I don’t know if you know people who have raised their business funding “properly”—seed capital, angel investor funding, venture capital financing (series A, series B, series C rounds, etc.), mezzanine financing & bridge loans, and then an IPO (Initial Public Offering)—but it’s torture and by the time you’re done, you’re a slave in your own company.
While dacoinminster had already published a White Paper on Bitcointalk titled The Second Bitcoin White Paper [PDF], it wasn’t until J.R. Willett, the man behind the handle, shared his vision for raising money, Kickstarter-style, by selling trading “ a bunch of trustworthy guys together that people have heard of” for Bitcoin for “a piece of our new protocol” with attendees of his panel discussion at the Bitcoin 2013 in San Jose, California. In short, it’s the origin story of the Initial Coin Offering (ICO). I embedded the below video to minute 4:30 when Willett introduces the concept:
“If you wanted to, today, start a new protocol layer on top of Bitcoin, a lot of people don’t realize, you could do it without going to a bunch of venture capitalists and instead of saying, hey, I’ve got this idea, you can—you’re familiar with Kickstarter I assume? Most of you? You can actually say, okay, here’s my pitch, here’s my group of developers—there’s a lot of developers in this room. If you get a bunch of trustworthy guys together that people have heard of and say, okay, we’re going to do this. We’re going to make a new protocol layer. It’s going to have new features X, Y and Z on top of bitcoin, and here’s who we are and here’s our plan, and here’s our bitcoin address, and anybody who sends coins to this address owns a piece of our new protocol. Anybody could do that. And I’ve been telling people this for at least a year now because I want to invest in it. I don’t have a ton of coins, but that’s where I want to invest my coins. And I’ve yet to find somebody who wants my coins. Does anybody in this room want my bitcoins because I want to—”
Like Bitcoin itself, J.R. Willett wanted to disintermediate the entire process and go directly from inspiration to realization. From semination to birth in one fell swoop. I have an amazing idea, a room full of talented, awesome people, and I think you should get a part of this by just dropping some coin into my wallet.” That act of defiance (or laziness or just introversion) was one of the most disruptive acts since the New York Stock Exchange was opened on March 8 (my birthday), 1817, on Wall Street, New York City, NY, USA. While government regulators have all but shut down the ICO party, the Initial Coin Offering (ICO) has changed everything.
That ICO resulted in Mastercoin which is now called the Omni Layer. As he suggested above, J.R. Willett believed that “the existing Bitcoin network could be used as a protocol layer for higher-level protocols to enable new rules for contracts thus enabling the creation of new currencies without changing Bitcoin itself or requiring the creation of an alternate blockchain to handle new rules.” In other words, “rather than trying to bootstrap an entirely new blockchain, as every other cryptocurrency does, Mastercoin seeks to create an entirely new network of currencies, commodities, and securities on top of Bitcoin itself.” This is something that Ethereum was subsequently and actually designed to do from the ground up. According to Hackernoon, the Mastercoin ICO raised 5,000 Bitcoin at a total value of $500,000 in 2013.
While that isn’t a lot compared to the $51,656,963 that Crypterium raised by January 6th of this year or the $392,790,000,000 cryptocurrency market cap of value created by all crypto projects; however, it is ground zero of what we now safely and carefully refer to as the Token Sale. By the way, Laura Shin wrote a very interesting article over at Forbes you should definitely check out. I was able to get the video clip and the transcription of what J.R. Willett said from her well-written and informative 2017 piece.