London Letter: Joining us today is Brendan Eich, the co-founder and CEO of Basic Attention Token and Brave Software. We’re at the headquarters of Brave Software in downtown San Francisco. Hello Brendan, thanks for having us.

Brendan Eich: Hey! It’s a pleasure having you guys.

LL: After our report on BAT in January our audience grew significantly. There was also a noticeable bullrun on BAT taking place shortly after. Nevertheless not all of our readers are so familiar with your project. Can you shortly introduce your project in a few sentences to our readers?

BE: Sure. The Basic Attention Token is an ERC20 token on Ethereum designed to be a unit of account of human attention in a reformed and private system of internet advertising and anonymous contributions. This system could replace the current web digital ad system which has a number of problems.

We see a mature but troubled ecosystem of digital advertising, ad-hoc donations, Patreon, subscriptions, the list goes on… But by far the most funding for the visible web comes from ads. It’s estimated that it was $200 billion globally last year and $80+ billion in the US.

Unfortunately that system is an inefficient market. It is a system of arbitrage based on intermediation between advertisers and publishers. That’s because the web has such scale that you can’t be like a newspaper 100 years ago and go to your local department store to do a direct ad sales deal.

You have to use ad exchanges: demand side platforms as an advertiser and supply side platforms as a publisher…

LL: Tons of middlemen along the way…

Brendan Eich: Correct. This creates excessive fees. The ad-exchanges are open to all sorts of abuse and they have no economic incentive to reject abusive players because they make a fee on every transaction.

So you get abuse from the so-called “buy side” – the advertising side – where malware distributors buy cheap ad spaces and put cuddly disguised exploit-kit loaders and fake ads. You also get the counterpart abuse which is ad-fraud where fake publishers, fake humans played by bots, take ad-revenue.

LL: Can you give an example of a fake ad? Do you mean these pop-ups claiming you’ve won the latest iPhone?

Brendan Eich: Worse – ransomware. That’s a big criminal business globally, some people at Google have been studying it recently. It first broke in 2016 when a new malvertising campaign was on the front page of the New York Times, AOL, BBC Online and other reputable web publishers.

The reason it got there was not because these publishers made direct sales to a malware vendor or ransomware vendor (laughs).

It’s because they were using ad exchanges.

They were using programmatic advertising. “Programmatic” is just a jargon word meaning automated ad exchanges.

The Basic Attention Token is designed to express human attention in a way that bypasses exchanges and all those intermediaries and therefore realises savings by cutting out the fees. BAT also brings back users who’ve left the system via ad blocking. Adblocking is a negative externality.

You have a system where something bad is not expressed by the price being lowered to make up for the impact of the bad thing. Instead the bad thing, like pollution, just hurts everybody or it involves someone accidental and negative externality such as an AdBlock user.

So, with the Basic Attention Token we help to bring people who object to ads either on principle or because of these abuses back into the system.

There’s no easy way for anyone but the largest publishers to do direct ad sales – the smaller the publisher the less they do direct. Everybody who’s below a certain size has to rely on programmatic, even some of the bigger publishers have to use it. That means they’re all prey to these parties who intermediate.

If we can get users who opt out of the tracking that’s required by this intermediation back into the system without tracking, without hitting them with malware or subjecting the advertiser who’s buying the ad inventory to fraud, then we should be able to bring people into this new ecosystem and then we’re blocking the old ecosystem.

So what we do is an environmental rescue operation on the web.

You start small with this kind of project. There is a precedence – take Firefox as an example.

It was not doing AdBlocking but it was bringing back browsing when browsing had been reduced to a very poor state by Microsoft which got in trouble as an abuser of its monopoly.

In the US law you can have a monopoly (this is also true in Europe despite it being a lot more aggressive).

Monopolies happen in nature, they happen in biology, they happen in markets. Microsoft had a monopoly on the operating system on the personal computer. Windows was the operating system for the PC in the 90s. We all got PCs, bottle monitors, we played games, we played Quake.

That was okay until Microsoft then said: “Oh, there’s Netscape. Netscape is building a browser and doing a deal with Sun Microsystems to distribute Java and the Java Runtime Environment – that could be a threat to us.”

“Let’s use our market power with Windows to make a copy of Netscape, Internet Explorer, bundle it with Windows and use the monopoly at tying Internet Explorer into Windows where you can only have that browser or it was the default browser.” If you used a different browser they would reset to IE.

They thought “Let’s use that monopoly power to take over the browser market”

And they did that. I was at Netscape at that time, we all went through it.

But it was the users who brought Firefox back. It wasn’t government regulators.

