend where people are starting to get annoyed with advertising, people are starting to get annoyed with attacks on

their privacy and things like that. Do you think that that is, I mean, basically what I mean is, it only takes a Facebook or a WhatsApp to copy that sort of model where they already have a substantial user base to bring those existing users into that new type of model. I mean, if it is a trend, you can also imagine that Facebook and WhatsApp and others will also follow that trend. How do you think startups like yours and others that may enter this space would be able to compete?

Would they have an advantage, whereas they are sort of like the underdog in the, in the ecosystem or would those large players have the advantage of having existing users? First of all, I don't necessarily agree with you that they have an incentive to change their model. They're making a lot of money out of the current status quo and they would like to continue with it as much as possible. If this trend that James is part of takes off and you know, Facebook changes their model will be very happy. You know, we made a change. Just like we see it now with the Western Union, you know, they're still charging $5 to $50 for every wire transaction.

And they're making the remittances network. There's billions in it. And they don't want to give it away, obviously. But, you know, Bitcoin is starting this change because it's taking off, because it's a very big competition to the regular status quo. So if we can make them change it, we've done a very big percentage of our mission. And if not, I hope we'll be able to take them down, just like big companies that didn't build themselves to be handled with changes went down. And we see it many times during history.

With regards to bringing people into the ecosystem, there seems to be a, a push towards building like blockchain's apps and services. And I agree that this is the sort of the good strategy is what you're doing is you're building an app, which essentially brings people into the Bitcoin ecosystem without them really having to know that they're in the Bitcoin ecosystem. The functionality is transparent. I mean, it's transparent for them that they're using a blockchain. Moving forward, like what are some of the sort of advantages that people,

people will, I mean, you mentioned this a while ago, being able to pay and things like that. What are some of the other advantages that people, just regular people that aren't necessarily technically savvy or not in the ecosystem would benefit from being in the, using cryptocurrency based app like gems? Yeah, for sure. So one of the biggest problems with any social network is there's a big problem of space. Like you said, a lot of people care about their privacy. If you would give your Gmail, your email, you wouldn't be happy throwing your email

over the internet and signing everywhere with your normal email because there's a big chance it will get into the wrong hands and you will start getting spam. The same with your mobile number, you keep it quite private because you don't want to to be completely public. So what we introduced with James is actually a good solution for this. You can register with your mobile number. You give it out only to your friends, but you can give your hashtag a username to anybody.

You can have it on your blog or in the internet or any location you want because you won't be able to get spammed. In order for people to send you an unsolicited message, people that are not your friends, they will actually have to pay you in gems. So let's say you're, for example, a celebrity, you're using Instagram or something like that. You're getting spam, not spam, but a lot of people are using your hashtag.

It's not possible to actually get in contact with that person. What we can do, you as a user, you can say anybody that wants to send me an unsolicited message has to pay me 100 gems for all. order for me to get it. And you can say, I want to receive only up to five unsolicited messages a day. This means that we can control the, you know, you can control the way you want to be reached by people that are not your friends. They actually pay for your attention in gems. And this can become very viral because there's a lot of people, you know, for example, I want to talk to or I would like to get their opportunity to talk to

or I don't know their personal details, but if there was a way for me to get in touch with them directly, and I would need to pay for it, which is okay, because it's for their intention. This can become a very viral and a very good use case inside the social network. So this is a question that I had, and after Brian had another question,

is does the user decide, what is attention is worth? Is that what you're saying? Basically, I decide, like, this is how many gems it'll cost for someone unsolicited to contact me? Yes, and you can decide how much it costs, and you can also decide how many messages you want to receive. So let's say, for example, you want to receive only three messages a day. There will be a bidding system. Let's say 100 people want to send you a message, and some of them bid their 1,000. gems and some bid 500 gems so you will get only the top three bidders to contact you. So you have a minimum number of gems you want to receive and the maximum goal is a bidding

system very similar to Google AdWords that everybody is competing on the same thing. Something just occurred to me before which I think is really fascinating. So I presume most of you know but for those you don't know the sort of the background or of proof of work that was developed by Adam Back. Of course, the idea originally was that it was going to be some sort of spam protection. So when I would send an email out, I would have to do some work, essentially mining on my own computer, send that proof of that work with the email. And the idea was that then this would become costly to send email, and it wouldn't be

