PROPOSAL: An alternative to IPO for PoW coins

[coinsolidation]

Following on from a chain of threads: How should coin developers be remunerated?, followed by Non-IPO project funding?, and further discussion on the Bitmark thread.

A common issue [POW] coin developers face, is how to fund the project both initially, and long term. Also how to balance distribution between miners and investors.

We have a simple proposal, we will call it Initial Public Mining.

First, we establish three things:
1. The startup amount required for developers and resources.
2. A foundation fund % to support long term development.
3. A ratio of investment from miners and investors.

For example in Bitmark's case, we have:
1. 0.6 BTC
2. 5% to a cap of 70,000 BTM (0.25% of the total coins minted)
3. 35% tbd.

Process.

• We the open an "IPM", where investors can choose how much BTC they want to invest in the project.
• The startup amount (1) is taken from the top of the amount required.
• The remainder of the BTC acquired is then used to fund hired mining rigs on the network on a daily basis rated at 35% (3) of the hash power of the network.
• 5% (2) of the coin generated by the hired mining rigs is sent to the foundation fund.
• The remainder (95%) of the coin generated by the hired rigs is split between the investors according to how much they invested.

This way the network is supported, the IPM is limited to a reasonable amount, the coins distributed fairly between investors and miners, start up funds are secured, the project secures long term funding and therefore development incentive.

Extras.
Optional cap per investor, and cap on entire IPM amount
Coins over and above the capped foundation amount are distributed evenly between investors.

Has this been done before, any comments or discussion?

We have not yet decided on whether to do this for Bitmark or not, but we may after discussing here first.

[cryptozim]

While I agree that this would stop an initial dump by IPO investors, I think that's the only thing it fixes. I see two other potential issues.


It does nothing for mistrust of devs
One of the complaints about IPO is that once the devs have the BTC, there's nothing to stop them from running away with it, and abandoning the project. IPM does nothing to solve this.


High hashrate would burn through the IPM money
This could probably work fine for a coin with a small hashrate, but as that hashrate goes up, you'll be burning BTC faster to rent bigger rigs just to keep at 35%, and because the money doesn't last as long, you don't make as many coins. I'll use scrypt as an example, due to both ASICS, and the fact that it is what Bitmark uses.


Assuming the following numbers:
IPM = 50BTC
Cost per MH/s (approximate on LeaseRig) = .001BTC
Block time = 5 Minutes
Block Reward = 50
14,400 coins/day

Now, compare these numbers to work on a low and mid-high network hashrate

Low:
500MH * 35% * .001BTC/MH = .175 BTC/day
50BTC / .175 = ~285 days
14,400coins/day * 285 days * 35% = 1,436,400 coins

Mid-High
2000MH * 35% * .001BTC/MH = .7 BTC/day
50BTC / .7 = ~71 days
14,400coins/day * 71 days * 35% = 357,840 coins

[Este Nuno]

It does nothing for mistrust of devs
One of the complaints about IPO is that once the devs have the BTC, there's nothing to stop them from running away with it, and abandoning the project. IPM does nothing to solve this.

I think the main issue is the perception of fairness. I don't think there is anyway around trusting developers at this point. A lot of people believe IPOs to be inherently unfair(I personally don't necessarily agree but that's beside the point). So I think moving the coin distribution from pre-launch to post-launch should avail some people of their fears of not having a fair chance to accumulate.

There are always fixed costs associated with any project so one way or the other someone has to be trusted to provide the services such as network nodes, web hosting etcetera.

This anti-IPO idea sounds logical to me in terms of fairness and openness. It's obviously less beneficial to the funders than an IPO since money has to be put towards mining and that money could otherwise be put towards other beneficial things. But if that's what people demand out of a coin then that's fine. And given all the drama and problems we've seen over the years I can understand why people want to make sure a certain level of transparency is met.

[coinsolidation]

mistrust of devs

A valid point, there will be ways to oversea this, escrow, partial daily release, something else?

