Cryptocurrencies can be used for a lot more than just sending and receiving funds. They can also be used directly for decentralized fundraising, either by maintaining continued support via websites like SatoshiVote, or achieving milestones on platforms like Koinify.
Initial coin offerings, or “ICOs”, occur when the developers create an altcoin and keep some of the starting batch, then sell them to raise funds. The coins could theoretically represent equity in a company, but for regulatory reasons, they typically do not. Instead, they are tokens required to use an associated decentralized application, which have value in the service that application provides.
This month, two new decentralized applications (or “dapps”) are holding their initial coin offerings. Known as Synereo and Factom, they’ve been creeping into the spotlight recently with their cutting-edge decentralized models. But are they worth your hard-earned bitcoins?
Synereo is a decentralized social media network, and the decentralized application required to utilize it. It relies on the Dendronet, which uses cloud storage to store social content while maintaining a consensus-based ledger. Every person with the dapp has a chunk of it–called a “Dendrite”–which stores the metadata needed to find content on the network, and also some of the randomly-chosen and encrypted content.
A private key is needed to decrypt that data, so if your private key is safe in your client, your social data is safe on the network. There’s no central authority who can access or control the flow of information, so your privacy cannot be breached, nor your news filtered and censored. Third parties cannot reach you at all without your consent.
If they want to, they’ll have to pay you for it. AMPs are a cryptocurrency native to Synereo which can be used to AMPlify your social content. Your native reach, which is proportional to your “Reo,” can be extended by offering AMP tokens to clients willing to read your post. This exposes people outside of your organic sphere of influence to chosen content.
The only other parties involved are AMP miners, who request a transaction fee. If you want some AMPs, you can get them starting March 23 at 8 PM GMT. 1 billion AMPs will be initially created, 18.5% of which will be offered at 154 AMPs per USD equivalent. The rest will be distributed as follows, as explained in their BitcoinTalk thread about the crowdsale:
- 18.5% are sold in the initial crowdsale.
- 10% will be used to compensate users as they join the network, invite others, and contribute to it.
- 7.5% will be awarded to content creators who begin operating on the network. We already have a few major musicians waiting
to join and distribute their art on Synereo!
- 10% are awarded to the founders of Synereo, vested over a period of 30 months.
- 11.5% are kept for bounties, awarded to contributors and developers.
- 42.5% will be kept for future funding rounds. We aim to have two more, spaced 1-1.5 years apart, each providing the necessary
funds for the next leg of the project.
“Factom does practically nothing,” CEO and lead developer Paul Snow is fond of saying. Instead, it provides a service that other dapps can utilize to keep and authenticate records.
Ever digital image, sound, video, document or file of any kind can be broken down into numerical data (1s and 0s, if you dig deep enough). Factom uses a distributed network of servers to collect and put them through a hash function, a mathematical process that combines and converts them into a single numerical value. This is then inserted into the Bitcoin blockchain via a transaction.
In math, the same input into a function always results in the same output, just like 1 plus 1 is always 2 in the traditional (base 10) system. You can’t inverse a hash function and get your data back from the hash value, but if somebody doctors and provides false data, you will find out when its hash value produced by Factom fails to equate to the original.
This allows you to protect against financial fraud and embezzlement, preserve old cryptocurrencies that have lost their mining power, or secure the Internet of Things on the blockchain without bloating it to an enormous size. Making these entries to the blockchain requires Entry Credits, which only Factoids can produce.
Unless you’re running a Factom server–which get rewarded for their service–you’ll need to buy some Factoids (or Entry Credits, if you don’t want to touch cryptocurrency) before you can get to hashing. Just like AMPs increase in value as more users join the Synereo network, Factoids will increase in value as more people want to use Factom’s service, making them a potential speculative opportunity.
The Factoid ICO starts March 31st at 3 PM UTC, and lasts for 45 days. As many initial tokens will be generated as users or speculators are willing to buy during that period. The process will occur on the Koinify platform, which gives Factom the coins 1/3 at a time as they complete milestones like the deployment of their beta client, their front end and first serves, and finally a functional network.
The decentralized world is coming, and its first systems are already on their way. Facebook won’t die tomorrow, but initial coin offerings are a good start, and ICOs like these will set a precedent for the future.