economical anymore to send spam. And that never caught on because I guess large email bulk mail sender didn't want to do that. So I think it's super fascinating that we're kind of coming back to that and we're actually now using cryptocurrency as a spam protection in this case. And what's also fascinating is that in a sense here we actually do have it backed by proof of work because the gems first were, of course, purchased or at least a large part of it with Bitcoin. which again were mined with the exact mining algorithm that Adam back developed. So that's something that occurred to me, which is extremely fascinating how it's sort of over a lot of around a lot of corners we have sort of ended up now with this at a point where a proof of works actually used for spam protection. Yeah, definitely. I agree with you. It's gotten a little bit of

point that we can see it at least with the Bitcoin blockchain, that the minimal fee, obviously it's much lower than if you compare it to Western Union or any fiat monetizing system, money transferring system. But still the Bitcoin blockchain makes it hard, at least under our model, to reward the mainstream users or to have the scalability. to be able to approach a big user base with our daily air drop. So what we are doing, we actually built a, you know, a hybrid system that on one side we have off-chain. So all the rewards, the gems reward for participating in the network and for adding friends

to the networks are being done off-chain. any moment, anybody can transfer these gems onto the Bitcoin ecosystem, blockchain, by doing a Bitcoin tax ID. So we can utilize the blockchain protection and decentralization, but we can also incentivize users on a mass-based scalability using the off-chain technology. So we're utilizing both right now. So I think we can move on to the gems pre-sale. which is a very big topic as well.

Tom, do you want to briefly introduce how the gems pre-sales going to work? Yeah, yeah, for sure. So the way we have the gems token pre-sale structured is that the public gems token launch will be on December 1st at 9 a.m. Pacific Standard Time, actually. So the way that the actual pricing for the gems has worked is that during the initial pre-eems, invite phase that we're currently in. The gems are set to 17,225 XGems per VDC funded. This is a 2,250 XGM bonus on top of the base, which is 15,000 gems per BDC. And this carries for the initial invite period, along with the first 48 hours of the public sale so that everybody's

kind of on the same playing level here. There's really no competitive advantage to being into this early invite phase. We're just kind of rolling people into the platform slowly before the actual public sale. So December 1st, the floodgates will open, though, and all community members will be available to purchase X gems. We have a built-in Coinify counterwallet, so the purchase flow is actually, it's all automated, and it's about two clicks of a button. So when you have access to the platform, it'll be purchase.

You scan the QR code and the purchase flow is automatic and X-Gems are instantly credited to your account. So we're pretty pumped over at Coinify to finally get this up and going. You know, we are really looking forward to gems. We really think Daniel has a great team over there. We're really just excited and supportive. And yeah, so, you know, keep an eye out. We're going to be rolling invites out this month along with the actual launch on the first. So I was interested in this token distribution.

So there are 50,000, 50 million tokens which will be sold in a pre-sale. And there's 30 million in anirdrop, which will be allocated to air drops and cents, things like that. And then there's about 12 million to 12 million for marketing and promotion and then 8 million for the development team. So that totals to 100 million. How did you come to these numbers? How did you budget this distribution? and also maybe just kind of briefly mention in some of the earlier discussions on Bitcoin talk there was mention of a hundred billion or sorry 10 billion total coins why did you scale

that back to 100 million yeah the way we calculated the the number of tokens we want to have is based on a user adoption the hardest part is to grow from zero users to a thousand users, from 1,000 users to 10,000 users. And those are the hardest parts, and from 10 to 100. If you get more viral, obviously there is a very big network effect, but the beginning is the most difficult. So in the beginning, we did thought about starting with a very, very big number, like 10 billion, and that if we do reach hundreds of millions or of,

users. Each user we still feel like he's holding a lot of gems. It's more from a psychology point of view. But then later on, we did decide to move to a smaller number because we understand that

the hardest part is in the beginning. And if we do achieve the later stage mass adoption, we can always change how you see the gems value portrayed inside the application. we have Bitcoins and people were thinking to switching to

