Nov 182013


Crypto-equity, instead of just plain crypto-currency, might be the future of Bitcoin-like projects including alt-coins. So what is crypto-equity and has it been tried yet?

Crypto-equity was first successfully tried and implemented by Invictus Innovations (correct me if there are earlier instances) by launching ProtoShares, which is crypto-equity for several other projects in the pipeline, most notably BitShares. ProtoShares has been a pretty successful launch, even though it’s just been 2 weeks. In this short time-span, the market cap of ProtoShares has risen to be greater than Peercoin, which has been around for a much longer time. Why is it? Because ProtoShares is more than an alt-coin, it is crypto-equity.

What is Crypto-Equity?

Crypto-equity looks like a regular crypto-currency in that it has a blockchain, proof-of-work and other elements. However, it differs in one fundamental respect: there is a promise to fork crypto-equity into a future product by the development team. This means anything this dev-team makes in the future, you’ll get an automatic share in it if you hold crypto-equity. This is a pretty neat concept and has several advantages such as –

  • Show People the Team is Serious: There is no pre-mine or other incentive for the development team. All they have is crypto-equity. For it to have value in the future, the team needs to be committed to their idea. The team mines crypto-equity just like everyone else. However, they will likely be more invested in this and spend more on hardware because they believe in their ideas.
  • Good Compensation for the Development Team: Pre-mining is frowned upon on the community and with good reason. Through crypto-equity, the dev team is on the same level playing field as everyone else in the world. However, it is likely that they will invest more in mining because of higher stakes. When future ideas of this dev-team take off, they get a higher compensation through a stake in everything they create, since they hold a higher percentage of crypto-equity.
  • Investing in Ideas: Crypto-equity allows you to invest in ideas before they become reality and before they are fully implemented.
  • You can Own Many Things: The team can create several new products and you get a share in each one of them through crypto-equity. Thus the crypto-equity continues to have value as long as new products are being created.
  • A Ready Community: In addition, anyone else holding the same crypto-equity could fork it to create a new product, so as to leverage an already enthusiastic population of people. When you launch, you have a core group that has invested in crypto-equity and they will automatically be invested in your idea as well. This makes it easier to raise a community around your new products.

In the case of Invictus and ProtoShares, the holder of ProtoShares automatically gets ownership in BitShares, DomainShares, and other products to be released by Invictus. If you have a good idea, you might want to buy some ProtoShares yourself and fork your product off of it, because you give the already formed community an investment in your idea, thus increasing the chances of its success.

Crypto-equity is a great way to build a new product in this space, and I think it will catch on with more and more teams adopting the idea.

Photo Credit: Kevin Trotman

  One Response to “Crypto-Equity: The Future of New Bitcoin-like Projects?”

  1. There is actually a great working solution for this, it’s called Counterparty XCP.

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