How to pay people Nothing, while actually paying them everything.

What is a company?  A company is a conglomeration of people that, in the eyes of the law, is a person.  In business, it's an entity who is designed to create profits for the people who own it and are its constituents.  I've never really thought much about what a company is because they are such essential parts of our world now.  You can't really move an inch without running into some aspect of the world that exists because of a company.

Recently, a new little online news network has started to structure and run itself in an outlandish new way.

The first problem of any company is how to get it started.  Currently, often this happens with investment of money by the founders, venture capitalists and investors.  People who generally know what they are getting themselves into and have lots of money to get things started.  Those people will end up owning big chunks of the company and be the ones who profit from it's continued success.

This new endeavour pretty much turns everything on it's head in some really interesting ways. First, we will start with the ingredients of this news network.

Ingredients:
Podcasts - which include advertising segments
Articles - which include website banner ads and comments
A forum where people come to discuss stuff.

Now the problem that is faced by the people running this site is that they need to produce podcast and articles that will draw enough people so that advertisers will be willing to pay for ads which will pay for the website and all the content producers.

The problem is that this is a cycle and it needs to be kickstarted by funding to get the whole thing started.  Before, the whole thing seems to have been running off the shear force of will of the network creator.  But he is creating a new way forward, which sounds ridiculous, but might actually work.

He is making "fake" money.

The plan goes like this.  Every week, anyone is free to submit content, like articles and podcast, to the website.  It is checked by editors and posted on the site if it passes a certain level of quality. Depending on a variety of factors, such as the amount of content submitted, and the portion of readership, the content authors get paid a certain amount of "fake" money at the end of the week.

Next, the audience comes to the site, reads all the articles and listens to the podcasts.  Because the "fake" money was just made up by the sites creator, he gives some of this money to the audience based on how much they read, listen and comment on the site.  Every week, everybody who has been participating on the site gets some "fake" money, just for being an audience member.

And now comes the trickiest part.  For advertisers to buy ad space during the podcasts, or for banner ads on the articles, they need to pay using the "fake" money. Unless they themselves are contributors to the site, they will need to go to an open market and buy some "fake" money using real money. And it is in that instant, where "fake" money is traded for real money, the "fake" money suddenly gets real value.  All the effort that was put in for nothing actually was contributing in a small  invisible way that grew into real value.

This cycle of "fake" money being paid to the participants will continue to repeat.  If the site is successful, more people will submit content, more people will read and comment, and there will be more competition to buy ad space on the network.  If the news network continues to grow, the value of the "fake" money will grow more and become more real. 

In the end, the "fake" money will actually represent all the effort and value that all the members contributed.  The members, without really realizing it formed a company in which they all were given stock based on their participation.  The company that they formed, has value, and for that they are rewarded.

Now this all sound ridiculous, because there are so many problems with making "fake" money. The site's creator could just print as much as he wants, and everybody could counterfeit it, and how would all these people send money around on the internet without running into all sorts of crazy laws and fees....

...of yeah Bitcoin.

Except Bitcoin is real money, it's not fake value and you can't give it away for free.  So some nice people have invite a new way to make "fake" money that rides on top of Bitcoin.  You can't counterfeit it, it's fairly cheap to send around the world and it works great on the internet. The most advanced version of "fake" money seems to be a technology called Counterparty.

And the whole system of giving away "fake" money has been happening for a few months and it seems to be working.  The news network is called Lets Talk Bitcoin and they have their own "fake" money called LTBCoin.  It's still early days but it is a really exciting development because with this new structure, if this whole thing were to become successful, it wouldn't be some investors standing on the sidelines who stand to make all the profit, but all the people who are actually participating and contributing in the conversation.

The idea of creating something from nothing is pretty amazing, but it actually might work.

Kyler


4 comments:

Stuart Spence said...

Interesting idea. Some implementation issues, but interesting :P

Mory Buxner said...

I have no head for business so excuse me if you've addressed this somewhere and I just didn't understand, but...

At what point in this process does the virtual money turn into something that you can use in other places? Like, how does one buy food with LTBCoins, or convert the coins into a format that can be used to buy food? And if it can't, then doesn't someone relying on a virtual economy still need a supplementary source of money to stay alive?

Stuart Spence said...

The very first bitcoin purchase was a pizza.

Kyler Kelly said...

"For advertisers to buy ad space during the podcasts, or for banner ads on the articles, they need to pay using the "fake" money. Unless they themselves are contributors to the site, they will need to go to an open market and buy some "fake" money using real money. And it is in that instant, where "fake" money is traded for real money, the "fake" money suddenly gets real value. All the effort that was put in for nothing actually was contributing in a small invisible way that grew into real value."

This is the place where LTBCoin becomes something of real value that you can buy food with. When people who want to advertise on the LTBNetwork, but don't have any LTBCoin, they will need to buy it.

Currently I know of three places where the trading of LTBCoin actually occurs. The first is the LTB forum, people just make posts and make trades very casually.

The second is the first exchange that makes LTBCoin to Bitcoin trades, Melotic.com

The third is within the Counterparty system itself, which I believe is a decentralized exchange, meaning that the bitcoin system is actually running the trades, not a third party arbitrator. CounterWallet.co

In all three cases you can get Bitcoin for LTBCoin. This means to actually buy food, you would have to find a way to get food with Bitcoin, which is becoming a little more possible all the time, though the most reliable way would be to trade Bitcoin for regular old money.

So currently it is pretty convoluted, but it is possible.