Epicenter - Learn about Crypto, Blockchain, Ethereum, Bitcoin and Distributed Technologies - Lisa Cheng: Token Sales and Crowdfunding in the Cryptocurrency Space

Episode Date: March 23, 2015

Creating a new token and selling it to fund the development of software has become a preferred way of fundraising for cryptocurrency entrepreneurs. It’s a tempting tool, allowing startups to avoid traditional investors, build a community and allow anyone anywhere to own a stake in the project. For participants, there is the promise of big financial upside and being part of novel undertakings. Lisa Cheng, whose consulting firm Vanbex has accompanied many crowdsales, joined us for a discussion of this revolutionary way to fund and monetize open source software. Topics covered in this episode: Why crowdfunding and cryptocurrency are a natural fit A brief history of crowdsales in the cryptocurrency space US securities law and the questionable legality of token sales The value of writing a solid white paper before launching a sale Elements of a successful coin launch The role of companies like Swarm and Koinify in conducting crowdsales Episode links: An Interview with Lisa Cheng Tokenizing the User Experience Token Sales and the US Securities Law David Johnston DApps Whitepaper Vanbex Group This episode is hosted by Brian Fabian Crain and Sébastien Couture. Show notes and listening options: epicenter.tv/071

This episode of Epicenter Bitcoin is brought to you by Shapeshift.I.O. With no account or sign up required, it's the easiest way to buy and sell light coin, doge coin, dark coin, and other leading cryptocurrencies. Go to shapeshift.io to instantly convert all coins and to discover the future of cryptocurrency exchanges. 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 Kuchu. and my name is Brian Fabian Crane.

We're here today with Lisa Cheng. Lisa Chang is the founder of Vandex, and she was also previously working in doing business development for MasterCoin. And we're going to talk today about crowd sales and crowdfunding in the cryptocurrency space. She's been very involved in that, and we all know it's an exciting space, and there's so much happening there. So thanks for joining us today, Lisa. Thanks for having me, guys.

Looking forward to the show. and Epicenter is one of the shows that I watch. So thank you for inviting me on today. Well, we're certainly glad to hear that. Yeah, so I think that we have had topics. We have had shows on this topic a few times. We had Joel on from Swarm. We've had Tom Ding on from Coinify.

And we've had quite a few projects on that went on to do their own crowd sales. We've had several times. We've had people from Ethereum on. We've had gems on. well, Swarm itself was, they were doing their own crowd sale, and there may well be some other ones, or factum, and there are probably some that I've forgotten. So it's even when we look at our sample, there's a very prominent topic, and it seems to be a prominent topic in the space in general.

So Lisa, can you give us a bit of a maybe brief introduction to the evolution of the crowdfunding space? Sure. Sure. So just to give some background, I started off with the crowd sales in Bitcoin during my days at MasterCoin. Prior to joining MasterCoin, there was still crowdfunding happening within Bitcoin on forms like Bitcoin Talk. And people were doing, you know, going to places like BitFunder, going to threads that were purchasing, you know, ASIC minor shares. And they were doing a kind of crypto equity that kind of went away as, I guess, Bitcoin became more mainstream. And during that time, Mastercoin did their initial crowd sale.

And so they helped create a protocol to launch coins, and Made Safe was their first crowd sale on Mastercoin. There were others that happened after, like, separately, such as counterparty and several that have been counterparty and I was mostly working on MasterCoin so I was able to kind of be around there for Madesafe and then I was part of Tatiana coin and a few others as well. Yeah all projects that uh well as Brian mentioned that we've mentioned on the show in fact we've had Tatiana on and uh and others so out of that so from that initial experience what were you able to learn that sort of uh enables you to start the Vandex group after that Sure. So one thing that being at MasterCoin, especially being there for the whole made safe thing that happened, I learned that it's really key to kind of get the message across early about the project, communicating what the project is doing from a technical standpoint, what it is under the hood as well as the business itself. How are they going to use the money? Who is behind the project?

seeing all of the negativity that happened with some crowd sales, I learned that, you know, a white paper is important to communicate what the project is about, how it's going to be built, you know, what is it actually going to do? And then from a transparency side, you have to go out there early and talk about the project, go on to the forums, the threads, the places where, you know, People are getting their information, especially who you're trying to sell the coin to. Bitcoin people, they're kind of a certain demographic. They go to certain places, and you have to go to those places to tell your story. Otherwise, you're going to miss them.

And if you're trying to get bitcoins, you know, you have to go where they are. Yeah. I mean, I think the kind of interesting thing to put in the interesting thing to put in perspective here too is that you know crowdfunding is a is a pretty new thing as well i mean i was i was looking at the wikipedia page of crowdfunding before and it mentioned that the first time the term crowd planning was even used was like 2006 or something you know it's like not even 10 years ago and uh you know kick starter is was started in 2009 so you know it's it's a very uh it's a very new development and what is what's interesting too is

that you know it's a tricky thing crowdfunding right because legally it's often challenging so Bitcoin I think for a few reasons right Bitcoin is so like uniquely it's such a unique match with with crowdfunding you know for one reason it's just that there's no you know there's no problems getting people from all over the world to to support your project right because they they can just do Bitcoin transactions there's There's no problem there. Whereas otherwise, you're going to have to work with payment processes. And then that's, it's not, at least it's not possible to do on your own.

