The Mojo solution Forget Napster and Gnutella. Jim McCoy's Mojo Nation is the coolest file-trading service on the Net.

Jim McCoy left Yahoo in May in search of a libertarian utopia.

"It got boring," says the 31-year-old about his old job managing Yahoo's Web-based mail system, which he helped create. "Getting the first million users was cool; 10 million users was cool too. But after a while the phone calls at 2 a.m. weren't worth it. I was tired of not doing something revolutionary."

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So McCoy went back to his old passions -- cryptography and digital cash -- then struggled to marry them with today's latest craze, peer-to-peer file trading. The result is a company called Autonomous Zone Industries, where McCoy is the CEO, and a piece of software named Mojo Nation.

The company's name plays off the idea of "temporary autonomous zones," a term first used by anarchist Hakim Bey in 1991 to describe the pirate-run utopias of the 18th century. These tended to exist on islands, where criminals, exiles, rapscallions and other outsiders could found their own societies, make their own rules, then flee at the first signs of authority or danger. Bey wanted to found new "zones" in the real world, but when the Net appeared, geeks and libertarians saw the Net as the ideal spot to set up camp -- a present-day uninhabited universe with more than enough room for worlds within worlds.

Mojo Nation doesn't completely realize this dream; with his team of lawyers and his belief that venture capitalists will be on board by the end of the month, McCoy isn't so much avoiding the real world as he is trying to beat it at its own game.

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Still, Mojo Nation looks more a like a libertarian dream come true than anything else that's out there. It is nothing short of the first-ever encryption-protected, user-run, open-source, file-sharing marketplace. It essentially takes the decentralized model of other Napster alternatives like Freenet and Gnutella and adds on a layer of laissez-faire experimentation.

Home-brewed currency, or "Mojo," lies at the core of this new world. Users cannot simply take and give as they do with Napster and every other file-sharing service. Rather, those who download the free, open-source new release in November must use Mojo to buy and sell content for prices that they themselves determine.

This is how it works: Download a free Mojo Nation "agent" and set it loose. The 2,000 users who are testing the beta version earn 1 million Mojo just for signing up, but new members can earn currency only by sharing what they already have -- unused computer power on their desktop. Mojo Nation will pay users Mojo for letting the network "rent" their computer's disk space, processing power or whatever else the system needs. The prices change according to the rules of supply and demand: The more people want of what you've got, the more you can expect to earn.

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The same goes for buying. Once you've earned enough Mojo, you can then use the agent to search the network and buy the files that you want, agreeing on prices -- for porn, MP3s or other files -- that are determined by market forces.

The agent also lets you upload content of your own. It even breaks the file into tiny pieces, encrypts it and spreads it out to other users on the network so that bandwidth pipes won't get clogged. But don't go thinking you'll get rich by offering all those Beatles songs you've downloaded from the Net: Mojo Nation's market is based on the action of distribution, not the object itself, so sending and receiving have value but content itself does not. You can get paid for sending the file out, but not for the file itself.

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And the artist or creator of the file? He or she gets nothing. Nothing, that is, unless you decide that he or she deserves something. Mojo Nation's final interesting twist is that it allows users to tip creators for their content. How much you want to tip is up to you.

McCoy believes that content creators will get what they deserve via Mojo Nation. He and his 10 employees -- who work out of a Mountain View, Calif., home and call themselves "evil geniuses for a better tomorrow" -- are convinced not only that the program's economic incentives will encourage people to share but that Mojo Nation will forever alter how the Internet runs.

Like all file-sharing endeavors, however, Mojo Nation faces several hurdles. Legally, the quasi-commercial nature of Mojo Nation's distribution network may mean that it will be hard for the service to claim it is merely engaged in "noncommercial" file sharing -- the tactic employed by outfits such as Scour and Freenet. An even more challenging aspect may be the complexity of the project. Hardcore geeks think Mojo Nation is the coolest thing since packet switching itself gave birth to the Net, but the average user may be a bit confused by all the price setting, agent-led "content tracking" and Mojo-ish compensating.

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Nevertheless, as McCoy says, it sure sounds like a more interesting project than working on Yahoo Mail.

It seems as if Mojo Nation is designed to be the ultimate Napster or Gnutella. You've said that Mojo Nation is "architected" to scale better than its competitors. How exactly does it do this?

There are a couple of ways we scale better. On the pure data delivery side, we do it by breaking the file into, say, a thousand pieces, so delivery is not bottlenecking on the slowest agents. We allow the system to actually aggregate the bandwidth of hundreds or thousands of low-bandwidth agents. It's like a swarm of ants; we're trying to move data from point A to point B, and if you've got ants and gang up a million of them, you can move a lot of stuff. So in Mojo Nation, instead of trying to push a 4-gigabyte file through somebody's 128K[bps] uplink, you break it up into 4,000 or 4 million chunks, then have lots of agents -- on their DSL lines or 14.4K[bps] modems -- send you part of it.