millibitcoins when it became over $1,000. Every gem token is divisible by a decimal point, so we don't have really problems of scalability, but we did want to give mainstream users a feel that they are holding a good amount of gems, but not a huge amount of gems, which is unnecessary in the beginning. and also to point out the airdrop,

we don't want to get to decimal fractions. And the way it works is that every day, 27,500 gems are dropped for users for their participation and adding people to the network. So let's say you added 10 users to the network and I added 10 users to the network on day one. then we will split the airdrop of 27,500 between us. So we incentivize early adopters of the network

because let's say in the beginning it's 10 new people joining a day, by after a month it can already be 100 users joining per day, but the air drop is still a fixed number of 27,500, which means that only if more than 27,500 users join every day, then each user will receive a fraction of a gem, which is something we don't want to get into, but it will take time until we get this kind of growth. So we feel quite comfortable with the numbers,

and obviously it's divisible by age, so we can always play with how we portray it. Okay. It occurred to me, though, when thinking about this eardrop, that there might be opportunities for abuse where if, so maybe I don't understand how those verification works, but if I can just create as many gem wallets as I want, wouldn't I then be able to invite as many people as I want and take more of that bonus away?

Or is there some kind of a mechanism there that I'm not understanding would not prevent people from doing that? Yes. So we actually are thinking about those problems with abuse and civil attacks. So we build a we're building an algorithm that can find this kind of abuse. And each user, his trust will be score is actually built from a couple of different elements. For example, I just mentioned a few of them how we flag fraudulent activity. So one is your account age. Obviously, in the beginning, when you just open an account, you start with

initial low trust score. If you decide to be completely anonymous, you're not using or connecting your mobile number, again, you will be a bit of very low trust score. And the other things we check is how many gems you have available in the account. If you have a small amount of gems, it reflects on your trust score. We can do a user, usage frequency patterns to see if you just created it and you're sending one message or you're actually using it on a daily basis. If we feel that you have a very low trust call, we can send you a push message to feel a capture in order to make sure it's not a bot and it's an actual user. We check your communication network with your friends.

If you're talking with people that have a high, high score, then obviously there's a bigger chance that you're a real person, if your relationship connections, you know, if they look good, if you're connected just to bots, which all of them have low trust scores, obviously it will reflect on your trust score. And also, the community can flag if there is a bot or something like that that's trying to speak with a reputable, somebody that has high reputation, and he feels like he's not speaking with a real person, he can obviously flag him. him as being a bot. So we take this different

criterias and we build a trust score around each user and only if you're above a certain threshold, you're eligible to use to receive gems from theirdroth. So it's not as easy to just create bots and game the system.

That's really interesting. I think it's a lot better than probably some of the abuse mechanisms that are in place on platforms like Skype where essentially there are there are none. So I think that's really good. Yeah, because Skype is not giving any value for participation or daily reward and so on.

So we are much more careful with how the airdrop system work. And even if somebody is able to game the system, the air drop is fixed to a daily amount. So we'll be able to track him without losing too much of the gems reserve because it's not like if he creates even 1 million users on a specific day that he will get more than the daily airdrop. So we're doing a lot of protection. I think mainly mainstream users will attach their mobile number

because they want to see their friends that join the network and they want to invite their friends. And this by itself adds a lot of... a lot of protection, but we do have other measures if people want to stay completely anonymous in order to be able to build their trust score. Okay. Now coming back just to the crowd sale briefly, so part of the mechanism with regards to selling the just the token sale is that, so there's 50 million tokens allocated for the X-Gem token sale. And what, What you've said is that any unsold tokens after the end of the crowd sale will be burned by being sent to an unferrified unspentable address.

This seems to me different from other crowd sales, perhaps where we've seen that the fate of remaining coins is voted by the community or things like that. Can you explain why you decided to do it this way? Yeah. Obviously, the crowd fund is very important for gems, success. and we are trying to build a very high-end product. We're developing the iOS version in Objective C and Native and also the Android is going to be developed in Java, in Native. And it requires funds to maintain the network and develop the network and all the ideas that we have lined up.

