MaidSafe COO Reflects on Lessons Learned from Crowdsale

Danny Bradbury
Jun 25, 2014 at 11:45 UTC
Updated Jun 26, 2014 at 17:52 UTC

MaidSafe was founded in 2006, when founder David Irvine, a former IT consultant, decided to create a new platform to improve Internet security.

Computers running MaidSafe talk to others on the network to create a large storage array (the firm’s name stands for ‘Massive Array of Internet Disks, Secure Access for Everyone’).

Participants can choose how much storage they provide to the network, or can choose to use the system while providing none at all. Any storage allocated is used by the network to store encrypted portions of other users’ files.

It has now been over two months since MaidSafe raised millions of dollars in a crowdsale using the mastercoin protocol, which was criticised by some observers for the way in which it was conducted.

So, what is happening at this Scottish company, based in the sleepy fishing village of Troon, and what is their view of the crowdsale controversy?

How MaidSafe will work

The network uses two encryption methods. First, a file is encrypted using MaidSafe’s own algorithm, which uses the data in the file to encrypt itself. Then, MaidSafe obfuscates the data further by running it through another, public encryption standard (AES256). The network randomly decides which machines will be used to store the data chunks.

The idea is that you can store your sensitive data without anyone being able to read it, firstly, because it’s encrypted, secondly, because the parts are scattered around the Internet, and thirdly, because no one knows where those parts are.

The developers have been slowly writing the underlying software since the firm filed its patents, shifting programming language, from Python to C++, partway through. Now, they’re in the middle of testing the network.

How can a system like MaidSafe be reliable, however? If a computer hosting your file is switched off, then how can you access your data?

“The system keeps a minimum of four live copies of a file,” said Nick Lambert, who is in charge of marketing and operations at MaidSafe. There are also ‘dead’ copies left on machines that disappear from the network with the potential be turned back on and once again become available, he explains.

When a live copy disappears, the network recreates that chunk on another node within 20 milliseconds, said Lambert. This happens randomly, using an algorithm to avoid live files being stored in close geographic proximity:

“We expect the network to be extremely robust in that regard.”

MaidSafe has a foundation, set up as a charity, to hold its patents, which the firm says are purely defensive. It may have noble goals, but it also has a for-profit business model.

The firm will charge a fee to companies seeking to use its network for their own commercial services. If, for example, Dropbox wanted to provide its users with more secure storage, then it might decide to connect its service to the MaidSafe network, and it would be asked for a percentage of its revenue.

MaidSafe has a nominal figure of 1%, although it would have to be negotiated on an ad hoc basis, in practice.

‘Development pods’, the network of third-party developers that MaidSafe is currently building, will also develop their own apps, bolstering the ecosystem and earning more money themselves.

The other part of the system that also generates money is safecoin – the cryptocurrency that enables MaidSafe to work.

Safecoin

Like bitcoins, safecoins are generated by the network or participants. However, rather than being mined, they are awarded to a participant of the network whenever someone retrieves a chunk of data from a device that they own. The more data that users retrieve from the network, the more safecoins are generated.

The person retrieving a file doesn’t necessarily pay the fee, explains Lambert. Instead, payments are made and received according to network usage. If, for example, someone uses less storage than they provide on the MaidSafe network, they are likely to earn more coins than they spend.

“Your wallet is incremented by the network. It will potentially be invisible. The system will entirely manage it,” Lambert said. “If you’re a developer, you’d hard-code your safecoin wallet address into your application, and based on how much it’s used, the system provides safecoin to that address autonomously.”

If, on the other hand, you choose to use the network without providing any storage, then you will be paying for services without receiving any payments. In that case, you’d have to buy safecoins to spend them on network services. There will be a decentralized exchange allowing people to buy and sell safecoins, Lambert confirmed.

The system can handle millions of transactions per second, and confirm them at network speed, rather than bitcoin’s block chain system, which takes 10 minutes. MaidSafe uses its own version of a block chain, which it calls the ‘transaction manager’.

Unlike the bitcoin block chain, which contains a complete transaction history for the entire network, the transaction manager only knows the existing and the previous owner of a safecoin. “In that way, we are likening it to digital cash,” Lambert said.

Lessons learned from the crowdsale

The world will be watching as MaidSafe rolls out its technology, but it has already observed the company’s crowdsale, which took place in April. Designed to help fund further development, the firm made 10% of all safecoins available to buyers, through a proxy token called the MaidSafeCoin.

The company allowed people to pay in bitcoins, or in mastercoins, and it reached its $8m target in just five hours, having originally allocated 30 days for the crowdsale.

The sale may have generated a lot of money, but it didn’t go entirely to plan, Lambert admitted. The firm had to convert any bitcoins paid by investors to mastercoin, in order to run the sale over the mastercoin protocol.

“As we got near to the crowdsale it became apparent that the amount of mastercoin that was being loaned to us was not sufficient to cover the number of bitcoin that we anticipated receiving,” he said, adding:

“So we chose to try and fix the amount of MaidSafeCoins that you received in relation to mastercoins at a slightly higher rate so that we would have a sufficient number of mastercoins available to run these conversions.”

MaidSafe did this because it thought the price of mastercoin would increase, meaning that most people would pay for their MaidSafeCoins using bitcoins instead. In fact, the price of mastercoin didn’t increase as quickly as the firm had anticipated, meaning that people were instead using cheap mastercoins to buy MaidSafeCoins.

The end result of this was that MaidSafe received more mastercoins in payment than it expected.

BitAngels, the angel investment group which was helping out with the crowdsale, expected mastercoins to comprise no more than 25% of the overall investment. Instead, Lambert explained, they ended up making up roughly half of the investment total.

The firm published a post-sale analysis here, detailing some of the challenges that it faced, although a multi-million-dollar crowdsale in five hours is still a result that many firms contemplating crowdsales would aspire to.

Lambert said:

“A lot of people questioned why we would use two currencies, and looking back we [should] have used one.”

The price of mastercoins fell shortly after the crowdsale, and the value of the funds raised now amounts to around $6m.

Mastercoin pricing

Mastercoin pricing following the MaidSafe crowdsale (source: cryptocoincharts.info)

“The mastercoins, we still have. The bitcoins are what we’re living off,” said Lambert, concluding:

“We’re pretty hopeful that as their protocols and tools are rolled out to others, that it will start to become a more liquid layer and the price of mastercoin will increase to the level that it was at during our crowdsale. It’s been a currency without a huge amount of function until this point.”

So what’s next for MaidSafe?

The company will continue testing its software, and has a succession of testnets to implement for network testing purposes before it considers the network ready for prime time. The company is not setting a date for release, Lambert said, pointing out that software developer deadlines generally aren’t met.

So, for now, we watch and wait – and anyone else considering a crowdsale will have a lot to learn from the company’s experience.

Padlock image via Shutterstock