High hashrate would burn through the IPM money

Low:
500MH * 35% * .001BTC/MH = .175 BTC/day
50BTC / .175 = ~285 days
14,400coins/day * 285 days * 35% = 1,436,400 coins

Mid-High
2000MH * 35% * .001BTC/MH = .7 BTC/day
50BTC / .7 = ~71 days
14,400coins/day * 71 days * 35% = 357,840 coins

That would be part of the point, it helps mitigate attack from private miners and ensures no stalling of the network if a multipool drops off.

Percentages could be adapted, and BTC per day cap's imposed to handle this. Although if the network is growing, it may make investment sense to mine earlier rather than later?

I do not see this as a negative, rather as just a reality.

Thank you for taking the time to consider this approach and to question it, it is appreciated.

[Este Nuno]

Does this have any way to provide long term support for development? The 5% or whatever is decided is something, but that's not going to continue to grow after the mining contracts are all used up and the fund is empty.

After that is it just back to development funded by donations?

[coinsolidation]

Does this have any way to provide long term support for development? The 5% or whatever is decided is something, but that's not going to continue to grow after the mining contracts are all used up and the fund is empty.

After that is it just back to development funded by donations?

Bitmark specific.
The startup costs are now covered, and I as the primary developer am financially organized for roughly one year, not including any misfortune which may occur.

So the funds sent to the foundation would be for use from 12-18 months onward, we do not know what that equates to in fiat or btc terms yet. We can conclude that if the project is successful and earns value, that they should be worth a fair amount, the more valuable the work and the wider adoption is, the more valuable the holdings of the foundation.

From an investors perspective, so long as the coin holds 95% of the cost to mine, they should get out with no loss if they want to.


Other coins.
Other currencies which took this approach may wish to change the variables to what suits them, to modify appropriately, for example requiring xxBTC of startup funding. An expecting to be paid team of five will surely have higher startup costs.

[Sharky444]

I think we have too many coins already. Initial funding should be harder, not easier.

[Este Nuno]

I think we have too many coins already. Initial funding should be harder, not easier.

I don't think it's about making anything easier. It's about fairness and transparency.

If you did a word map of all the posts on this forum you'd probably end up with some giant words like: "Premine", "Instamine", "Unfair distribution", "ScamCoin" etcetera.

People are constantly complaining and arguing about fairness in alternative cryptocurrencies. So this thread is a continuation of those discussions linked in the OP where myself and others were attempting to figure out ways that fixed costs could be addressed in a fair manner. And the discussion is continuing here but at this point there is no definitive answer. So there is lots more room for discussion here.

The method in OP doesn't make it easier to fund coins. I see it as making it harder since in the interest of fairness more work and significantly more risk has to be taken on by people who fund(since they are not just purchasing a stake as they would in an IPO). But if this is what it takes to make a fair launch then perhaps the community would benefit from exploring ideas such as this.

[tobeaj2mer01]

I prefer to a pre-mining IPO, there are  many uncertain factors in reverse-IPO, we don't know the bitmark price, don't know the pool hash rate, maybe there will be some big Scrypt miners. But if we conduct a premine IPO, I can pledge two BTC at least, for this good coin, I think it can raise 50 BTC easily, it can support the development for a long time, but if it's reverse-IPO, it's very hard to estimate how many BTC will be posted to development fund finally.

I know your concern, we can set up a better premine percentage which is fair to miners and investors,  and PoS is the trend of alt coins, it will not waste so many sources like electricity to process meaningless hash calculation and this is one of the reasons why so many new alt coins switch to PoS.

[loveyouforever]

Reverse-IPO sounds unfair and meaningless to the investors, why don't they rent miner rig themselves but take more risk and get just 95% coins, if there are big Scrypt miners rolling into the pool, they will take more risk. I don't think you can raise any BTC via reverse-IPO.

[Este Nuno]

Reverse-IPO sounds unfair and meaningless to the investors, why don't they rent miner rig themselves but take more risk and get just 95% coins, if there are big Scrypt miners rolling into the pool, they will take more risk. I don't think you can raise any BTC via reverse-IPO.

I agree that there is lots of risk in this scenario. A couple of big pools could easily crush the reverse-IPO group's hashing efforts.

[smalltimer]

screw ipo. The truth is: when dev cries for money from minute 1 he is likely to wrong guy.
You need people with the right spirit. They are very few. Maybe 1% or 2% of devs.
If the dev delivers something of value he'll be making money from the coins he mined, bought and gets donated.
There is no need for an ipo ever.