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The other thing we do to help it scale is try to use economic incentives. If at some future point it becomes economically viable for an agent to dedicate more bandwidth, then it will do so. If there is a market need and somebody can fill it, they will earn more Mojo and so they'll do it. So we basically let market forces decide what Mojo Nation needs at that point.

People on the Net have gotten used to getting their music and other files for free. Do you think people will really embrace the idea of payment and sign-up that is central to Mojo Nation?

The system is not designed to be as easy as others because it was honestly designed to scale up and work in the long term. But we know the market works. We've basically created a marketplace for information, a place where these agents can buy and sell on behalf of users or a company or whatever. What we're trying to say is that you will want to be assimilated eventually. Our system is resistant to parasites and it scales up well. Most of the other systems out there don't do that. We're just waiting for them to collapse. You're right, it is a little tricky. But for most users, it's just as easy as pointing their Web browser at the local agent and saying, "Go get it."

Does the person who originally uploads a file to the network get paid?

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No.

Then how do content creators get paid -- what's the incentive for them?

You can earn revenue by publishing through a feature we haven't added yet, which is basically tipping. When you publish you can say, Here's a digital signature on this map: I published this file; this is who to give the tip to.

It lets users develop a reputation as a source of good information, an authority -- or perhaps a record label would publish a song with a signature from Universal Music saying, Yes, this is the official file we released.

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What about the potential legal pitfalls? Napster, for example, is defending itself in court by arguing that its users engage in noncommercial sharing, but because of the way Mojo Nation works, this defense wouldn't seem to apply. What makes you think the labels won't come after you?

It's possible that they will come after us. But we spent a lot of money on very expensive lawyers over a year, in the early design phase, to make sure that we're covered by existing laws. The system is designed so that, for example, we fit under the safe harbor provisions of the Digital Millennium Copyright Act. And there are substantial non-infringing uses of Mojo Nation. It's used for online backups, for publication of unpopular Web sites. By being content-blind we can also be much more flexible than Napster, for example.

Napster, for example, has the problem of not being able to get rid of the files even if it wanted to. They couldn't play fair just because of the way their system was designed. With Mojo Nation, if a content owner comes to us and says, "Hey, someone has published my Britney Spears track and here's the blocks and the map," we'll say, "Well, you're correct, and according to the DMCA, we'll take it off of our servers." We'll remove those blocks and publish them as bad blocks. Everyone who subscribes to that list could say they won't traffic in that.

That wouldn't stop someone from putting up another Britney Spears song, though, right?

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Right, it wouldn't. But that's not our problem. Remember, these content maps have to be disseminated to the users, so if the user submits that to a content tracker that searches specifically for MP3s, then that content tracker would have to follow the laws of his or her own jurisdiction. So if someone were running an MP3 content tracker -- which is one of the software agents that all users can run -- they would be in the same position as Napster is now. Functionally, that's what these content trackers do; they act as distributed index services and directories.

Then you're pushing off liability onto your users?

Exactly. We say that users are grown-ups and they can make their own choices.

When you say that creators of content might be compensated by tipping, aren't you making a kind of optimistic assumption about how people will behave? Users don't have to tip.

Well, part of the thing with peer-to-peer is that the user has complete control over the system. You can't force someone to do something. What you can do is make it easy and possible for them to do the right thing. Mojo Nation is designed assuming that what we have to do is build a system that works, so that people can effectively tip those who they think deserve compensation.

The key component of Mojo Nation is payment for service rendered. How exactly does it work? What is a Mojo worth?

It's not designed to be dollars or euros. The prices themselves are meant to represent the costs of activity within this network, which is a fluctuating amount. Most users will start running their Mojo Nation broker and earn tokens for performing work, which they can then redeem. So it's not trying to put a price on any particular activity; it's just trying to keep score.

But what, for example, are most of the beta testers earning by offering their computer's unused processing power for a day?

It depends on supply and demand. But it's the kind of thing where if you make your computer available during the day, then at night you can download as much content as you want.

If you're a porn user, for example, and you run the agent all day -- connected on a broadband PC -- than you can download one or two of these 10-to-15 minute movie clips. Right now, though, we're just throwing numbers around because it really depends on the market.

So let's walk through the process. Say someone has some Mojo tokens and they want to buy a file. Who prices it? The person who uploaded the file?

Yes and no. One person doesn't have an entire file. Part of the design of Mojo Nation is that every file is actually broken up into hundreds or even thousands of pieces. So if you wanted to download a file from this system, your [Mojo Nation software] agent would go out into this marketplace and try to buy these blocks. The people holding the data don't know what they're holding. So they can't say, for example, Oh, that's a file I know that Damien wants later, so I'll up the price on that. All of the agents just see it as abstract chunks of data being passed around.