And we don't think that giving the unbought gems on our, based on a proportional ratio is a good decision because basically what it brings in the end of the day is that everybody is a little bit, you know, on the fence, looking what other people are doing. Because for them, it doesn't matter if the crowd fund, if reaches 300 BTC or 1,000 BTC, they just look at their percentage of their holding. So in order to incentivize people to buy gems and to take, and to have a bigger vested interest in the project

and to help us promote it, which is a big part of doing a crowd fund and not going to venture capital, we actually want to build a user base with vested interest in the project that will help us promote it and enrich their friends and mainstream people. We think it's a better way of conducting a crowd fund instead of just saying we're selling 50% and it doesn't matter the amount we raise

because it gives people the wrong incentive during the crowd fund. So one thing I think that's kind of interesting if we look at this. And, you know, maybe Tom, you guys have an opinion on this as well, is that if we talk of 100 million gems being issued, then if I understand correctly, right, So 50 million will go to the investors. Then 30 million would be giving out to new users and people signing up new users, essentially rewarding activity.

Another 12 million also sort of community giving out the people. So that just leaves 8 million, so 8% essentially for the founding team. And it's, of course, interesting. If we contrast that to regular startups where, typically I would say after a first funding round, after first funding round, people tend to be left with, I don't know, 70% or things like that. Can you talk a little bit about how you arrive at having a very small ownership percentage of those tokens?

and how you feel that is going to influence incentives in the long run because, of course, what happens, for example, when you run out of the BTC you raise here, you won't be able to do another crowd sale of those tokens, right? Yeah, so I think when we deal with the cryptocurrency and tokens and, you know, networks that are being built by the community, obviously us as the founders and developers we are leading the effort

but it's very important to achieve a good balance between the founders reward and the community reward for participating one of the you know a startup usually they keep a lot to themselves because they are more built around

them adding the value compared to starting an ecosystem with a token or cryptocurrency that you're very much supported by the community. Bitcoin has value only because the users wants to use it.

The same with all the other cryptocurrencies. So you need to be very careful with the number and after studying other use cases. You know, for example, Mastercoin, J.R. Willard was holding a very, very big percentage of the total Mastercoins. It makes the community think if this is the project they want to support compared to counterparty, for example, that the distribution was much more, much better.

and you can see the contribution and the ecosystem that was built around counter-party. So we think this is a good number to be in. I don't know how many other coins or cryptocurrencies, you know, I'm not holding even 1% off. So it's a good number. I think it's a number that gives us very motivated, a very big incentive to, to deliver the milestones and to achieve the goals we are looking for.

Yeah, to go on top of something of what Daniel was just talking about with that as well, you know, we think it's great that, you know, we actually usually, you know, in this, usually in this scene and field, you have the issue of the community saying, why are the developers taking too much money? So it's quite interesting to get almost a little bit of the reverse flip side, but we think it's a, we think it's a great number to incentives, to continue to bring incentive to develop this product along with we really think that these milestone investing periods are really going to help contribute to that as well because it's not you know you get 8% of the stockpile right off from the beginning and you're good to go um you know

jem's team and daniel's team needs to continually produce an actual you know product and progression to continue to get to continue to get the money that's raised in the crowd sale um they you know they don't get all the money all at once. So there's milestone structures such as the advertising platform, Android release, and additional features that we also believe will really help keep gems on track, keep this project high quality, and keep, you know, the development process and the incentive for the project at a very high level for the community.

Yeah, I mean, I was asking that question also sort of prerocatively because I do think it's an interesting question, right, where do you balance the incentives for the founders? and that community thing, which is super important. I totally agree. It's interesting you guys chose a similar number that Ethereum chose. I think it was something like that too. I don't remember exactly. And of course, the incentive then for you guys as founders is very much to make this huge.

Because if it's not going to be huge, then that's not going to be worth a lot of money. And I think that's also great what you guys are doing on Coinify is that that vesting thing is so important. I think that you really have accountability, transparency, and that people can just, you know, come in and get it and get out and sort of keep their share. So, yeah, I think I'm really excited what you guys are doing too on that front from quantify. I think that can play a really important role in the long run

in making sure these crowd sales are running a good way and in making sure that the trustworthy teams and that we hopefully get down the level of scams. So there's one more topic I would like to come to and sort of a perennial topic we keep coming back to again and again, which is the topic of regulation. So of course the question comes up, right? So you have this app now and you're going to send around gems in there. Now, do you think of gems as money or not? There's one question, but of course, there's also Bitcoin's be sent around.