You have to go to a platform to do that, right? So I think that's really interesting. And then I guess the other one, I guess we forgot to mention that before when we're giving some introduction to the topic is David Johnston and that whole DAPS concept, which of course brings a whole other level in, in that year. you're sort of able to give incentives to people. Yeah, I think the whole evolution of crowdfunding, I guess it is still very young.

I didn't realize that it only started, you know, less than 10 years ago. I mean, there may have been some things before, but I think sort of in earnest in a more serious way, I mean, I think it's still very much nascent. And, well, there are a few different areas. No, people do the lending, right? So like Lending Club and we have to end Bitcoin as well and like BitBond for example. And then equity crowdfunding.

Actually here in Germany it's it's there are some platforms to do that. It's like I think it's more possible than in US where it's extremely restricted. Didn't that just get opened up recently though in the US as well with some sort of jobs act that opened up crowd sort of crowdfunding to the equity market? Yeah, non-accredited investors. Yes, right. They haven't formalized the Jobs Act specifically. It's still very vague.

But so the legislation right now is that you can't accept money. You can't, you know, promote your company unless they're accredited investors, which means that you make over $100,000 a year or you have like a million in assets. And so Kickstarter was interesting in that they weren't selling equity. you could raise, you know, money by doing a product. What was the VR project that they raised? Oculus Rift. Yes, Oculus Rift.

They were the one, I think, that really put Kickstarter in the purview of a lot of people, and they helped people realize that it could be successful. And they went on to sell to Facebook. but, yeah, Bitcoin sits on this gray area where, you know, we don't know who people are that are buying or supporting these crypto crowd sales because Bitcoin is anonymous in a sense. And there's no limitations on geography. So we can't just say this country is going to be regulated this way. So, yeah, I think crowd sales and kickstaters are kind of, they're less than 10 years old. And maybe in four years from now, it will look different.

So basically what you're saying is there's tremendous challenge because Bitcoin is what it is, right? It is completely decentralized. It's accessible to anyone worldwide, so you don't have these restrictions. But at the same time, I think that the crowdfunding space, even though it is quite young, as we've mentioned, it's sort of ripe for to be Kickstarter again, I guess. Because, I mean, I've never

personally, I've never spent any money on Kickstarter. I think Brian, you were mentioning that you invested or sort of funded a lot of projects that you didn't get anything in the end. I think that's the experience for a lot of people. You don't get any magnets or T-shirts? Well, I mean, actually, this is something

I've been thinking a lot about and maybe this is the right place to bring it up. And it's not directly related to cryptocurrency, although it applies here certainly as well. And I think crowdfunding is an interesting thing, right? Because when you, the incentives are very strange. So if I start a Kickstarter project, for example, for some sort of gadget, some technological gadget, then, you know, generally these people haven't actually produced it yet. They have some plan of they want to do this thing.

and now they try to raise the money and when they raise the money they go to try actually do it so obviously I want to get as many people as excited as possible for this project so I'm going to promise like as much as I can make a really nice cool video

and you know it's going to be like deliver soon to your door have it by Christmas type thing so you know you have that incentive to promise a lot but then the downside is that well one it's difficult to do hardware right you have to deal with customs and factories in China and all kinds of things.

Two is these people generally have no experience. And then things go wrong, right? So I think that's the sort of interesting thing about even an established crowdfunding site like Kickstarter is it's presented as if you are buying a product. Like you're buying this thing and it's going to be delivered a certain time. But you're not. you're buying a promise that if they actually can do it, they will give it to you, hopefully, roughly at that time, the general it's like a year later or something. So, I mean, yeah, I mean, personally, I've had a pretty terrible record that some projects

just never did anything, like fell apart, I don't know what they did, you know. But presumably it was because they overpromised and they didn't have the necessary competence to deliver. And so that's an interesting tension. And I think that's something that I wasn't so aware of before. It's just kind of over time with using Kickstarter and Indiegogo. It's become clear. So what was it that drew you to invest in those projects?

No, it's just there were like cool things. Like, oh, I want to have that, right? Like, you know, it wasn't available elsewhere because often it's very counting edge products, right? And products. Like, did they have a really good video? Did they, like, what was it? Of course.

right. There's a great video. There's a lot of promises of cool features and stuff. Yeah, I think, yeah, you're probably not the only one. No, no. I think this is a, I think this is just a fundamental characteristic of this. And it's, of course, the same thing in the cryptocurrency space, right? So when you launch your crowd, you crowd sale, your project, you want to make a lot of great promises that's going to be available soon, that it's going to be able to do a lot of things and that you can do all this stuff because you want people to invest in that. And, you know, mostly, I'm sure, with sincere intentions and like you believe it can do it.

But that being said, of course, implementing it is often harder than coming up with the plan. I think the good thing about crypto crowd sales in particular is because there's that stage where the community comes out and points out all the holes in the project. And there's that vetting process where like, hey, you are, where are you going to spend the money? And who are the people behind this? And it's like, you have to overcome those challenges. And if you don't have those answers ready, then you're losing a customer. But do you feel this really happens? I do.