Firefox wasn’t a traditional venture funded company. It was an open-source project that Netscape spun out. It took us a long time and it wasn’t a sure thing. One of the key elements that helped Firefox succeed was that we did build a better product.

Now, to take on this advertising problem. You cannot please everybody at once – you cannot please the publisher and the advertiser and the user. Especially the user who blocks that, who rejected the system and left. That’s why at Brave and BAT we start with the user.

LL: One of the things that helped Firefox’s success is that you gave the users choice unlike Microsoft who tried to enforce the usage of IE.

Brendan Eich: There were other browsers but Firefox had tabs, it had pop-up blocking, it had speed. Now the competition among browser has levelled out because the big browsers- except for Apple’s Safari – are somewhat or even entirely captured by advertising businesses.

Google is an advertising business.

Mozilla has a dependency on a big search deal with Google they renewed last year. They can’t really risk it too much. I think it may even have a hidden clause which says “no AdBlocking, no tracking blocking”.

I know that Microsoft’s Bing does search deals with browsers but they say “if you block ads and trackers by default we won’t do a deal with you”.

There’s been a capture effect even with secondary search engines like Bing. Google is arguably not a monopoly on search in the US – it’s somewhere around 80%, maybe more of the search queries by volume in the server logs. In Europe, Google is a monopoly – the search queries are more like 95% – and they’re in anticompetitive law trouble there. But in the US not so much.

Even so, Bing is unhappy with adblockers, you can tell: a search engine is a combination of a publisher and an advertiser if it’s selling space for text search ads.

If you’re an encumbered system you don’t like the disruptive changes that Basic Attention Token brings. But like ad blocking – it’s been rising globally for many years, it’s rising on mobile in Asia.

The first thing that we realised while building Brave was that we needed to protect users from malware, protect from bad experiences, from tracking as well as ads.

But our users said “What about that site? I like that site. I never click on ads but even the little ads that I see provide a fraction of a penny, the so-called cost per thousand impressions. I know if I’m blocking that I’m hurting my site a little bit. How can I help them?”

We said “Okay, Brave is protecting you, let’s add a cryptocurrency so you can then give back anonymously.” So we created Basic Attention Token upon the Ethereum blockchain.

LL: Was it after this malware attack which affected the publishers like NYT?

Brendan Eich: Yes, that was in March of 2016. So in 2016 we saw malware on the NYT. At that time we were building Brave. Then by the fall because we’d already started the Bitcoin Brave-payments prototype (we didn’t have the Basic Attention Token yet) we realised: we just want to give back.

We could actually do anonymous ads in the browser and pay them a revenue share. Everything we’ve now tied to the BAT was originally developed with Bitcoin in mind but Bitcoin got expensive.

Even in 2015 when I started Brave I wanted to have a system of social credit that allowed us to give users tokens of some sorts. In 2015 I called it “Brave coin”, just an idea – from nothing, for nothing.

So with the Basic Attention Token we’ve precreated a pool (a user growth pool) and then we did the sale of a billion on top of the 500 million we’ve precreated.

So that gives us over 366 million of user growth tokens plus reserves to give to the users. And that’s what we’ve been giving our grants from. We couldn’t do that with Bitcoin.

We’ve shut down the Bitcoin prototype and replaced it with the Basic Attention Token. Its idea, like with the Brave Coin idea from 2015, was mainly about giving users tokens to get them started from this pool. Now, the pool would eventually get exhausted but maybe we’ll have grown so much that it’ll stretch the entire ecosystem so that the coin becomes more dear – that’s just a mathematical property – and we can make it last.

We’re not worried about the long run because we think in the long run crypto should be easy to buy, there should be lower volatility and greater stability of the price, at least the second derivative should be a constant. We shouldn’t have these wild swings – for instance Bitcoin had an amazing spike today.

Anyway, we had this idea that in the long run with a large number of users, with other apps than Brave brought into the ecosystem, the price will stabilize. This is actually mathematically supported in the section 7.3 of our white paper, it’s in the appendix. We make an econometric argument that as the system grows the price becomes more stable. It doesn’t mean it’s constant, it just won’t swing wildly.

LL: Yeah, just like DAI swings a little.

Brendan Eich: Yes. Even USD Tether swings a little, if you can believe it.

Willy Woo, WooNomic on Twitter, did a chart on volatility of major tokens and coins last December 27th and believe it or not, BAT was less volatile than Bitcoin. And it was only number two, the least volatile was USD Tether in his basket of tokens.

So, we think we succeeded in our goals, we made the user growth pool, of course we’ve raised funds to fund the project. If we grow we will have a more stable unit of account over time.

