"Greed brings attention to things," Manu Sporny says.
He's thought about this for some time, brainstorming the pros and cons of an immensely popular, yet flagrantly hyped new mechanism for raising money – the initial coin offering (ICO).
So, today, Sporny and his team at Digital Bazaar, a successful software provider 15 years in the making, are launching the Veres One identity blockchain without its own token.
The project isn't ready for general availability just yet, but is being released for testing and tweaking (should bugs be found in the code).
However, what seems most notable, especially in today's frothy crypto ecosystem of multimillion-dollar token raises, is that Digital Bazaar's identity blockchain does not need an ICO, it does not need a token.
"Our goal is not attention seeking, it's trying to build the most cost-effective infrastructure for this thing," Sporny said.
And that infrastructure needs to clean up the mess that is digital identity today, where large, powerful gatekeepers control the system and keep silos of data that have proven vulnerable to data breaches. Not only that, but an identity blockchain needs to be a global public utility that everyone – even the poorest of the poor in developing nations – can benefit from.
Yet, how could that dream come to fruition if the platform's token is being pumped and dumped and speculated on rampantly every day, in turn making the fees to operate and use the network unpredictable?
As such, the Digital Bazaar team designed Veres One as a public, permissionless distributed ledger where three groups of stakeholders work together to keep the system running: nodes that run that software, maintainers that develop the software continually and a diverse (both gender-wise, ethnically, culturally and geographically) board of governors that sets the operational rules of the network that maintainers then execute on.
All these groups will provide checks and balances on each other, according to Sporny.
Without a token, the blockchain will subsist on fees for users – currently set for users at around $1 and anticipated to stay low, since Digital Bazaar won't start in debt with its investors, Sporny said.
Downsides of being different
That's not to say Sporny doesn't see a place for crypto tokens and ICOs anywhere.
If a network was going to generate billions of dollars in value, he said, it could successfully implement a token. With identity as the business, though, he doesn't see that happening. And he's OK with that.
Sporny told CoinDesk:
Although, Sporny said, Digital Bazaar almost did hold an ICO. The team hired lawyers and started designing a token, but a couple of months into writing the white paper, they decided it made no sense, he said.
"The problem is that if you have a competitor that comes in without an ICO, they'll be able to do things much more cost-effectively," said Sporny.
Not everyone agrees.
Drummond Reed, the chief trust officer of Evernym, another blockchain identity provider, has raised private equity, but is also planning a token sale in the future.
"We believe the best answer is a balance of both," Reed told CoinDesk. "All equity, which is the conventional route, is both slower and more dilutive than tokens. However, [just doing a token] goes too far the other way – it doesn't lay a solid foundation for a company as a business."
He continued, speaking to the trend in the crypto space today, saying:
With money in the bank from the work Digital Bazaar has provided and continues to provide for clients, the company didn't need to raise another round. It's used that money to build the infrastructure already.
Although, Sporny acknowledges that, without a token, the platform might not garner as much attention as some of the other projects in the cryptocurrency space. Yet, with the crypto space hinting at the first signs of ICO exhaustion, according to several investors CoinDesk has spoke with, it's not guaranteed a token will even lure that much enthusiasm anyway.
Plus, token sales generate the "wrong kind of attention" for Veres One, said Sporny. According to him, the project needs to entice decision makers such as government agencies and international non-profits, instead of western investors.
The 'right' interest
Digital Bazaar has been successful in that area already.
The firm was given grants by the Department of Homeland Security twice – both times for its work building a fit-for-purpose blockchain for digital identity.
According to Sporny, this work with the Department of Homeland Security was how some of the Veres One blockchain was built and why it's designed the way it is.
Decision makers and government agencies (the grants not only gave them access to U.S. stakeholders, but internationally too) want a system that is "simple, predictable and the cheapest thing out there," he said.
"Frankly, doing an ICO is a mark against anything that will potentially be used in government," Sporny continued, adding:
Not only does Digital Bazaar already have contacts within government, but what's also notable about the team is that it has serious street cred in the digital identity space.
On the Veres One project specifically, the group has worked with Rebooting the Web of Trust, a community started by Blockstream's principal architect Christopher Allen; the Internet Identity Workshop; the Decentralized Identity Foundation; and the W3C Credentials Community Group and Verifiable Claims Working Group.
Digital Bazaar's work in W3C undertaking with groups within the organization actually inspired the architecture and governance structures of Veres One.
For instance, the system is patent and royalty-free, and transparency is at the core of the project, with every meeting the board of governors (who hold their position only for two years) and the team has will be public and recorded.
For Sporny, that means the ledger can't be corrupted as easily as others in the space.
While he isn't interested in pointing fingers at any one group specifically, Sporny mentioned the momentum for hard forks, where a group of people effectively start competing networks. And this practice puts pressure on network stakeholders and could incentivize certain things that aren't ideal for the network in an effort to keep certain parties happy.
And those politics are what Sporny and Digital Bazaar want to avoid.
Because of the nascency of the technology, "I don't think people have done really good economic analysis about what an ICO does to a network," Sporny said. "Investors put money in and want a 10X return, in crypto, they want returns that are many times more than that. The problem with doing that in the identity space is not everyone can afford to pay the enormous fees associated with rampant speculation on a cryptocurrency."
He continued, "If the costs are predictable then people that are in situations where they don't have access to a lot of capital can still use the system and control their own identity. We aren't building an identity system for people in the West that are rich."
There's a bit a sermonizing, sure, but it's struck a chord with a whole spate of people that think this is the winning ticket for changing identity online. It seems there's a growing number of people becoming disillusioned with the ICO.
Allen at Blockstream commended Digital Bazaar for bootstrapping the build of an identity platform and not corroding it with a token.
"There are a lot of people out there that would like to take advantage of some of these technologies [in the crypto space] but the token, the pump-and-dump game is a barrier for them," Allen said, pointing to governments, social impact organizations and international NGOs.
While the commercial use (and exploitation) of digital identity now rules the web, Wong believes Veres One "elegantly" solves several issues with decentralizing identity online.
According to Sporny, if everything in this testing phase goes as planned, the Veres One blockchain will be stabilized and ready for production within two to four months.
Disclosure: Pindar Wong is a member of CoinDesk's advisory board and CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in Blockstream.
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