During the past few weeks a lot of my energy was focused on analyzing our legal, funding, and governance approach, and turning it into a workable plan. At the end of all this it seems to me that the crypto-community and its ecosystems continue to have debates about non-value adding aspects. 

The Tail Wagging the Dog

I hear people at conferences say “watch every word you say” so that the SEC does not come after you. There are suggestions about how to communicate, and what to do so that a token can be seen as a utility token, safe from SEC interference. Crypto-ventures try to optimize tax structures and get around legal and tax requirements when raising money through ICOs. These debates happen with all the glory of legal vagueness. 

The continuing debates between “coins are securities” vs. “coins are utility tokens” sap the focus from building relevant solutions with wide acceptance. Instead they start “number games” that only few may survive – because they start not with products but with pitches to raise money. The overarching question becomes “how can I jump on the bandwagon of raising as much money as possible, preferably without a threat to go to jail.” 

But there is something profoundly off with this approach. The purpose of an enterprise cannot first be about legal aspects, and not even about raising money. Instead, efforts and messaging need to be focused on customers and markets, however defined. They have to be about the product and solution first, and the money will come. This is not a blue-eyed view at the world. It just means that our project milestones cannot be expressed as funding milestones, which may lead to a wrong sense of achievement. Whether bubble or not, raising money seems to be easy. What to do then is a bigger challenge. 

We need to stick to our roots: We are about bottom-up solutions and distributed solutions. Our project milestones cannot be driven by funding exercises.  

I was very pleased with a meeting set up by James with Dave, a lawyer here in Boise. I found his common sense thinking in these matters refreshing. This was and is particularly helpful since he is NOT part of the crypto-echo chamber. 

This all adds to my conclusion that even a supposedly ‘safe’ SAFT-approach (as in Simple Agreement for Future Tokens) would suck a lot of energy out of our core team. 

The question then is what is a realistic approach? How else can we collect early-stage funding? Doesn’t it require the setting up of some sort of legal entity, whether a corporation or a foundation? The short answer to this question is “no.” We can set up a smart-contract based “Distributed Autonomous Foundation” (DAF) and with that follow a profoundly more “crypto” approach that puts critical infrastructure components first: solution, community, and governance.  

We have two options.

Option A 

Following a more typical industry approach would be to establish a Foundation to protect us for a formal 5-step process:

(1) Get informal funding commitments through a letter of intent, from select investors, 

(2) Collect early-stage money through a SAFT agreement, 

(3) Establish a smart contract that creates a DAF, 

(4) Issue a smart contract-governed Genesis Block of coins, and complete the POC, and 

(5) Have a formal Crowd-funding event (e.g. an ICO). 

This would let us collect money from early stage investors, and later from the public, and protect us throughout this process using what seems to be a legally sound approach.

Option B

Alternatively, we can FIRST establish a Smart Contract that includes the establishment of a DAF and the issuance of the Genesis Block, and THEN just build the community and finalize the code. We would not need to spend time, money and energy on legalities and investors. We would just build Healid. Then we can donate ever-more-valuable coins from the DAF to community members (so the exact opposite direction), and in effect never have legal investor obligations.

(A) arguably is easier in the beginning, (B) lets us focus on the real task of achieving the mission and increasing the value of shares on the way.

Am I just a contrarian, or does B sound so much more appealing?!