by James Clayton

In the world of cryptocurrencies there are a variety of strategies for funding projects and coins. One of the oldest is simply having some edge at mining early on and just making sure that the founders manage to mine a very large amount. This can work out sometimes, but often results in short term projects, as it is easier for them to just move on to a new project and do it all over again. Miners and traders also play along as many coins and projects were never meant to last, and nobody really cared how it would be funded even a few months down the road, let alone years.

Premines are another strategy, this allows a project to start without a ninja launch and potentially without any unfair edge for mining at the start, but the common concern here is just that devs will dump the premine and move on to the next project. Just like they would if they mined a ton at launch. In my experience the difference here is really more of optics than anything else, the end result is often the same. The large amounts mined fast and early, the premine just gets dumped, and there is little incentive to carry on and plenty of incentive to just make another project, usually by anon devs that just do play this same game out over and over.

ICOs, or initial coin offerings are another strategy. Here devs are often just selling an idea before it is even created. This can allow for lots of funding and avoids the mining issue entirely, but of course there is no guarantee that devs will deliver on promises, and they are often being paid fully in advance. Of course best case this leads to funding normally running out early, worst case, just money taken and projects never completed. There have been some successful ICOs that have lasted, but most end up dumping below ICO price and the devs move on to other project, or perhaps just start another ICO. Again, in cryptos often these are by anonymous devs running the same schemes over and over.

A recent evolution for funding projects appears to be ICOs and a premine, only projects with well known developers can really try to pull this off, as they are not only asking for money up front before delivery, but also a huge share of the project itself. This can allow for more funding down the road, but to do it devs must sell their premine off and potentially impact price and ICO investors. It is safe to say all the multi million dollar ICOs are going to use this strategy, as it provides the most funding and control of the project to the original devs and founders. Easy enough to add in mining later for the fair distribution angle, and of course they can incorporate proof of stake and interest for their premine. Transparency is often a concern here, as different devs have their own funding, and of course they might sell off as desired, not necessarily the best method for long term funding.

Expanse is the current project I am working on, and we are doing something different. Expanse does use a premine/reserve to avoid the ninja launches or unfair early mining concerns, but is also using a DAO, a Decentralized Autonomous Organization, to limit the release and spending of the reserve funds. To limit potential mistakes in spending. In this way it requires no ICO to start and the team and community must build up the value. So there is no ICO money to be risked, and only by developing the platform will the devs be rewarded well. Since the DAO works like a series of time locked safes slowly releasing funding, there is also no risk of dumping or greatly harming the market. This also ensures funding for years in theory, provided the team works hard and increases the value of the project over time for investors and miners. I believe this funding system is quite unique as it provides long term funding, long term incentive for value creation, and the DAO itself is also transparent and open to everyone to join in and share the risks and rewards.

By having value creation and community teamwork at the core of the project, protected by smart contracts, code, Expanse and other DAOs following this example can be far more experimental, requiring almost no initial funding other than the value they create, and while having a fair launch and distribution to those joining in the DAO and building up the project. Certainly no funding method is perfect, and all have their pros and cons, but this method has very little risk, a great deal of incentive, and by the DAO code controlling the funding, strong incentive for devs to stick around and build the project up, working with the community in a transparent way to build something with potential to last. Because in the end, funding is really what keeps projects going regardless of what model you like best, and this model potentially can provide what many are seeking. Long term projects with funding released over years, ones with true potential to grow, make a difference, and bring new talent and ideas in over time to help build it up.