Because personally, I mean, to some extent, I'm sure you're right, right, it does happen. But personally, I feel like that's one of the flip sides of crowdfunding is because you're selling to a thousand people or 10,000 people. nobody has the resources or even the interest or the know-how to like really deeply look into this thing, which is something very different than if you try to raise money from venture capitalists, right, where they're like, you know, they really look at you, meet with you in person, talk with people who work with you, look at your plans, etc. And I think you don't have to have a crowd. I mean, of course, at the same time, there are other upsides, right?

And you do have to crowd, especially in Bitcoin, right? there were a lot of critical people that do give to say. Totally agree. There were a lot of people that came up to me afterwards and were like, oh, I put money into this project. And, you know, I'm so excited. It's going to release. And I was like, did you check out Reddit and Bitcoin talk?

And they're like, no, I never go on there. I'm like, okay, well, you know, you have to do your own research as a consumer. And some people, like you said, fine, they don't have time to do that. So one thing that I'd like to point out is that makes crypto crowdfunding so different than regular crowdfunding is it's a different type of product. In one hand, the Kickstarter and Egogo, mostly we're talking about physical products that need to, like you said, Brian, be manufactured in China or something like that. When you're talking about crypto crowdfunding, for the most part now, at least I think, I mean, it's mostly been software. And there's a completely different dynamic as well is that the software is often accompanied by coin in which you, sort of become a holder and I want to say it but you know you you you some would say

invest in that project yeah although that's not how it's framed so it'd be interesting to see I guess in in some near future if we start seeing physical products and if the same sort of problems occur of course in that right now with regards to the software like you said mentioned is you can go and And you can, I mean, most of the software is in a source, you can go have look, you know, what the source code is and point out the holes or the eventual problems, which is much more difficult with physical products. No, I think this is a great point, actually, Sebastian, you bring up. And this is also one of the reasons why I'm, I don't feel as, I don't feel that a lot of the cryptocurrency crowdfunding projects are as problematic. Because let's take an example of Ethereum. So you buy Ether.

I mean, everybody knows that this is risky and that, you know, they're going to try to build this thing and hopefully they will do it, hopefully they'll do in time, et cetera, et cetera. And there is that potential that it's going to gain a lot in value. So you get compensated for your risk, right? So it absolutely does have this sort of investment type or share type character. And you don't have that with Kickstarter, right? It's like in the best case, you get what they promised you on time. and you have your whatever thing for $100 or something. But you don't get compensated for the risk you take.

And I think that's different in the cryptocurrency space. And I think that's why I actually think it's, you know, it's okay to have that risk if, you know, there is, you know, there is the potential reward in the other side. But I guess this brings us to sort of the topic. I mean, you just mentioned it's about Cia, right? the question between an investment versus a product sale. So Lisa, has it, I mean, it's been my impression that companies have framed in the cryptocurrency space, the crowdfunding campaigns as product sales.

Is that correct? Has that been your experiences as well? That's right. So it's, I see the community and I know that they approach these projects. as viewing it as an investment sometimes because they're purchasing something, they're anticipating the value to increase. But it's like I see it as, you know, coming from the tech side, working within technology for so long, it's this dilemma of open source.

How do we fund open source development? And how do we do it in a way that incentivizes developers, create scarcity for, you know, the product. And in the case of ether, like you mentioned, you're buying ether, you're not sure whether the product will come out. You're hoping that the value of the ether will increase. And, you know, if you're a smart participant in the crowd sale or token sale, you will watch the project, watch for the test releases.

And Ethereum has released TestNet. And right now you can mine test ether. And if you want to actually build a DAP on Ethereum, you need Ether. So when they do release their product, I've heard is going to be really soon. They push the data a few times. But, you know, I wish I had some ether to use so I could buy and use it within the network. But it goes back to the point that, you know, it's not an investment because what you're doing is you're purchasing the right to gain access to the network at a future time.

And depending on the resources available in that network, you know, if it's of high value, that the value of your token will increase. You're right, of course. But then if you actually want to build a app later and use it, et cetera, et cetera, of course you can buy it at that time. There's no... Yeah. So there's this thing with Ethereum right now where it's free to create a feed. And there's only so many, I guess, spots available to do that.

And if you're the first one there, then you have the advantage. If you have ether ahead of everyone else, you have. have the advantage of claiming more resources in the network. So in that sense, people that participated in the Ethereum crowd, so I have not participated in any crowd sales. But for those that did, they... You haven't participated in any crowd sales? No, I have not.

You have bad advocates of crowd sales. Yeah, I sit in this weird area where, you know, I only have Bitcoin. But it's not that I don't believe in it, but then I, I tried to take a very balanced view. And there are sometimes challenges with the projects we work with. And we try to make sure that, you know, you address those challenges. And for that reason, we don't want to accept the coin because then we're taking it biased. Yeah, no, that definitely makes sense sort of in a professional role, right?

If you work directly to the projects, I think that's a very laudable and good position not to take the coin, not get paid in that currency, I think. But, yeah, I mean, I think personally, you know, what we're talking about, of course it makes so much sense. You know, there's monetizing open source software in this way. It's just absolutely brilliant. And it's clearly, clearly makes a ton of sense. I mean, Bitcoin in a sense is a bit like that, right?