There are various arguments for why you should or shouldn’t want a token to be an app coin. We don’t view this is as an app coin. But people who then say “I’m just doing a protocol coin”, they don’t have any leverage over their future.

0x is interesting. But I’ve seen people then say “we’re using 0x protocol but not ZRX” – they’re not using the token so they’re bypassing the payment.

LL: 0x is used to settle the transaction fees on decentralized exchanges. Basically it ties the use. On top of that, ZRX will be used as an governance token.

BE: Yes. Fully decentralised exchanges are challenging to govern. I mean it’s crypto2crypto but it also involves atomic swaps so it’s collateralized. There’s no margin or any risk like that but there are fees. It is slow enough on the current Ethereum blockchain that there is front running risk, there are other problems.

So, we’re pragmatists. I think you’ll notice that also. We start semi-decentralised. We can’t decentralise everything at once, it’s just not gonna work.

LL: What if Ethereum, the base for your currency, is going to fail? If it’s not going to work in the long run, can you switch to other blockchain?

Brendan Eich: You can, I’ve seen a number of projects do that. You can generally do it – commit a protocol between few chains to migrate token from one chain to another.

That would be a big mess if we did it. I mean, it could be done, it would be like a wartime rescue operation. And I don’t see Ethereum under that kind of wartime threat right now.

There’s a lot of disgruntlement with the pace of innovation on Ethereum. Plasma is coming in to make it a lot faster.

So, there are other people doing new chains and I’m sure in 10 years there’ll be a fantastic blockchain that is high throughput, low fee and probably anonymous.

To get to 10 years from now we can’t bet on that and then just take time out from reality. We have to be in the market. That’s why we’re using Ethereum right now.

LL: That’s why we are asking, because we would like to give our readers a sense of backup plan of the projects that we feature in our cryptocurrency newsletter.

Brendan Eich: Yeah, we thought about it. It doesn’t have to be a detailed plan right now because there is no imminent threat, but it’s possible.

You may see this – people will migrate chains. Now, I know projects that went from Bitcoin to BitcoinCash for instance.

LL: Your ecosystem is already being put to use. What problems did you face while creating it, while developing BAT & Brave?



Brendan Eich: The problem that we’ve also faced is the user growth pool – neither Bitcoin nor BitcoinCash solve that. And then a problem, I think everyone struggles within crypto is making it usable by average users, so-called “normies”.

Are they going to want something where when they lose the key they lose the money?

Are they going to want to dispute a charge like they do with their credit cards?

They say “that wasn’t my charge” or something wasn’t delivered, I want a refund, I want a chargeback. You can’t do that with crypto. You’d have to use some higher level provider.

I think that’s what we’ve done with the 30 days of private analytics on the browser that leads to the settlement through this anonymous protocol. It is more usable because it allows users to say “Hey, I don’t like that site, I’m gonna turn them off, I’m not gonna support them” or “I want to pin half of my monthly budget to Wikipedia.”

After the settlement and the anonymity protocol does its thing, there is no linkback to the user identifier, there’s no way to get a refund.We created a system that has different properties from subscription. For instance, I myself subscribe to the Financial Times. It’s one of those things I forget about but when I see a piece on Twitter and it’s behind the paywall, I can login and get it.

But I can also say “I’m turning this off now” or “I turned it off a little late in the month. Can you give me back that month’s charge, I didn’t read anything?”

That ability doesn’t apply to anonymity protocols. If you’re using the browser you don’t want to put everything on the blockchain because you’ll identify yourself right away and the gas fees will be really high. Those are the two problems but we dodge those with the 30 day buffer.

We also work on the user interface – it’s more like a frequent flyer system but not one you forget about. We give you the BATs from the user growth pool and that’s something you can do now, every month. If you go to your payments panel, you can click on “Claim my tokens” and then contribute back to your favourite YouTubers, creators and so on…

LL: For now that’s the only way to get BAT tokens…



Brendan Eich: From us!

LL: Yes, from you. Although recently you’ve started the ads user tests. How is it going so far?



Brendan Eich: It’s early days yet, so it’s a small, hand-picked group of users. I just was playing with the build today and it’s working. I think we now need to start exposing it more.

We are doing private ads to users – it’s kind of like a search ad. You get a little text notification that tells you there is an ad to look at. You can get rid of it or if you can click on it and it opens a new tab and you can get rewarded by viewing it.

Basically we’re lifting ads out of the page. This is a “user-as-publisher” model – the user gets 70% of the revenue.