So your agent would go into that marketplace, it would find those servers that are advertising ranges that cover blocks you're looking for and then it would try to buy them. The key is that in Mojo Nation, you don't pay someone for holding a block -- you pay them for delivering it to you.

What about customer service? What happens, for instance, if I get only half a song? Do I have to pay for it?

You only have to pay for what you downloaded. You would have to pay for the chunk you downloaded. You wouldn't have the whole file, so you couldn't decrypt it or get it to run -- but you would still have to pay the agents because no one knows you downloaded this piece of content and couldn't find all of it. They don't care. All they're charging you for is the service they gave you.

Sounds like there's a high potential for unhappy customers -- people who paid for something they didn't get ...

Yes. But you would probably be more unhappy that you couldn't download a file -- couldn't get the piece of music -- than the fact that you would have spent two one-thousandths of a cent trying to download a piece.

So Mojo Nation doesn't guarantee what you download or verify the content to make sure it's of high quality?

No. But on the other hand, it's like the real world. There are probably 10 million or 100 million shoe stores, but I only patronize a couple -- people who have given me good service in the past, people who are local to me. And agents that are running are always gathering this information: who's close to me, who has good connectivity, who's always up when I go looking and who's actually got the inventory when I want to buy it. The agent uses these background reputations to keep track of where to go to next. The agent does all of this on its own.

Give me an example: a song. How many Mojo does it cost and who gets paid for it?

It will cost about 10,000 Mojo to download a song. The people who get paid are those who perform the services, so those agents that helped direct you to find that block get paid. The distributed search agents get paid. All of the different block servers that you purchased blocks from get paid, and if the user was running through a relay server, either because they were behind a firewall or because they wanted to protect their privacy, the person passing those messages would also get a cut.

How are the cuts allocated?

Everyone advertises their prices, and they compete with each other based on price and quality of service.

So the ultimate price paid is just the sum of all the services needed to get it?

Right. And the price will lower as the network grows and faster connections come online.

How does Mojo Nation and Autonomous Zone Industries make money through this process?

As the bank, we earn a small percentage of Mojo-to-dollar transactions or dollar-to-Mojo transactions. We act as a market maker: There are some people who will end up with a surplus of Mojo -- they will contribute more than they download. There are lot of people who will end up with a deficit of Mojo. We will put the two parties together and basically let them buy and sell on our Mojo market, and we'll take a small percentage.

At the moment it's 2 percent. It's only for dollar-to-Mojo transactions. If you put $10 of Mojo into the system and keep using it and using it, you never pay the fee.

This particular software is also very adept at using IT resources. Look around an office at how many systems are left idle. So Autonomous Zone Industries -- the parent company -- will license the software, which will allow the company to perform internal online backups, to run their own intranet server off their own machines, to store the local documents they want and also go into the public market to buy and sell resources. It will be a B2B marketplace, and the consumer marketplace [of Mojo Nation] will only be a component of that.

What about the selling side of the equation: How does the content get onto the Mojo Nation network?

Users have to publish data to Mojo Nation. It's not a strict file-sharing service like Napster. In most file-sharing systems, the agent looks through your system and says, "What have I got, and whatever I've got, I'll make available."

The other alternative is a publication system, like Mojo Nation or Freenet. In these systems, you have to actively put data into the network. It isn't passively pulled in. Someone has to publish the file.

Autonomous Zone Industries is incorporated in the Caymans. Where does this fit into your legal plans?

We're not sure. We created this company for doing cryptography exporting [back in 1993]. Then they changed the rules on that and we were about to move back into the United States when the whole Napster case started. And we thought, Well, we'll keep this just in case. It's a useful artifact. In fact, for the first time in my life, I think I'm really glad that the U.S. had these onerous crypto laws. It's ironic and very bizarre.

But being in the Caymans -- it helps, but we're not relying on it for our legal defense.

Ultimately, you've got a lot of faith in human nature, particularly when augmented by financial incentives. What will you do if you're wrong and the world disappoints you?

There are weaknesses. Copyright, for example, is a problem that has a lot of different sides to it: technical, legal and social. We proposed tipping as a solution, and we have a technical solution to put that in place, and we'll require the participation of others to handle the legal stuff. And then socially, we need to teach people.

To be honest, though, we don't have all of the answers. In the long run I think it's going to work. If not, I'll go back to being a perpetual tourist. For me this is a really cool idea that's been eating away at the back of my mind for several years, and I've decided to finally do it. And I think that the time is right and it's going to take off. If not, it's always out there. The source is available and maybe it will be the seed; it will catch on eventually because it is the best way to use these resources.