Dapps, Crowdsales, and App Coins done right

William Mougayar

Best Practices in Transparency and Reporting for Cryptocurrency Crowdsales

*Mougayar recently wrote an article on the frail bitcoin startup ecosystem. This prompted a response from Fred Wilson in which he references Perez's innovation framework of surges and crashes. In this 3rd post in the series Mougayar clarifies his position and provides particular insight into the world of Dapps (distributed applications) and the modern crowdsale.

Assembly is currently, I think, headed in the right direction for pioneering the practical future of Dapps/DAOs. The system works by assigning valuations in App Coins (essentially equity) to particular tasks for the public to accomplish (i.e. designing the logo, building the backend, etc). I think there's a pretty huge legal grey area here that will likely need to be addressed at some point. For now, go check it out, it's REALLY cool, and there are lots of products that could use some assistance. 

(original post on Mougayar's blog)

Key Points:

• DAO's would probably be considered companies under today's law, even if they don't fit the definition perfectly.
• Before Funding: White papers are cool, but they tend to be weak on implementation details. To gain credibility organizers need to:
• communicate implementation details to the community
• outline credentials and experience of the founders
• essentially: build a public pitch deck
• During Funding: This is the mechanics of the crowdsale itself. Here we address the issuing of tokens, wallets, shares, etc.
• An independent foundation, not the founders, should handle funds.
• Be transparent. Natural virality is best. Be transparent.
• Development: The scary stage when the company goes dark for a year and builds the product they claimed they would.
• Issue monthly transparent reports that include everything.
• Blog posts are good if they have substance
• Link between token and value of Dapp needs to be very clear
• begin thinking about system partners
• Market Entry: In spite of the name, you're not going to be autonomous yet.
• Development should have prepped you to some extent for this stage, but you'll still need to be involved in a guiding role at least.
• You need profits for this to work

Mougayar's Conclusion: This blog post is primarily directed at those individuals currently involved in crowdsales, premines, and the like. You need to be careful and aware of the impact your actions have on confidence in the market and in the broader economy. What you're doing is essentially making yourself a public company from day one, and that's no easy task.

Takeaway: While this post is directed at those already involved in the system of crypto-crowdsales, it should serve as a lesson to all entrepreneurs. We need to be as open as possible with all those involved in our endeavor. Whenever someone invests something in your venture, be it time, money, code, whatever, you are obliged to provide them with an open look into your stewardship of their resources. As a startup, be open with your investors. As a premine or crowdsale project, provide clear progress reports to your backers. As a public company (essentially what these crowdfunded projects are), be open with everyone. Be honest, be humble, work hard.