2. Overview
• Business Models on the Blockchain
• Some Funding Models
• Crowd Funding
• Kickstarter on Ethereum
• Dominant Assurance Contracts
• Variants
3. Business Models on the Blockchain
• Ledra Capital has an interesting
brainstorming list of these: link
• Site also contains a thought provoking list of
assertions about bitcoin
• #12 on the business model list is
Crowdfunding
4. Crowd Funding
Definition (wikipedia): Crowdfunding is the collection of
finance to sustain an initiative from a large pool of backers—the
"crowd"—usually made online by means of a web platform.
Types
1. Donation Based
2. Reward Based
3. Credit Based (peer to peer lending)
4. Equity Based
Comparison of platforms/services (wikipedia): link
5. Kickstarter
• Kickstarter is an example of a type #2, multi-level reward
based crowdfunding platform. It’s a pledge threshold based
system.
• Example: Project initiator must raise $10k in 30 days or all
pledges are refunded. In a successful campaign, donors may
receive different rewards based on amount donated.
Stats
• Currently Kickstarter takes 5% in fees and Amazon takes 3-
5% for payment processing.
• For the example above, a 43.99% success rate. For 60 day
campaigns this drops to 29%.
• Most projects raise less than $10k
7. Kickstarter on Ethereum
• Platform and payment fees can be cut drastically by
creating this as an assurance contract on the
Ethereum blockchain
• Will still require a web front end, promotion, and
gateways to fiat currency (Paypal USD <-> Ether) etc.
• Alex_GuangTou in Vienna and I have been working
independently on Kickstarter contract HLL code for
Ethereum
8. Code Comments (Kickstarter)
Contract Storage
[1000] is contract state (0 = first run, 1 = initialized and unfunded, 2 =
expired, 3 = fully funded)
[1001] is contract creator address
[1002] is target date for campaign to finish
[1003] is target funding amount for campaign
[1004] is number of donors
[2000] is donor //1 address [2001] is donor amount
[2002] is donor //2 address...
All Runs
Make sure there is enough ether to run contract (GAS)
First run of contract (state == 0)
Need 2 args for expiry date and target funding, or stop
Store contract state, contract creator, target date and target funding
9. Code Comments (Kickstarter, cont’d)
Contract Initialized (state == 1)
Create constants based on contract storage (campaign parms)
If contract expired
Check if funding goal met
If yes, state == 3, send balance to contract owner (suicide)
If no, state == 2 loop through contract storage[2000] to refund to all
Delete contract (suicide)
Else contract not expired
Store donor and amount in contract storage[2000], [2001]…
Increment the donor count by (one).
-Used to determine GAS/fees for refund if necessary.
-Min donation should be the mktx/CALL fee to allow refund
• You can do this in less than 100 lines of commented code
10. Dominant Assurance Contracts
• Alex Tabarrok, George Mason University (1996). Model is
credited for the success of GroupOn
• Project initiator pays the donors a fee on top the refund if
the target fundraising amount is not met
• In exchange the project initiator asks for a profit (fundraising
target is more money than the cost of the project).
• Example: A project costs $10k and takes 30 days to
complete. The project initiator asks for $12k and will refund
an additional $1k if the campaign is unsuccessful.
11. Features
• Solves the free rider problem through incentive alignment
• Project initiators can profit. Creates a marketplace for
projects
• Improves perception of a project because the project
initiator is putting money on the line
• Project initiator may forgo some profit by providing
additional funding near the end of the campaign
• Jason Quinn tried this out successfully on Quora to fund the
Center for Election Science (link).
12. Variants using Ethereum
• Prize (refund bonus) proportional to the amount
contributed: Incentivizes matching contributions by initiator.
• Funder acceptance test (FAT): Goods must pass an
acceptance vote at the end of the project or not be released
with the initiator refunding the profit.
• Equity: Contributions are converted into equity shares via
Ethereum subcurrency. The good/product could be sold for
ether. The shares could then be traded and could be used
for voting on dividend issuance (in ether).
• DAC: Convert the contract into a DAC (Distributed
Autonomous Organzation)
13. Next Steps
• Successfully code and test Kickstarter contract
• Try it out by attempting to raise funds
• Build web front ends and payment gateways
• Rinse & Repeat for Dominant Assurance Contract
• Integrate into Daemon / SkyNet
Crowdfunding. -1- Donation-based Crowdfunding, in which the backers essentially donate money to support a cause. Sometimes he/she may receive in exchange a "thank you", a special mention, or even a gadget, but in any case the pledge is essentially a gratuity. -2- Reward-based Crowdfunding, in which the backer receives a reward with a clear monetary value in exchange of the pledge. The reward is often a product or a pre-series item that the backer helped producing by pledging money. In this case the money pledged is similar to paying for a pre-order of a product or service. -3- Credit-based Crowdfunding (more commonly called Peer-to-peer lending or "Crowd-lending"), in which the backer lends the money and receives an interest rate in exchage. In this case the money is pledged in the form of a credit loan-4- Equity-based Crowdfunding, in which the backer receives shares of a company in exchange of the money pledged. In this case the money is pledged in the form of risk capital (wikipedia).
Called “dominant” because the dominant strategy in the Nash equilibrium is to contribute. Solves the free rider problem.
Free Rider Problem – 2 Kinds of People-Contributors: Each agent doesn't want to waste effort and has no assurance that others contribute if he does.-Freerider: A freerider just assumes the good will be provided regardless of his individual actions, so why bother contributing?
Free Rider Problem – 2 Kinds of People-Contributors: Each agent doesn't want to waste effort and has no assurance that others contribute if he does.-Freerider: A freerider just assumes the good will be provided regardless of his individual actions, so why bother contributing?