Like that Bitcoin early developers, you know, they have Bitcoin's because they were worth nothing at the time. And it gave them an incentive to work on this. And so there's no question in my mind that this is a brilliant model. It makes a lot of sense. It works. But that being said, there's also no question in my mind.

It works precisely because people treat it as an investment. And whatever now the project creators think of it or frame it, et cetera, you know, that's just the reality, right? And then I think where it's going to be interesting is how governments and law enforcement, et cetera, will look at this, right? Whether they will sort of look at maybe the terms of conditions. If you think of Ethereum, right, they had terms of conditions where they've specified, you know, paid lawyers a lot of money to do that, at terms of product resale.

And if they sort of accept that and say like, yeah, that's a face value, like, then it should be fine, right? Because you can do that with product pre-sale. But if they look at it more, sort of maybe take a step back and say, oh, but how do people treat that? Well, then I could see that getting some projects into some difficulties. But I guess we'll see. I agree. I think it was back in October, November, there was a project called BitNation.

And they were approaching their crowd sale in a way that we are not incorporating as a formal entity. and just like Swarm, they were also talking about crypto equity. So there's this question of what will happen to these projects, and so far nothing. Yeah, so far, but I mean, didn't, but Eric Voorhe's got some fine because he was selling like some sort of equity in Satoshi Dice on Bitcoin Talk. I've read that he sold Toshi Tice and didn't report his. his income from the sale. No, no, I think he got a fine for selling equity in that thing. I think we could check it, but yeah, anyway.

But yeah, I mean, I think you're right, right? So there is a sort of, there's a question, and it's an open question, because we don't know yet, we haven't really seen action, and maybe everything will be fine of how lawmakers are going treat those crowd sales that make the effort of trying to make it a product pre-sell. But then I think for those and they have been, maybe projects have become more careful at the moment who have actually phrased it as like we are selling equity here. And there, I mean, that's of course a huge liability of carrying it sort of at any time, right?

They could get in trouble for that. Today's magic word is strategy, S-T-R-A-T-E-G-Y. Go to let's talkbentcom to sign in, enter the magic word, and claim your part of the listener award. So can you tell us, Lisa, what has been sort of your experience in the spectrum of what these projects have been framing their coins at as investments or equity or products, and what in your opinion is right now sort of the best approach from a cautionary perspective? So network token sales, which is what we're calling them, they are not an investment, but they are a purchase of the right to access a network at a future time. So just like software licenses, you know, you purchase the right to, you know, the next call of duty

or the next, you know, Halo before it's out, right? You're buying that right to use the game before it's officially released. And that's how tokens operate in the same sense. Software companies and gaming companies have been doing this forever. You know, you can buy Windows 8 before it came out. Crypto companies in particular have started incorporating in place like Switzerland and in the UK. and they are making sure that, you know, they're releasing a token and communicating that it's a technology product before, you know, the actual crowd sale happens. I mean, I think that's actually another important point to bring up here, right?

Because one thing is, like, what's the legal status of this, like, in the U.S. or something like that? But, like, you know, that's one question. The other question is about enforcement. And, of course, if you are somewhere else and maybe it's legal in the local, laws but it's not legal going in the US, you may just say, I don't care, right? And I think that's a perfectly legitimate position to have. And that's a great advantage of cryptocurrency space is that you can often do that kind of thing and you go just wherever you find a local jurisdiction, that's okay with that. But maybe even no jurisdiction. I mean, of course,

that's, I don't know if that's advisable. Probably not. Probably not. So some have set up in Switzerland, some are going to London, and especially like the way Konyphi has incorporated in the U.S., they've consulted, like, lawyers and have, you know, a requirement that you sign up and register. So I would definitely use Kynify if I was to launch a token sale. And I would also incorporate in Switzerland.

But then there's the question of like, consumer. protection laws. So regarding this network token sale approach, I mean, is it foreseeable that sometime in the future, like all these projects will get slapped on the rest because the law didn't see it that way? I mean, that in fact they were interpreting it as an investment? So there's the question of like whether it will be seen as an investment and will they be penalized as an investment or will someone that has purchased a token complained? to their local jurisdiction about, you know, consumer rights, you know, fair business practices, you know, those things that protect regular consumers when they purchase the product.

And then there's the crowdfunding laws, you know, under a million, did they know what they were buying? Yeah, I think in the future we'll see something possibly happen. We know that they're looking at Bitcoin. Right. No, there's a whole gray area there and we don't know what's going to happen. In fact, we've been advised by some people like, you know, to be careful about what we talk about in fact. And so, I mean, I think that's probably somewhat exaggerated. But it is a very gray area. I mean, if I was launching a crowd sale, I would really want to think twice about whether or not I'm going to be fined or penalized in the future for, uh, I mean, if I was launching a crowd sale, uh, I would really want to think twice about whether or not I'm going to be fined or penalized in the future for, uh, selling something that was in fact illegal or against consumer protection loss, as you mentioned. I mean, I also think like one thing that I feel sort of conflicted about, you know, if let's say we did some advertising for crowd sale on this podcast, I personally, which we have

