The killer app for blockchain is already here: distributed companies

The killer app for blockchain is already here: distributed companies

People keep waiting for the “killer app” of ethereum/blockchain to come along. Some think it will be VR others see potential with IOT applications, healthcare, or identity. All of these are certainly possibilities and will come to be in due time.

But while we’re waiting for all of these very cool ideas to come to fruition, what is actually happening? Companies are sidestepping traditional venture capital and going straight to blockchain to raise money in the form of crowdsales (also known as token sales or ICOs) in order to build these things.

And why shouldn’t they? Raising VC is hard because you have to persuade a puny number of people that invest in a puny number of projects per year that you have a billion dollar unicorn on your palms. The odds are not in your favor, and the pressure to produce outsized growth is not always what every project needs.

Github launched a renaissance in open source by creating a “decentralized” platform where anyone can fork a project, and make contributions. Open source software has blossomed to take over the entire software industry. But one thing open source has always lacked is a baked-in business model — a way for developers to get paid.

In open source land, your business model options are pretty much to form a consulting company to sell services around your project, sell “pro/enterprise” versions with extra features, or provide hosting for a chunk of open source SaaS software.

While these are all viable models, I believe that when we introduce money into the equation of open source from day one, we will see yet another renaissance.

The fundamental problem with traditional companies is they do not map to open source organizations that contain hundreds or thousands of developers across the globe. Where would you even incorporate? If you contribute to Linux, you cannot directly get paid for your contributions unless you become “famous” and get hired by a company to help support the work you do.

But imagine if the Linux project was embarked as blockchain company, where money was raised in a crowdsource style, developers were paid for bounties collected from this money automatically from brainy contracts that could be triggered by verification of features or bugfixes committed to the source code.

Today, there are lots of “companies” forming as distributed decentralized entities, with “employees” around the globe to work on perhaps puny to medium sized endeavors that will never be the right fit for traditional VC.

Brainy contracts and blockchain technology enable these companies to raise money, hold it in escrow, develop complicated rules including vesting, distribution, all baked into their software contracts. There are no lawyers and sometimes no legal corporations formed. Sometimes the project contributors are fully anonymous or have never met in person. And yet, with blockchain they can form decentralized entities that can raise money, sell goods, take votes from their “shareholders”, do payroll, and etc, all fully managed by software.

This is the future. The future is already here, just not evenly distributed, and it’s being developed by many companies ad-hoc — in order to innovate on their projects, they also innovate in the underlying structure of the company. Of course, there are many dangers from reinventing the wheel when doing this, especially given the tricky nature of raising money securely.

Fortunately there are several efforts to provide platforms that give you “decentralized clever contract company as a service” so you can do all the things a “company” does but not have to write the contracts yourself. My money is presently on Aragon, which has been covered in Forbes.

What stands out to me about Aragon is their concentrate on user practice, which is often fairly lacking in blockchain projects founded by very clever engineers who think that non-technical people understand what decentralization means. Aragon UX seems to truly shine, and they are also being very responsible with their token sale by baking in terms like founder vesting and caps.

Open source projects of the future will be powered by decentralized capital raises and decentralized automated governance, and this will lead to a fresh generation of organizations that do not conform to our normal idea of companies.

The only thing that can stand in the way of this is the baby sitter state, with overprotective ideas about who should be able to contribute capital to projects and how much. This is the main danger especially for US Investors to be left in the dust with an overprotective regulatory environment preventing many innovative companies or fully decentralized non-corporeal projects from suggesting their tokens to US citizens.

Of course on the blockchain, it’s very difficult to ascertain citizenship, and where leaky regulation lies, only the virginal and the idiots will be caught, while the real criminals will go unpunished.

Here’s hoping regulation catches up to the revolution that’s happening online today and to a successful Aragon crowdsale on May 17!

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