Colorado Sun

Prominent Denver Post journalists, who recently left the embattled newspaper amid a battle with its hedge fund owners, are forming a start-up that's embracing one of the hottest trends in technology: blockchain. The Colorado Sun is launching as a reporter-owned, ad-free publication in partnership with Civil, a New York-based media company that's applying cryptoeconomics to journalism. The online paper is sending out its inaugural newsletter, the Sunriser, on Wednesday afternoon, and the full site will be up and running in the coming months. Blockchain has thus far largely been applied to cryptocurrencies like bitcoin and ethereum, which are tracked on an electronic ledger and not subject to the rules of central banks. But tech entrepreneurs have been pursuing all sorts of other uses for blockchain, from storing medical records to managing music distribution, and any number of projects that require housing digital data and transactions. Civil said it is experimenting with blockchain in the news business and has plans to launch its own cryptocurrency, a token that would be used for accessing content, rewarding newsrooms for good reporting or even challenging the quality of work. "We are all about doing great local journalism, and we think this is the best model for doing that, said Larry Ryckman, a former senior editor of The Denver Post who is now editor of the Colorado Sun. "It is new and unproven, but we are willing to take a chance."

Hedge fund vs. newspaper

Ryckman has assembled a team of eight former Post employees who left the paper in the last few months after a round of layoffs that cut about one-third of the newsroom. The Sun will be one of Civil's "First Fleet" of up to 30 newsrooms, alongside publications like Cannabis Wire, focused on marijuana, and Documented, which covers immigration in New York City. Civil says it's aiming to create "a vast ecosystem of journalists, citizens and developers building products and services dedicated to powering sustainable journalism throughout the world." The Post remains mired in a public battle between the paper's staff and its owner, the hedge fund Alden Global Capital. Since Alden bought the Post in 2011, the firm has cut about 75 percent of the paper's employees, forced a move out of its headquarters and established paywalls on digital content. Some reporters and editors have even claimed Alden, by way of parent company Digital First Media, was censoring content.

Elizabeth Hernandez and Noelle Phillips, both reporters at the Denver Post, protest outside of the Lipstick Building in Manhattan. CNBC | Chloe Aiello

Those accusations surfaced around the time Ryckman and Colorado Sun senior editor Dana Coffman left in May. More broadly, Alden's actions elicited cries from staff members that the hedge fund is more concerned about profit than journalism and prompted a discussion about whether hedge funds should be in the business of newspaper ownership at all. "For us, it became clear the old models didn't work for us," Ryckman said. He described that model as "working for corporate overlords and having an ad system that emphasized clicks over quality." While the old journalism model that relies on circulation and ad revenue is struggling to survive, Civil's version is new and unproven. The start-up aims to leverage the blockchain to create journalism free from the limitations posed by ad-supported news sites. Civil's founders, including CEO Matthew Iles, operations lead Lillian Ruiz, and communications lead Matt Coolidge, are setting out to create a platform for blockchain-based newsrooms that can be owned by the journalists. Here's how it works: The technology at the core of the Civil publishing platform is ethereum, an open-source distributed computing platform, based on blockchain. Stakeholders will be able to use CVL tokens, a cryptocurrency debuting soon, to access stories and incentivize reporters by paying more for quality work. A limited amount of CVL tokens will be issued to stakeholders like distributors and consumers of news.

Joseph Lubin, co-founder of Ethereum. Adam Jeffery | CNBC