BitcoinJ developer and former Google engineer Mike Hearn is working on a new decentralized crowdfunding platform that will support bitcoin transactions and could lead to a reshaping of the peer-to-peer finance landscape.
The crowdfunding platform, called 'Lighthouse', was announced during a talk led by Hearn at the Bitcoin2014 conference in Amsterdam. Hearn later elaborated on the announcement in a 17th May blog post.
Like other crowdfunding platforms, Lighthouse will serve as a means for users to create projects and pledge funds to others. Hearn wrote, however, that its primary aim will be to help fund more advanced features and services within the bitcoin network, explaining:
"To make these features come alive takes work, and because they're inherently about decentralised infrastructure it's often hard to find anyone who will pay for that work. With no way to own the infrastructure once built, many traditional funding models can't function."
Lighthouse is being designed to solve this problem and will provide project fundraisers with a lightweight, encryptable wallet that is build on the same code as the Android wallet app designed by Andreas Schildbach.
How it will work
Lighthouse will function on the premise of 'assurance contracts', which means that projects are funded on the basis that the money is only collected and utilized if enough money is raised. The platform will use the block chain itself to verify transactions directed toward a project.
However, the bitcoin network will only verify the transactions once the goal has been reached, said Hearn.
Additionally, users will be able to revoke their pledges before the round is complete. Lighthouse will double spend the funds back to the user's account, freeing them up for other uses.
Hearn framed these characteristics as making the crowd funding process much easier for both project owners and contributors, saying:
"This simplifies life for everyone: the project owner doesn't have to worry about being hacked, they can go on vacation for a while and not have to worry about handling withdrawals from the pot, and anyone who pledges knows they can get their money back whenever they like before the goal is reached."
Cost and security, Hearn told CoinDesk, are some of the issues involved with centralized crowdfunding platform that can be solved by a service like Lighthouse.
Websites like Kickstarter can charge as much as 10% of a project's total funds, he pointed out, making it harder for projects to successfully raise enough money:
"If you're trying to raise money from a community, that's a big problem because it's quite demoralising to wonder if you're one of the 10% of people whose pledge will just be eaten by middlemen. For smaller projects it can render the entire process unworkable."
Hearn added that in many cases, centralized platforms impose restrictions on project creators that add to the burden of their task. Decentralization, on the other hand, empowers them to raise funds in a more proactive manner.
From a security perspective, Lighthouse protects users by not hosting private keys on any centralized server. This makes the platform a poor target for hackers or other exploiters, said Hearn.
He also cited the idea that decentralized crowdfunding allows for more comprehensive vetting processes. In turn, this helps projects prove themselves to possible donors and increase their chances of success.
With Hearn still hard at work on Lighthouse, it remains to be seen what features and characteristics will ultimately define this decentralized crowdfunding platform.
Bitcoin network image via Shutterstock