AngelList co-founder and CEO Naval Ravikant took to his blog over the weekend to outline what could be a new paradigm in funding startups. It melds the crowdfunding model with a novel cryptocurrency that in theory could allow a company to “go public” without the accompanying red tape.
The bullet points are as follows…
- Write software to power a completely distributed network in which any node can participate anonymously.
- Allocate scarce resources in the network using a scarce token – an Appcoin. Users need this Appcoin to use the network. Owners of scarce resources get paid in Appcoins.
- Pre-mine or early-mine Appcoins and keep some non-threatening amount. These are shares of your company, equity that will appreciate in value if the network is adopted.
- Give network operators the ability to collect new Appcoins in proportion to their contribution. Route a small fraction of each transaction output to the developer foundation (Mastercoin does this). These revenues are used to pay for operations, and bounties for ongoing development.
- As network usage increases, so does equity value and revenue.
- Anyone can buy Appcoins, anywhere, anytime, anonymously. Ship your code, ring the IPO bell.
Ravikant continues by explaining that software-related products and services could reward early adopters and build their networks by offering “shares” as coins in their own denominations…
What else can we allocate in a network? NameCoin is already working on Distributed DNS. Can we build a striped, encrypted, high-availability data store using Boxcoin which pays for disk availability? Can we build a caching infrastructure using Cachecoin which pays edge nodes with un-used resources to cache large, static content? A DDoScoin used by web servers to throttle incoming browser requests? A PKIcoin that provides a global, un-assailable encrypted and anonymous messaging network?
And then he drops the bomb…
Are there more applications, like Bitcoin, that map to the real world and bypass network resources altogether?
In a laudatory blog post entitled “Unregulated Crowdfunding,” Fred Wilson nods to his own interest…
We’ve been asking ourselves at USV if we should be purchasing coins in some of these “genesis block sales” instead of our normal appetite for Series Seed and Series A shares. I think the answer is ultimately yes, but we are most certainly entering into unknown territory in the process.
It’s certainly a radical take on capital formation and it isn’t without its own challenges and problems, but I think the message is clear. We’re at a point in time where regulation deemed too onerous can be usurped with technology. Whether it will happen is anyone’s guess, but I do think Ravikant may have just fired the first shot over the bow.