actually, yeah. But so I personally, I feel like one thing that and maybe we didn't do that so well or we didn't do that properly is one thing i think that one should do is have a disclaimer like this is risky you know it can go wrong but it also has this a potential upside right so like people understand it in that in that context and i think it's fine right because people are like personally i feel like people should be able to make those choices whether or not that's legal or not is a different question right but just sort of from a personal like ethical thing you know i think that's fine. But of course that implies you have to make that kind of disclaimer that, you know, it does have this kind of upside. It can get very valuable, but it can also be totally worthless

and this is speculative. And that was a little bit, I mean, I don't know to what extent, but it seems to go a little bit against and the framing it as a product pre-sale. So like we both work in this like area, like you guys and us at Vanbex, work in this area of talking about what's happening in this space. And we have to be kind of aware that, you know, we're not going to promote pump and dumps because there are those. They do exist. But there are those projects that are really quality like Ethereum, you know, that have a good team. They have a solid project.

And we can talk about the product. We're not going to endorse that people buy the coin because that's their choice. But we can talk about the value of the technology and what it can do. And I think that's where, you know, where we are. And we can add a disclaimer. We add a disclaimer when we work with projects. like we're not responsible, you accept the responsibility, you own all the content. We are just here as advisors.

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So come back to crowd sales, Lisa, so you've been involved in quite a few crowdswomen sales. Can you talk to us about the different crowd sales you were involved with? Sure. So I started, I guess, working with in Bitcoin, with MasterCoin. And during that time, they did Made Safe. And I was working on a project called Tatiana Coin. It was right around then that Adam Levine was starting to talk about LTB Coin. And he went with Counterparty. He was the first one that actually sent me a Counterparty and encouraged me to kind of take a look at it. And it was quite easy. I created half a million green coins, and I sent him 500,000.

No one will buy my coin, though. It's kind of, I don't understand why. And after that, I worked on David Johnson's API Network. There was storage, swarm, as well as a few others. There was gems, something called Merchant Coin, more recently, Scenario, and factum. Aziz. So tell us, what are the things that software developers or people engaging in a crowd sale should consider in terms of launching a successful crowd sale? So if someone's considering doing a

crowd sale or a network token sale, they should, for one, have a very clear idea of what they are trying to launch. It's not just about doing a product and having a few lines of code and saying this is what it'll do, but what is the business going to be afterwards? Where is the money going to go? Do you have a clear idea of who's going to use your product? And based on like that, that's your story. You have to communicate that story through, you know, the white paper. Make sure it's saying, you know, the technology is there. This is exactly how it'll be used, what people can anticipate. when it's out. And on the other side, making sure like the business is set up if you're going to incorporate, if you're going to, you know, set up as a nonprofit, which is what a lot of

people have done. So just being transparent in how you're set up and making sure that you're communicating where the money is going and what the technology will be. Do you feel that a lot of the crowd sales that we've seen so far in the cryptocurrency space have been successful and being transparent before they launched their crowd sale? I think it's always a challenge. This is something that we are usually brought. So with Vandex, we're usually brought in through word of mouth. People are launching a coin and they are needing some advice and guidance at some point. And they bring us on because we tell them this.

And the projects we work on do understand that. And I'd like to say that they are more successful because of us. I mean, I really like your emphasis on the white papers. I think that's a really, really good thing because just if somebody has to write a white paper, right? It's like you have to sit down properly think through it and, you know, put the thoughts on paper. I think, well, first of all, it certainly, you know, it's a good process for the teams themselves to really clear. It does force you to be structured. Yeah, force you do structure, forces you to really think through.

And also, of course, it makes it obvious if people haven't done that, right? I mean, if somebody can't write a proper explanation, you know, then that's definitely a warning sign. And I think that's, you know, business plans, right, they're sort of out of fashion today. Nobody seems to write a business plan anymore. So, and there's certainly something to be said for that, right, because then people write a business plan and they never do anything that's in the plan and the plan tends to become irrelevant. but that being said, there's certainly value in terms of like a business plan that it actually forces you to think. And I think the white paper is a great thing to take that role.

And so I'm a big fan of that part. Yeah, I agree. The white paper is almost needed in the crypto crowd sale. It's like the equivalent of the business plan and the startup industry. But a white paper is almost more complex. that you have to say, here's what we've done, here's what's coded, and here's what we're going to do and how we're going to do it. Whereas a business plan could be based on nothing.

Yeah, exactly. I mean, white paper makes it much harder to hide behind the stock photos and pie charts. Fancy videos and, yeah, nice looking websites aren't enough for crypto crowd sales. So when launching a product, an open source product, for instance, at what? What stage of development should one consider doing the crowd sale? Should it be very early on? Or should they at least have some code written or a good part of their code written? So someone asked me this recently, like, when should they have the crowd sale?