Our model has fixed app-store-like revenue shares – 70% to the inventory owner. That’s the publisher if it were on a page – we haven’t done those yet. It’s the user if it’s in the tab. The other thing about the tab is that you don’t identify the user right away but the user gets to interact with the brand who’s doing the ad.

If you like it you can start to identify with it. It could become an engagement channel with that brand, it could become an eCommerce channel.

LL: So how is it going to look like really? A user visits a website, say, LondonLetter.org and we run BraveAds. Is there going to be like a pop-up?

Brendan Eich: No, not really. The idea is for publishers who want to work with this, we can do a more traditional model where there’s an ad in the page – (but that’s going to be phase two where we do a trial with the publishers. Right now we’re in phase one doing the trial with the users.)

That’s something where we’d need publishers as a partner and we haven’t yet pushed on but some publishers want to do that. So, in this model it’s Brave putting the ad into this slot with the publishers cooperation. The publisher would get 70% of revenue.

But this model we’re now, doing trials on, is a user model, it doesn’t require any publisher. It’s a two body problem – it’s the advertiser and the user.

There used to be something called “All Advantage”. It was a PC app in the late 90s. It did really well in the US. It was like a browser but it didn’t have ads in the main news, articles (it was a news reader). It had ads on the strip at the bottom and it gave users a revenue share.

We’re trying to lift ads out of the page where they have brand safety and other problems and put long formats into a user private channel.

There’s no ad-server, there is no exchange, there is no tracking partner, there is no data management platform.

LL: Without tracking those advertisements are going to be very broad..



Brendan Eich: No, they can be targeted and that’s an interesting idea.

The targeting can be based on your entire browser signalling history that’s blocked. You know, we’re blocking third parties from tracking you but, if you’re opting in this ad program, we’re not ignoring all the signals that would be tracked.

So, by privately running machine learning in your browser it can see you’re reading the Wall Street Journal and you have an affinity for European cars – maybe you’ve been searching for a new car and you haven’t found one yet. Now you get an opportunity to look at an Audi ad.

We don’t like the word ‘targeted’ because it suggests somebody remote with a rifle, right?

The idea with these user private ads is not just to give the user a share of the revenue. That’s just the standard, 70% for whoever owns the ad space. So, we’re following a fixed fee structure. But also to let the user’s wallet fill up again. So users who opt into this do not get tracked, they do not get identified to the advertiser unless they choose to be later.

But they get 70% of the fee, the advertisement gross payment and that fills their wallet for giving back to their favourite sites through our User Interface. So, when you opt into the ads, this system of Brave Payments is enabled as well. I think we’re gonna call it ‘Brave Rewards’.

That means – this is the really tricky part – we don’t make the users identify themselves to us since we’re not giving them tokens to take to the bank. We’re giving them tokens in the wallet in the browser in a controlled flow back to their favourite creators.

We want to let users who earn that revenue take it out if they choose to – it’s their tokens. But they’re going to have to go through a bank or an exchange to do that and those all involve what’s called ‘KYC’ – Know Your Customer.

So, we’re working with Civic on making that decentralised KYC solution usable so that people can take their BAT directly out. That’s not available yet but we will make it available this year. We want to let users take it but we think that most users will give it back, by default to their favourite sites and creators.

We think the donations are important for the ecosystem. Most users are going to be just letting their own attention tokens circulate. And most of the publishers, though not all of the YouTubers, some of them want BAT, but most of the publishers especially the big ones they don’t want crypto.

They don’t understand it, they don’t want the risk. So we have a partner which is like Coinbase – Uphold. They are a bank in part and they can convert to fiat, they can convert to other crypto.

So, if our platform becomes the dominant use of BAT, the money comes in for the user at the beginning of that 30-day period. On the 30th day the money goes through that zero-knowledge proof protocol in a single transaction to Uphold and then it goes into settlement.

Settlement takes 15 to 30 days and then it goes to the publishers. That means that the whole time is somewhat fixed because the publisher exchanges BAT back to dollars or pounds and that goes back to the advertising site.

So we do see a circular flow, we see the user as a more efficient intermediary than all the intermediaries in today’s ad tech.

There could be speculators, there could be other uses of BAT but we stabilise the hold time which helps us keep the price stable for BAT. That’s part of the argument in the white paper if you look at that section.

LL: Where can the publishers sell their Basic Attention Tokens for US dollars?



Brendan Eich: Uphold will do that for them. In fact, that’s already happening.

Uphold uses Bittrex for the BAT-to-Bitcoin probably because Bitcoin has the biggest depth and then Bitcoin-to-USD is on another crypto-fiat exchange. So those are two steps to get out.