What started as a quick video on a whitepaper I read this morning before work, turned into a full-blown post. You can read the post or skip to the vlog at the end... whatever tickles your fancy!
The Why
So today I decided to read the Snip whitepaper. Why would I do that you may ask?
Well...
Attention Evangelist
The reason Snip piqued my interest is that it is proposing an alternative way for content creators to monetise their content online, using cryptocurrencies.
I'm a firm believer that there is a strong use case for cryptocurrencies in the so-called "Attention Economy". Millions of people spend hours providing content and giving their attention to social media sites everyday. This have value and companies like Facebook are making billions off the back of user-generated content that is provided for free.
The cryptocurrency that give back some of that monetary value, by way of micro-payments, will stand a fantastic chance of on-boarding users and being one of the 'currencies of the internet', in my opinion.
Snip, is the latest contender to throw it's hat into the ring.
Snip whitepaper (broken... down )
The Problem
The Snip whitepaper starts by laying out the current state of play. It goes on for pages but can be summarised in a sentences.
That is; unless you’re Facebook or Google the existing Ad Revenue model is likely not working for you.
The Solution
Snip is a decentralised, user-generated, news content system. Although it is focused on news and more specifically summaries of news content (e.g. snippets), the platform is built on IPFS, a decentralised peer-to-peer sharing network.
IPFS is purported to be censorship resistance (so anyone can post anything) however the Snip company (and/ or the community) will have controls over what is viewable on the website. Users will also be able to control and manage the news feeds they see.
Growth model
The whitepaper sets out how the Snip Company see the platform growing,
Referrals:
Referrals are seen as the primarily means of growing the platform. You can earn SnipCoins by referring people to the platform.
I've also seen on the website today that you can earn by referring people to the ICO also. 3,000 SnipCoins for every friend that participates in the Crowdsale using your referral link. Given at current rates a Snip is worth $0.00086, that's $2.57 worth of SnipCoin per person referred. You get $10.28 if that referee buys more than 4 ETH ($1200) worth of SnipCoin. Perhaps this is indicate of the approach that can be expected from this platform...
Token Holders:
The whitepaper talks about Token holders are key to spreading the word. There is an assumption that token holders will promote the platform.
This, to me, reads like the referral scheme as token holders may as well use their referral link to onboard also.
Viral Content:
Apparently they have tools to identify the next topic likely to go viral, they will recommend to writers.
I have a healthy skepticism about this claim. If these claims are true, the value of being able to predict viral topics could trump any cryptocurrency! They could just set up an agency that develops viral content and make a killing! I'll be interested in seeing how this pans out.
Business Model
Having stated upfront that the existing model was broken, the whitepaper then proposes a business model that is pretty traditional.
Subscriptions:
Snip will offer a subscription service. For those that wish to access premium content like audio versions they can pay for it. I've seen on the site that the current price is 0.01 ETH (around $3) per month.
Tipping:
You will also be able to tip on the site. There nothing special here other than you're giving away 3% to Snip Company. Not sure how popular this will be above putting a donation link/ address.
Ads:
Snip will have ads, tailored to users, also there is a degree of transparency to the process. Again, I'm skeptical that ads (straight out the gate) on a new 'decentralised' site will go down well. Especially as it's not clear whether users will be compensated for having to view ads.
Ad free:
Users will have option to subscribe to ad-free version of Snip.
SnipCoin
The Snip Company will pre-mint 10 billion tokens.
Initial Pool
2.1 billion tokens will be used to reward contributors over a 5 year period (the 'initial pool'). The amount of rewards starts at around 15.5m per week then decrease every week.
Platform revenue
Any platform revenue (I'm assuming from Subscriptions and Ads) will be added to the pool (after the Snip Company have taken 'a small cut').
Ad/ Subscription based revenue long term
The whitepaper predicts Subscriptions and aA revenue increasing over time and outstrip the initial pool rewards. So long term Contributors will be paid from Subscriptions and Ad revenue.
Coin Distribution/ Crowdsale
So what of the other 7.9 billion tokens? Here is a breakdown of how coins will be distributed;
28% Initial Crowdsale
The first ICO aims to raise $8m, minimum goal of $0.8m. The website suggest $4m has been raised already! Exchange rate is 1 ETH = 310K SnipCoins.
30% Reserved for future ICOs
Yes - there will likely be further rounds of funding... what joy.
21% Contributor Rewards 'Pool'
As above, the Contributor Rewards Pool will make up 1/5 of all coins.
20.5% Reserved for the Snip Company
Oh yes, the company et al take their cut!
0.5% Bounty for spreading the Word
Not sure if this is referrals pot or something else.
Roadmap
The whitepaper talks about various stages of release. However no timeline is provided.
And the rest
The rest of the whitepaper is about Budget Allocation and Competitors etc.
What is missing from the whitepaper?
Not built on a blockchain
Often the best way to judge a whitepaper is by what is not written. This platform is not built on a blockchain. SnipCoins have been created as a means of raising funds and distributing rewards to Contributors to the site. No data is stored on the blockchain. This platform is not leveraging the immutability or censorship resilience of the blockchain. Rather it is using IPFS to achieve this.
How will IPFS work and scale?
Given that IPFS is the backbone of this site. The whitepaper is silent on what IPFS is.
Nor does the whitepaper explain why IPFS was chosen. There appears to be an assumption that anyone reading the whitepaper would automatically understand this.