[From Above]

IPO for the win
Get in BitShares now!

~CfA~

[tobeaj2mer01]

screw ipo. The truth is: when dev cries for money from minute 1 he is likely to wrong guy.
You need people with the right spirit. They are very few. Maybe 1% or 2% of devs.
If the dev delivers something of value he'll be making money from the coins he mined, bought and gets donated.
There is no need for an ipo ever.

I think you are a big miner, man, you are on behalf of big miners's profit, it's reasonable, but not be so greedy, just one simple question,
Devs took so much effort on this coin, why can't they get some BTC from investors for further development, can you donate some coins you will mine to them as development fund?

[Este Nuno]

screw ipo. The truth is: when dev cries for money from minute 1 he is likely to wrong guy.
You need people with the right spirit. They are very few. Maybe 1% or 2% of devs.
If the dev delivers something of value he'll be making money from the coins he mined, bought and gets donated.
There is no need for an ipo ever.

The thing is not everyone is a miner. I'm not a miner. What should I do?

It seems a lot of people are seeing the letters 'IPO' in the title and putting their blinders on. The point of the thread is to discuss alternatives to the traditional IPO.

If the dev mines a lot of coins by himself, people will scream 'ninja launch!'. Even when there is lots of prior announcement. If there is an IPO anyone who is involved in mining will call it 'unfair' by default. If there is a premine of any sort people will automatically consider that a 'scam'.

So the question is, is this a better option or not?

[smalltimer]

screw ipo. The truth is: when dev cries for money from minute 1 he is likely to wrong guy.
You need people with the right spirit. They are very few. Maybe 1% or 2% of devs.
If the dev delivers something of value he'll be making money from the coins he mined, bought and gets donated.
There is no need for an ipo ever.

I think you are a big miner, man, you are on behalf of big miners's profit, it's reasonable, but not be so greedy, just one simple question,
Devs took so much effort on this coin, why can't they get some BTC from investors for further development, can you donate some coins you will mine to them as development fund?

wrong, i am seasoned investor with no large miningoperation. Name one ipo where price of the coin at free market didn't go lower than ipo-price at one point? Name just ONE!

I see Ipo as a donation-request. I am not buying into any ipo. I only trade free market. Made my experiences.

Coin takes off or it doesn't. If it has ipo i think chances are lower for it to take off. So i would recommend screw ipo and dev should mine like the others and then make a good product and collect maybe donations later on.
There is enough additional ways to raise money once you got a succesful product. Additional money could be in the services that are created. So ipo is really not needed.

If dev needs cash the first thing to think of would be to create a nice casino for his coin or buy coins before releasing updates.  There are so many ways to raise funds when you are dev, ipo is just painful lazy fundraising.

Just my 2 cents.

If you want money: do something for it!

[cryptozim]

If the dev mines a lot of coins by himself, people will scream 'ninja launch!'. Even when there is lots of prior announcement. If there is an IPO anyone who is involved in mining will call it 'unfair' by default. If there is a premine of any sort people will automatically consider that a 'scam'.

This is actually a big point. Miners and investors have completely different ways of looking at how to make profits. You're never going to make both of them happy.

[smalltimer]

If the dev mines a lot of coins by himself, people will scream 'ninja launch!'. Even when there is lots of prior announcement. If there is an IPO anyone who is involved in mining will call it 'unfair' by default. If there is a premine of any sort people will automatically consider that a 'scam'.

This is actually a big point. Miners and investors have completely different ways of looking at how to make profits. You're never going to make both of them happy.

why not take to good old rewarddecrease with more coins in the beginning as a catch for early adopters. The dev is just mining like early adopters. Make onramp of few hours/days with low reward to prevent instamine-accusation , then full reward and decreasing gradually after that over time? It worked for bitcoin ...  

[coinsolidation]

I see Ipo as a donation-request.

If it has ipo i think chances are lower for it to take off.

If you want money: do something for it!

Exactly.

I would be interested for you to read the section "funding" on my latest update to see if you think this is fair.

[coinsolidation]

We have discovered an additional benefit to this proposal.