And it's not really like something you can set in stone. You should start talking about your project soon, as soon as you can. Go on the threads, go on the form, start talking about what you want to do. and then and when you know when the community is starting to

give positive feedback you've gone through that process of having people ask you questions and it's that vetting process and when you're

going through that that's when you know that you are almost ready to launch the crowd sale date that's kind of how we gauge

when crowd sales should launch you mentioned posting on forums and Reddit and such and I assume you're talking about sort of

Bitcoin and cryptocurrency-related forums. At what point do we permit ourselves to get out of the Bitcoin cryptocurrency forum space, which I think you mentioned earlier was quite peculiar in the types of demographics of people that live there? At what point do we move to other more traditional communications platforms, social networks, where the masses live? Yeah, I think it's, you have to do them both, go both as well on Facebook and Twitter. And like for storage, because it was a decentralized cloud play, you know, they appeal to people outside of Bitcoin. They were on places like Info Wars. Yeah, but I mean, Info Wars still, I mean, it's...

Yeah, it's kind of anarchist libertarian. Yeah, well, of course, the challenge is, right? So if you're going to try to convince people who aren't already Bitcoin users, the hurdle is so much bigger because they don't only have to say like, okay, I believe your project, et cetera. They also have to go out and buy Bitcoin's. They have to like familiarize themselves like, oh, how do I now send this thing somewhere else? And then also the process, right?

I mean, if you participate in a crowd sale, you know, you have to do some things, whether it's set up counterwallet and stuff. I mean, that's just so many hurdles that I think it's unrealistic to try to do that. So it makes total sense to focus on. So it's too early, is what you're saying? It is just so many hurdles. I mean, I think you're going to have to focus on cryptocurrency users because the other ones, I mean, of the ones you convince of your project, you're probably going to lose like 90% on the way because they can't figure out something

or they get scared or they're confused. I agree. Like Bitcoin people are a certain demographic. And like we've discussed already, they hang out on certain forums and they read certain things. So I would say like focus 80% of your marketing and PR on Bitcoin and 20% elsewhere, like on regular social media, regular, you know, if it's like a social networking project, then hang out on the P2P Foundation forums, you know, those and even anarchist forums. But you're going after people that have Bitcoin already because they're like the little hanging fruit. So you want to go where they are.

So can you talk a little bit about the different platforms that have been used? So I know, I mean, I think originally right, MasterCoyne sort of was used for some things. It seems recently counterparties become more popular. What are the pros and cons here? And where do you see this going? So Counterparty and MasterCoin are interesting in that they both sit on Bitcoin. They use protocols. They use metadata for,

putting their information into the Bitcoin blockchain, which is then, you know, passed to the Bitcoin miners. The difference between the two is, well, they're similar in technology. Mastercoin now called Omni, they are using, I think it's, I forgot what it was called, it's not op return. But to be sure, counterparty has come out first with an easy-to-use wallet. They charge a little bit of XEP to create coins. There's no limitation. There's no correlation between how many XEP you need and how many coins you can create. Like I think I use 75 cents and I made like 9 million coins.

Like it's kind of crazy. And counterparty today has launched way more than MasterCoin. Omni, just as Omni has taken the very slow approach, they have yet to release a stable wallet. They will be doing that soon. and I think they're just kind of hedging their bets in the sense, letting counterparty go forward and test the waters. Well, that's a very positive way of phrasing it. I mean, it seems like, I mean, even David Johnson himself said,

like, no, they've had, like, lots of problems. Yeah. Implementations were incompatible that they, like, start over with the whole co-base and stuff. I'm curious. What are your guys' thoughts on why? colored coins and open asset-based protocols haven't taken off? Oh, colored coins? Well, the colored coins team, Amos, who I spoke with, we helped them recently with some

marketing. They actually raised some venture capital funding, and they have hired a full team, and they're formalizing the colored coins protocol. So they're working specifically to kind of create. a formal colored coins technology and allow people to create tokens for the internet of things. They've been slower for sure. Well, I mean, I think one problem of the color coin stuff is know that there are protocols, right, but they're different ones.

So they're not compatible with each other. So, you know, one is a coin prism of Flavien, whom we are on as well. but then there was another one called Chroma Wallet and you can't use one with the other. And yeah, I think Flavian mentioned this as well, right? There's now some people who try to have formalized this somewhat, which I think will be based or similar or compatible with the open asset protocol, which I think Flavion has done. But it's a good question.

I don't know why not. I mean, it seems, yeah, it's a, who knows? I mean, I'm not sure why this hasn't been so more used. Well, like the colored coins team, just like any of the other teams, have had their own ups and downs. And, you know, Amos and some of the other guys, they took a while to kind of figure out what they want to do with colored coins. So they might surprise a few people later this year when they release. If you remember Reddit notes, they were going to use color coins as well. Yeah.

I hope so because I mean, I really like the project. really like the implementation of it. I think they have a really good approach. I mean, I think the important thing, though, here to point out is that there's not like a project, Color Coins, right? Like, Color Coins is super old. They've been like Vitalik was working on that once. No, I'm sorry. What I meant was Coin Prism. Coin Prism. Yeah, yeah. No, Flavien. So, I mean, I think that's one of the challenges, right? So the idea is age is old. Then different people have worked on it for different times. Some people have gone this direction, done incompatible things. And, you know, maybe to some extent, it is also related to the fact that they don't have your own currency.

