The world of financing is changing and with it the employment structures, which are shaping to new methods that would seem no less than bizarre just a couple of years ago. That poses the question: how do we adapt?

The Initial Crypto Offering (ICO) financing for blockchain projects is a new kind of beast challenging entrepreneurs and workers (not to mention the investors, but on that in a different post) to come up with new compensation schemes that defy the “old world” employment methodologies, and we need to adapt.

The Entrepreneur

Entrepreneurs are flocking to the new kickstarter-esque method of collecting funds to build their dream products and services — The ICO term has only recently joined our collective vocabulary but it’s been used by the crypto community for the past decade with Satoshi Nakamoto himself exploring the idea earlier this decade when he funded the bounty to create Namecoin.

Since then the concept of bounties has spread throughout the cryptocurrency ecosystem and nowadays is the main method to engage communities across the world to build brand and product recognition, and sometimes to QA and debug early crypto projects along with classical development.

Bounties are simpler than the ICO in that they are straightforward and provide value immediately as they are executed to both the bounty poster and the bounty collector.

ICOs are the evolution of these bounties combined with the kickstarter economy that allows entrepreneurs promise a future product or service and request funding from the general populace in exchange for cryptotokens or altcoins.

These tokens are promised to developers, designers, bounty hunters, and other service providers usually at a significant discount/bonus since these token are not immediately convertible to usable cash and the receiver must wait until the ICO has ended and sometimes even longer than that until the token is tradable on crypto exchanges.

These tokens are “Future-Money” — they allow the entrepreneur to expend money he doesn’t have yet and receive development, marketing, or legal services that otherwise would have been out of reach for the entrepreneur due to their costs.

The tokens are a tool for the entrepreneur to receive work for free before the ICO is complete sharing the risk with the service providers — both the entrepreneur and the developer are sharing the risk of being paid in future money and in most cases this can lead to issues if not structured correctly before hand.

The Developer

While the entrepreneur is searching for quality work to bring his ideas to life, the developer (referring to any and all service providers that might participate) is searching to make a living in the first place, and to enjoy the crypto offerings boom along with the entrepreneur.

The two are entering a symbiotic relationship — if the entrepreneur promises to build something the developer has interest in or believes can become a financial success they become interdependent on each-other.

The developer understands that his work will directly impact the success of the ICO and wants to be compensated accordingly. The result of which is that since early 2016 to late 2017 the pricing of ICO related services have skyrocketed 10x with service providers such as auditing, whitepaper writing, blockchain development, marketing, and application development.

The above is only true for established service providers in the ecosystem, leaving the entrepreneur with little cash in hand to actually pay for developers to build a product apart from the ICO related work he’s expected to deliver, and the newcomers to the scene are left with promises of future-money tokens much like the early days of startups where devs would be promised a portion of the company stock or options in exchange for reduced initial cost.

Personally I’ve always had an issue with stock and options since they would first and foremost be vested for sometimes prolonged periods of time and by the time they ripen to be sold by the prospective developer they might not be worth much and dev essentially invested in the startup at a far worse conditions than the average investor.

The Risk

Both sides are at a risk of working hard for potentially low-or-no pay, and both sides need to be fully aware of the risks involved and take the necessary precautions to make sure that their risk is mitigated and wouldn’t be financially devastating in case of a failed project.

On the surface we see that not much has changed from the startups of the old to the crypto startups of the new; entrepreneurs dream and promise, the devs buy into the dream and promises and hop on the bandwagon — the sooner they join, the better they’re off at the end of the ICO process.

Proposed here is a new way of entering a financial relationship between the two to allow the entrepreneur enjoy high quality services while compensating the developer appropriately by simply giving some thought to the proper mix of present- and future-money promised by the entrepreneur to the developer.

Depending on the financial situation of both parties and the risk that the developer is able to take the mix should provide the developer with a reduced present-money that will allow him to sustain his lifestyle while enjoying a potentially successful ICO future-money that calculates in the risk factor as a bonus.

For the sake of conversation let’s assume that the developer is charging on a normal day 1btc per week of work, and the entrepreneur is reluctant to pay the fee at his early stage and would prefer to pay a portion in present-money and another portion in future-money.

Since the risk is mostly on the developer, he has to make sure that in case that the ICO does goes through successfully he’s compensated not just on his regular day fee, but also factoring in the risk.

The proposed risk to bonus scheme is simple: the developer can provide a discount on the present-money portion of any percentage of the original sum, lets assume 50%, and requesting future-money compensation with a bonus, lets say 100%.

Essentially this gives the entrepreneur 50% discount on the cost of the dev right now, but the dev will be compensated 50% above his regular market price when receiving future-money tokens.

So in our case the dev would receive 0.5btc in cash, and would be promised addition 0.5btc in tokens with an additional 100% bonus making it a total of 1btc worth of future-money, and a grand total of 1.5btc if everything goes well, 50% extra on his regular fee.

In other cases the developer might be reluctant to give such a big discount to the entrepreneur in which case the discount on these terms will always equal the bonus he receives. So with a discount of 20% and a 100% bonus the developer is risking less but will receive a smaller bonus of only 20% on his risk.

In different cases the developer might be interested in risking more as a result of a promising project and team, and would be willing to give an upfront discount of 80%, but compensated according with future money.

Mix and Match

The above formula is just one of many the dev and the entrepreneur can agree on, in other cases the risk factor might be far greater and the dev wouldn’t be willing to give a large discount and would prefer a small discount and a large bonus.

Let’s assume a dev is prospecting a project that looks promising but he fears that the entrepreneur might not execute properly and the risk factor grows. In this case the dev might give a discount of 40% along with a 200% bonus which will yield 0.6btc in present-money and a potential 1.2btc of future-money, making even very risky endeavors potentially worth while for both parties.

In other cases the risk factor might be much smaller for such big bonuses, and this formula can account for that with a small discount and a small bonus — in cases where there is already a product available or proven track record for the entrepreneur.

Conclusion

The world is changing, the financial landscape is changing, and the way we do and receive work is changing. We need to adapt on all ends and learn how to maximize our capabilities and return investment regardless if the investment is cold hard cash or precious hours of work.

ICO, tokens, and future-money provides both parties with a new way to interact financially and build a better economy that both sides can benefit from provided it is done correctly and with all the necessary precautions in place.

While as a society we’re currently debating the correct way to do ICOs in regards to the proper checks and balances the entrepreneurs and investors should consider before engaging with one another, the professionals are left to fend for themselves with little-to-no discussion and written material as to how such a relationship should function.

I hope this text will serve as a starting point for the discussion and will cultivate a better standard to service-provider to service-consumer relationships and expectations.

For questions and inquiries feel free to contact me on Facebook, Twitter, or email (via eli dot sklar gmail).