So what are your thoughts on the regulation of this? Is that something you guys worry about? In particular, do you think you will have to do KIC at some point that, you know, maybe anonymous users won't be allowed to use the app? or do you think you may have to limit transaction amounts or things like that? Perhaps you can go a bit into that. Yeah. So it's important to point out two different things.

GEMS is, you know, it's on one side, it's obviously using blockchain technology. so it's not a closed system. The intrinsic value that we are bootstrapping into JEMS is derived from the users and advertising credit inside the systems that advertisers can use in order to send the unsolicited messages to the JEMS users. And I think that's something that is much more exciting for the users because they get paid directly by the advertisers.

So it's a partnership. It's not usually spam advertising that we're used to. If somebody is willing to pay for your attention, I think the quality will be higher, and there's a bigger chance that you will like to read or receive specific targeted materials that you're interested with. But from the technical point of view, obviously gems can be used.

outside the JEMS application. And if it grows and there is a big user base and there is liquidity and stability, it might be able to use as a paying to pay for things just like Bitcoin organically grew with the user base and liquidity and so on. We can't control this aspect. What we can is add, you know,

as much as we can features inside the GEMS mobile applications like sharing economy type of activities like crowdfunding and cool features to give users usability with the GEMS tokens. So there needs to be a separation between the purpose of GEMS inside the mobile application and the outside users that people, will be able to do because the blockchain technology that the Jemps tokens is built upon. So, you know, down the line, you know, it's more consumers or more exchanges and third-party applications that will, I think, need to be regulated. with these policies as you mentioned, KYC and anti-mandering and so on.

Yeah. So if I may paraphrase, maybe the way I would describe perhaps the position here is that you say first, James is a product, right? It's used as a product in app. If it has some value somewhere else, you know, that's sort of like magic cards that have values elsewhere you can sell them or whatever. And then I guess the other side, as soon as people start using as soon as people start using a Bitcoin in it,

it's sort of like you guys are just providing the wallet. And in that case, I guess you will fall into a several, a similar regulatory category as let's say a blockchain or info or other wallet providers that provide the software but don't hold the private keys, which I think is perhaps a good position to have, and then I can imagine that it prevails. I guess we will always see how crazy it gets in New York

with a bit license and similar approaches. Yeah, I think what currently the regulators are trying to put their attention on is the conversion between Fiat money to, Bitcoin or to cryptocurrencies. And this is more relevant to exchanges and Coinbase and third parties that are providing this infrastructure.

Inside the application, we have specific uses for gems, tokens, as we said on soliciting messages and advertising and so on. So right now, it's less effective on us. So where are you guys incorporated right now? Is that something that you've already established or is that still working on that question?

No, we are organized. We are incorporated in Israel. The development team is in Israel. We're doing everything we can buy the book. Okay. And how has... I mean, we talked to Manny Rosenfeld a few weeks ago about the ecosystem in Israel. How do you think things will evolve there with regards to the government accepting or rejecting crypto currencies?

There was inside Bitcoin Tel Aviv two or three weeks ago. So there was a representative from the Bank of Israel that talked regarding this question. as I understand it, you know, there are understanding there is innovation here. There is a chance to empower small businesses and, you know, the movement of value between countries and between users. So it seems to me that they are studying it carefully, but they are looking of ways to regulate it in a way that won't hurt the decentralized nature of Bitcoin and cryptocurrency. And there's a lot of things that this ecosystem can bring to businesses and to applications that won't available before.

Okay. Now, just before we wrap up, I'd like to come back to the app, actually, because we've been talking about this app for almost an hour, but haven't really talked about the application itself. So you mentioned that it will look like WhatsApp or perhaps Facebook Messenger. Is there anything else that you want to add to that about how the app will look and what will be the experience essentially of using the app? Yeah. So like I said, we want to keep the user experience as simple as possible that anyone that logs in is able to use it right away. In our opinion, a dedicated Bitcoin wallet is not good enough for mainstream users

because they might use it once to receive their first Bitcoin, but it won't keep them attached to the application. But when you bring this added value of a social network or a messenger build around this Bitcoin or Jem's wallet, it makes things much more interesting. There's going to be like in WhatsApp you see your messages from your friends. So if you get promoted messages that somebody paid your gems is going to be highlighted differently.