So you don't have a development fund that can, you know, sort of pay a team to work on this. But they have to, you know, maybe go different ways and that makes it a challenge. Yeah. Actually, they were interesting in that they raised venture capital funding from, you know, pretty prominent VCs in New York. Mark and I'm talking about Kolu, who's formalizing the Color Coins protocol. So unlike counterparty and MasterCoin, this was the only team that raised the traditional funding, with the traditional funding route. So it shows that there is interest in, you know, what's happening in Bitcoin and tokenization.

Yeah, there's investment available for these companies. Yeah. Yeah. So coming back to your personal experience with Vandex, you know, you've, you've, worked on a variety of different crowd sale projects. In fact, probably a good portion of the sort of ones that we've heard the most about you've worked on. Which ones really stood out as being very unique? And which ones do you think, which ones do you think would be the most successful?

I really like storage. I still like storage today. They're going to release the beta out. people that participated in the crowd sale are able to get in there first. Some of the guys on our team were participants, and they're telling me how they got their invite already to storage. And it's actually really cool. So I think that they have a lot of promise.

And their coin went up in value. So that was a good sign. Not because, you know, it's an investment, but because people wanted to get in the product, right? Yeah, no, I agree. I mean, I remember having Sean on it. To me, it seemed like the project that had the most potential and actually had real use, you know, that we could actually use on a day-to-day basis and has real value. So I think that plays a lot in the coin, having gotten so much attention and raising in value, like you mentioned.

Just to finish that. It's a, so they had a very clear story, right? This is what companies should, if they're considering a crowd sale, look at how storage has done it. It was a very clear product model, clear use case. You knew how you were going to use it. You knew what the coin was going to be for. And they were able to release versions and screenshots of what the beta is going to look like. And they had a white paper as well.

So those are all the good things that we look for. And what are some of the projects that you have on your radar that are coming up that you may be able to talk about that you're looking forward to? Sure. So Factum is one of the projects that we've worked with for the longest, and I really like what they're doing with their partnerships. And they have some really cool things that are going to be coming out in terms of land title registry that are going to really show the use case of Factum, because it's such a complex,

and at the same time, they say Factant does nothing. So telling that story in a way that outlines how people will use it. And that's kind of the area that I'm working with them. That's one thing I'm looking forward to. So watch for that. The other thing is that Swarm is actually going to have another Swarm class soon. And they have some really cool projects coming out, which we've been able to kind of be there and listen to and ask questions about.

So that will be really cool too. coming out soon. Yeah, with regards to the fact of it, so when we had them on, like you said, it seems so abstract. And then, you know, recently we were in Berlin, we saw Peter Kirby there. And it seems as how they sort of have use cases, one of which being these land titles. Brian, what do you think about Factum and how it sort of evolved as in practical use cases? I mean, I think Factum makes a lot of sense, right?

like the potential utility is sort of, you know, very clear to me, like why this would be useful for like a whole variety of things. I mean, I remember when we had Peter Kirby on the, on the podcast and Paul Snow, they talked about, you know, the idea that like a bank has all these like mortgage applications and they can use something like a blockchain to just prove, like, oh, they existed at that time and they weren't forged. after it's the documents. So that's just a very obvious case, right? Where you can achieve much better transparency

and reduce fraud, et cetera. So one could imagine at some point, maybe governments requiring this kind of thing. So I think there's a very strong use case there. Of course, everybody could do this on their own, right? Like it's, I mean, you could hash documents on your own, put it in the blockchain. I mean, in a sense, you don't need factoring for that.

But then, of course, nobody is going to do it on their own because it is, it's too much to ask, right? People want to have an easy solution. So, I mean, I personally see, the fact does make a lot of sense to me. Yeah, I think it's kind of funny in the way that, like, how Bitcoin projects, especially are trying to tackle so much in one go. You know, we're trying to solve voting and we're trying to solve, you know, geopolitical rights and on the other side we're trying to decentralize the internet and trying to

create this whole decentralized infrastructure it's such a large concept um that some of these projects are coming with and then here's factum with just very simple uh and very um basic uh approach to what they're doing and that i think it's kind of getting missed like they're not trying to save the world it's just trying to make things provable and try to say something exists yeah absolutely no i mean it's a simple thing but then of course if you think of all the applications and implications you know who knows where it's going to go right there there's like an endless amount of things that could be done with it potentially and then i guess the difficulty will be you know to actually

develop all those businesses uh you know because sort of on its own uh fact and probably won't have a lot of use right somebody will have to take this uh and build something on top of it for specific use cases, whether there is actually a requirement. Because in the end, a proof of existence has existed for a while. I actually used it once, but you could pay like it was like 5 milibs or something and you can actually document, put it in the blockchain. I mean, this has been around for a while. But who's going to use that?

I mean, it's, there's, you need to have specific use cases and I think that challenge is going to be there. I agree. Maybe it's like, I'm trying to think of an analogy and it's like, it's like a CMS, like a content management system. Like when they first came out with it, like, what are we going to use this for? Like it just manages content. Like how abstract is that? Like why would we need to do that? We can already, you know, put content on the web. But then, you know, like WordPress, it frames it in a way that makes it easy for the user to use it and get those same advantages out of doing it themselves, but their walk through the process and kind of handheld. And I think that's fact done. Cool.