The little I understand of IPFS suggests the network is maintained by independent nodes. However these node operators need to be compensated in order to retain your content. There is no mention of how content will be maintained and paid for on IPFS network. Do the Snip Company intend to run nodes over IPFS? How will the solution scale? What are the potential limitations/ disadvantages of IPFS? None of this is explored in any detail in the whitepaper.
How will people be incentivised to get and stay involved?
So they have a referral scheme... but beyond this, why would people want to come to Snip? I'm skeptical of any Project where the main pull is getting profits from pulling in other users.
So let's investigate the stakeholders and why they might come to the Snip party;
Initial ICO Investors:
The whitepaper is silent on why an investor would want to buy the token. Beyond a fuzzy warm feeling of seeing the project succeeds?
All I can see Investors speculating on being able to flip this for a quick profit after the ICO.
Token Holders
Equally what incentive is there for anyone to hold the SnipCoin? Token holders don't get equity in Snip Company, they don’t get dividends, there is no element of staking, it doesn't secure a network. It's nothing but a means of buying (ads and/ or subscriptions) and cashing out for Contributors.
The Project could be easily use any existing token or cryptocurrency, aside from ICOs being a good source of raising money at present.
Contributors
There is no incentive for Contributors to hold this coin. I can see Contributors wanting to cash out any rewards earned.
NB: The whitepaper mentions a minimum of 10% of a contributor rewards should be shared with 'referenced publisher', however no detail of how this works or how the referenced publishers are verified/ paid. Symbolic of the gaps in the whitepaper.
Subscribers
Yes, subscribers would need to buy this coin, but how many of those will there be? There is so much free audio content available, why would I want to pay for audio on a news site? Where is the market research suggesting there is a market for this?
Also there is no mention of how the audio content will be generated. I've no idea whether this is read by an automated bot or whether they are outsourcing to people or whether they are hiring in top talent to read these stories. This will make a big difference to the value of audio content and whether people deem it worth paying for. Also what will be the cost of audio content? Details please...
Advertisers
Furthermore, it is not clear to me whether the advertisers buy SnipCoin to advertise or whether the advertisements are generated natively using existing mechanisms or new algorithms or what? If advertisers do buy, what are they getting given the users have so much say in what ads they see?
Inflation
Given the rate of knots SnipCoin is being issued at, I struggle to see any demand for the coin keeping up with people desire to cash out of the coin. If there is a plan or an idea, it certainly been articulated clearly in the whitepaper.
Breakdown of allocation of funds
The whitepaper mentions a Contributor Rewards Pool however it is unclear how those rewards will be allocated.
Who determines which Contributors gets what?
Does the Snip Company decide? Does the Community decide?
What's the governance model?
Is rewards system baked into smart contracts? Are Snip Company in control of dishing out rewards?
Are rewards issued on subjective or objective criteria?
Is it based on likes? If so, how do people sign up, what's the verification process to avoid Sybil Attacks?
How does the platform protect against people gaming the rewards system?
How do they paid to avoid the referral system getting abused also?
All this is the bread-and-butter of creating a social media site that allocates rewards. The whitepaper says nothing on this. This is a massive omission to my mind. It's almost like they've said, 'give us the money and we'll figure it out down the road!'
Beef with ICOs
ICO skeptic
Just so we're clear, if you haven't clock already; I'm super sceptical of ICOs.
The barriers to entry for launching an ICO are low and the incentives very very high indeed, in the current climate.
If you're smart and audacious enough you can get millions of dollars thrown at your Project; all you need to do to start an ICO is;
- create a token (easy to create an ERC20 token on Ethereum)
- create a fancy website (e.g. copy another ICOs look and feel)
- have an idea (ideas are a dime a dozen)
- put those ideas in a paper (call it a whitepaper)
Then it's about how much money you want to put into marketing and promoting an ICO. You can put in $50k - $100k marketing and the returns can literally be in the millions. We could well see looks of Projects that don't require tokens, create tokens for the purpose of raising funds.
I'm not casting any aspersion on the Snip Team. I have no idea of what they can and cannot do. However there is a rush to pump out ICOs as the barrier to entry is low and the potential rewards are astronomical.
Everyone wins? Except bagholders..
On the surface there are no losers, right?
Project Team, wins!
The creators of Projects get good money to start their projects. What project wouldn't want money to burn! Or, if they don't have a Project, some chancers can and will make off with millions.
ICO gamblers, win!
The ICO participants get a coin they can flip on the market, for a profit. Losing coins, they can chalk up to experience. They can afford to lose 8 bets for that one bet that goes x10. That seems to be the mentally of a lot of so-called investors.
Bagholders, win?
Everyone wins except the person left holding the bag at the end, and no-one believes it's going to be them!
Credentials – can YOU deliver?
Even if an ICO is a great idea. And the Project raises all the money they are after. There is little to suggest that a lot of these Projects have the teams to pull off what they're proposing.
Even if you can deliver... 75% of start-ups fail.
Enough said!
Ride it out
The problem I have with ICO is that the whole cryptocurrency market risks being seen as a crapshoot rather than a space for genuine growth and innovation. Money thrown at Projects in the hope that all involved will get rich quick.
I suspect many fingers will have to be burned gambling on ICO before its bubble bursts. Let's hope that when the regulators move in (as they undoubtedly will) they are able to distinguish, cryptocurrencies, from ICOs and the ICO craze isn't used as an excuse to attempt to clamp down on cryptocurrencies.
Anyway, that's my thoughts on Snip and ICOs.
I hope you found my 'quick look' into this ICO resourceful. Good luck!