So you'll be able to know if it's a paid message or a regular message. Obviously, the wallet will display the amount of gems you hold, the value. and the ability to send a client-to-client encrypted message and the ability to send the gems and Bitcoins is going to be very easily portrayed in the keyboard. So you'll be able to easily, just as you send the text, to send the BTC or gems to your friends and to other users.

Okay. And so the app will be available on Android and iOS. But is there going to be a web client as well or a desktop client? Because I mean, a lot of times you're sitting by your computer, right, and not necessarily always on a mobile device. Yeah. If the community, if this will be a demand, we can actually implement it very fast. Right now, there is a working beta-alpha version of the iOS version that we are going to release. during the crowd fund period. And our top priority is developing the Android application also. If there will be a demand for a web desktop application, we can do that. WhatsApp still don't have desktop applications. I'm not sure how much the demand is big, but if it is, it will be easy and fast to implement it. Okay.

And so it seems to me that there are perhaps some interesting opportunities for brands to utilize a platform like gems. Now, two things. I guess one is how do you think brands can use gems and so as sort of, you know, from the perspective, new business models, I guess. And also, do you think that in the future there would be some sort of a developer platform where, developers could come on, build apps on top of gems and perhaps monetize those. I guess I'm thinking about new business models, new types of ecosystems that we can build on top of this platform. Yep.

So one of the ways we can get advertising active inside the application, before I said that you will be able to send unsolicited messages between users, that is something very interesting. interesting by itself, but we're also going to have advertising page a little bit similar to Zero Block that they're getting their feed from Reddit and from the Bitcoin website. So you will be able to select the things that interest you if it's e-commerce, if it's Bitcoin or if it's other things. And again, it's a bidding system to get the... to be on the highest point in this news feed.

So this is one way for brands to actually bring awareness to what they're doing. And regarding third-party applications, I think it's still, obviously, we are very supportive, and that's why we are living a big percentage to incentive these kinds of contribution. It's something that haven't been

done before that there is a social network built with a token monetization system inside. So it's a

little bit early to speak about the possibilities but like doing inside the crowdfunding or you know

building a more usability surrounding the tokens and groups and what you can do with it. I think it will be very interesting to see what people come up with.

And we are very interested in the community contribution to this. Cool. Well, thanks so much guys for joining us today. It was really interesting talking about gems and I think it's one of those projects that I'll be extremely interested in watching where it goes, how the crowd sale goes and especially how it goes one afterwards, how people will use it. And especially if we will, we will see that kind of mainstream. adoption that we are hoping for that it will serve as a hopefully as a great tool to introduce people to to cryptocurrencies. So thanks so much for joining us today guys.

So for those who want to learn more about gems, you can go on their website. It's called get gems.org. So that's get gems.org. Really nice website by the way, like design-wise I think you guys seem to be maybe like some of the best we've seen in or I've seen in the Bitcoin space. You can also check out Coinify, especially if you're interested in participating in the token sale. They have a blog post there that goes into the economics. Some of what we've talked here, but if you are interested in purchasing some, I recommend you have a look at that.

So that's Coinify.com. that's 25K so you can check it out there and thanks so much for listening so if you want to support a show you can do that in a number of ways you can follow us in Twitter

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Epstein and Bitcoin, or non-flash tips. Our next hangout is coming up on Wednesday, November 26th at 7.30 UTC. Now, what's UTC in normal? So 7.30, that would be 7.30 GMT, so London time. That would be 8.30 European time. And I think that would be 3.30 Eastern, so New York time, if I'm correct. well. So that will be with Solid X. Solid X is a company that does something totally different,

and they're trying to sort of get institutional investors to buy Bitcoin. So help them buy Bitcoin and really rich people that may have some other barriers, especially regulatory kind. Totally different thing, but I think it's very interesting too. So yeah, please join us for that one and thanks so much we'll look forward being back soon