So Lisa, what's your view? Where do you see this whole crowdfunding and cryptocurrency crowdfunding space evolving to? I think that we'll see probably more projects. In the last year alone, you know, Madesafe was only like a year ago. And we've seen so many projects already come out that want to pursue that model of, you know, raising Bitcoin so that they can launch their software. we'll probably see more projects that kind of try to go for the network token sale, but don't really capture the spirit of why crowd sales are started in the first place,

to fund open source development, to kind of have community people involved in the process of, you know, participating in the beta, the usage, and the growing of the network. if we see, you know, projects that come out and just try to pump their coin, it's not good for crowd sales, but that's what will probably happen. Yeah, so you think it will just be rather than being used as a way to fund open source software, companies will just use it as a way to make money. Yeah, for sure.

Yeah, and that's an interesting point, and I'm sure we have seen that already. some of the projects yeah hopefully hopefully you know platforms like cornify uh will help build trust you know and others as well but you know having a couple of successful crowd sales will help build trust with users who want to invest in and i mean i think that's one thing we didn't mention and maybe it's worth worth bringing that up briefly is that you know one thing coinify has started doing at least with some of their project is that they hope hold a part of their funds in escrow. I mean, I think for example, with gems,

and it only gets released upon reaching certain milestones. And I think that's a fantastic thing, right? And then they have some independent people who act as a sort of, you know, as judges to say, like, has this milestone been reached? So I think I remember with gems, it was some of the counterparty developers who fulfilled that function, some like trusted, known people,

in the community and then I think that's a I mean that's a great model and I see that becoming standard just like how you know on Bitcoin talk they had people doing the group buys and people doing escrow and those people were trusted right they had to have high reputation they were given testimonials positive ratings and they they were evaluated based on that and people use their service and put money into it based on those factors. And with crowd sales, we don't have that yet. I think Coinify is one of the first.

And just like Factum, we announced on Monday that Facton's crowd sale, we've managed by Coinify. And there will be several milestones for development that have to be achieved for Factum to receive the Bitcoins that they receive. Yeah, and perhaps we can imagine also sometime in the future. and this doesn't seem very unlikely where those sort of pools of people who validate that a milestone has been reached it could be decentralized people

decentralized people yeah it could be like 150 people thousand people and who would vote like looking at the code and would vote to attest a certain milestone has been reached for instance and then would unlock the coins there's all kinds of ways that we could do this that's a great idea like that's an opportunity for someone to create a platform

and say, hey, vote on this GitHub repo, look at the number of commits, look at the code. And if people are voting, then, and maybe it reaches a certain vote count, then the company should get the bitcoins. Like, that's a great idea. Free startup idea. Although, to be honest, I think there's a danger there, right? Because when you start having these kind of mechanisms, right, then nobody's vote has much weight anymore so the incentive to actually really do the due diligence is like much lower because like here

what their advantage is is that someone is staking their reputation on taking the right decision right so like now the counterparty developer or something he has to say like okay has gems reach that milestone and when he says yes right like i mean he's putting his own reputation on the line and if he does the wrong thing there you know people will not trust him anymore So there's a lot of stake there. And then when you have a crowd of doing ads, that's not anymore, right? Nobody's risking their reputation. So there's, I mean, of course, there is an advantage that it's not like a single point of failure,

but there's also a downside. Nobody has anything at stake. And nobody is going to have an incentive to actually be look at the code. It's a good point. But, yeah, I mean, it could be a way to go. Well, I think places or companies like Factor and will serve as those trusted agents. and, you know, Bitcoin especially, we vet projects and we question them and we try to poke holes in them. And if you pass the process, then you win a customer.

So before we wrap up, I'd like to give you the opportunity to maybe talk about Vanvex for a few minutes. Sure. So at Vanbex, we work in the background with Bitcoin companies. And we do a few things with marketing and grassroots PR and helping them communicate the story and framing their project. in a way that appeals to their target audience. If they're selling a coin, who wants to use the coin, what will the product be used for? And we help them understand that. And then on the other side, we actually do a few things with non-crow sale companies.

There's one called Clef, which is a two-factor. We're helping them with kind of getting an understanding of how to appeal to the Bitcoin community. And there's another one called gem.co. And we're helping with writing technical documentation for them. So we do a few things in Bitcoin. Our team of five tries to help companies launch better and help them achieve their goals, whether it's more customers, better documentation, more community, or having a successful network token sale.

Cool. Well, fantastic. And, yeah, I think it's going to be very interesting to see where this all goes. it's certain in my view that crowdfunding is not going to go away. It's going to play a very important role. And I think also these coin sales are not going to go away, whatever the legal questions are and whatever is going to happen. People will continue doing it and it will continue being a very interesting space,

interesting to see where this all evolves to. And so thanks so much for joining us today. And all the best with launching lots of successful new coins. and yeah, thanks for coming on. Thank you guys. It's a great show, and it was a pleasure of being on. I appreciate the opportunity. Yeah, thanks.

Thank you. Well, it's great to have you. And thanks to the listener for listening. We do appreciate your attention very much. And if you want to follow us on Twitter with Episode of BTC, and we'll be back next week with another episode. So look forward to that. Thank you.