I predict the market cap for all of the KIN tokens deployed during the next 5 years will exceed $100 Billion. This outcome may not have been the expected result of a "Dr. Evil-like" plan by Kik Interactive's CEO Ted Livingston but it will demonstrate to the world a genius-level method of customer acquisition and wealth-creation using a token-powered eco-system.
Before dismissing this prediction as hyperbole from a KIN fan boy or the pipe dream of a Kik founder, please read this entire post to understand why Kik is not only going to be worth that lofty valuation but it is also showing how other startups can use their same DAC -powered DAO technique to crystallize consensus, coordinate collaborations and change the world. In addition, you many want to read this supporting post on the why the author's next $100 billion prediction is credible.
KIN will have 8 trillion of its 10 trillion tokens deployed and fully tradeable during the next 20 quarters. These 8 trillion tokens will be worth more than $100 billion and this means that Kik Interactive's market cap will also grow in value to more than $100 billion. The reason for this linkage is that Kik will benefit from the deployment of over $40 billion of KIN Rewards that will go mostly to supporting of the Kik Messenger platform and related Kik-owned services. This $40 billion represents $20 per customer that can be used to reward KIN developers who help Kik get to 2 billion users using their services (i.e., on par with Facebook's 2 billion users which they monetize at a level justifying their current market cap is $500 billion).
The following chart shows one method of achieving the $100 billion valuation based on 24% year over year growth. However, due to the special dynamics of a DAC-based token system coupled with a set of blockchain-constrained maximum allocation rules, this price may actually be achieved earlier than the 20 quarters shown below.
The following chart shows the KIN's price per token growth over these same 20 quarters.
The following chart shows the effect of the timed-release of the tokens assigned to Kik Interactive and to the Kin Rewards Engine.
While these are just predictions which anyone could make, the rationale for them is provided below along with the history of the author's last prediction about a company being worth $100 billion 5 years prior to their IPO.
KIN's Lessons for The Little Red Hen
What if the Little Red Hen could have ensured that everyone helped her?
In the classic children's book, the Little Red Hen ends up mad because she had to plant her wheat, harvest her grain, grind her flour and bake her bread all by herself and then must deal with her neighbors' requests that she share with them her loaves of bread -- even though they all refused to help her when she needed them the most.
Imagine if instead of doing all the bread making work herself, the Little Red Hen had created 100 tokens that she could pass out to her helpers with the promise that they could later exchange the 1 token that each earned for 1 loaf of bread. In this case, she would have had "paid helpers" to share the workload and thereby avoided the need to do it all herself and created a fair allocation method for the wealth that she envisioned as the entrepreneur and that she and her team created.
This is an example of how a token-based currency can be used as a startup funding source and as the payoff mechanism for virtually any Dominant Assurance Contract or DAC (see the key paper on The Private Provision of Public Goods via Dominant Assurance Contracts here: https://mason.gmu.edu/~atabarro/PrivateProvision.pdf by Alex Tabarrok from 1996 that explains in academic terms how his DAC invention works).
The Beauty of DACs
In short, a DAC is an innovative method of influencing a group of people to act in their common interest or to earn a personal benefit that only comes into existence when a sufficiently large group acts together. What makes a DAC a dominant strategy is that it will work even when each prospective participant is highly skeptical that a sufficiently large group of fellow participants will ever commit to acting together.
A DAC improves on the familiar Groupon "deal tipping" concept (i.e., a plain old Assurance Contract) because with a DAC the Groupon-like deal not only tips (i.e., creates a "winning payoff" for all members) when a threshold number of participants sign up in the required time but also provides for a smaller but still valuable “failure payoff” to each participant who merely signs up even if the minimum participation threshold isn’t reached.
This guarantee of a “failure payoff” causes more folks to take the time to sign up (even if they believe the chance of the deal tipping is a long shot) because their act of signing up is compensated by the “failure payoff.” So, all that is needed to make almost any deal tip is that the group value the “failure payoff” enough to warrant their time in applying for the “winning payoff” and that there be someone who is credible enough to back the “failure payoff.” (NOTE: Tabarrok calls this person the “Entrepreneur” but I prefer to call this person the "Sponsor" because it may be that this funding partner is distinct from the Entrepreneur who is typically more focused on delivering the "winning payoff").
A side-benefit of the DAC structure is that if the deal tips the “failure payoff” is never paid. This is important because it allows the Sponsor to be generous in the creation and size of the "failure payoff." Using our Little Red Hen (LRH) example, the Sponsor might guarantee that 1 LRH token is worth either 1 entire loaf of bread if and when all the necessary workers sign up, do their parts and the planned-for outcome is achieved or 1 cracker to be selected from the Sponsor's cracker barrel if and when the LRH eco-system fails to create enough loaves to cover the total obligation represented by the issued LRH tokens.
How the Bitcoin Eco-system is a DAC
In essence, what Satoshi did with his Bitcoin white paper was to find a way of using a hypothetical virtual currency with a maximum allocation of tokens to create a DAC that would have both a “winning payoff” of 21 million issued tokens as part of a new global currency that increases in value based on Bitcoin’s adoption by more and more participants and a “failure payoff” that promised to reward the Bitcoin miners and fiat-currency traders with sufficient increases in ownership and currency value to put in place ready-made exit ramps for any of them that wanted to take all or a portion of their Bitcoin holdings and receive their “failure payoff” for leaving the Bitcoin eco-system early.
Like any form of money, the Bitcoin eco-system relies on the “collective acceptance” and “collective intentionality” of the participants. Thanks to Satoshi, Bitcoin has given the world a new “man on the moon” moment in that many new things now become possible because the Bitcoin global experiment has worked. Specifically, huge value can be created without the ongoing support of a competent, visible, human being actively driving the process forward (i.e., there is no CEO of Bitcoin who has to hire a team and manage a company).
To use a construction analogy, Satoshi was an architect who used his Bitcoin white paper to document his vision for a new type of skyscraper. The white paper also provided the rules for an eco-system of individuals whose collective acceptance of his vision of the completed skyscraper (and the future rents that it would generate) provided the ongoing funding mechanism necessary to reward the workers who choose to help build the skyscraper. While that may seem like an unlikely leap of faith on the workers' part, we are comforted by the fact that in the real world Bitcoin's market cap of over $87 billion has been built based on a similar belief in a shared vision by tens of thousands of individuals who chose to spend their money and time as miners to earn a future reward.
A New Model for the Growth, Engagement and Monetization of Startups
In a way, Satoshi’s Bitcoin-powered, Decentralized Autonomous Organization (DAO) is a new model for what any startup can now do. The first step is for the startup to envision an end-state that would be fairly easy to realize if they only had either $1 billion to implement their plan (or whatever amount of funds are sufficient to directly compensate an eco-system large enough to achieve the goals of the startup) or millions of users already actively supporting the startup's product. The key to this new approach is to first publish this vision in a white paper showing how the to-be-raised funds will be allocated to the participants who help the “little red hen” to plant her wheat, harvest her grain, grind her flour and bake her bread.
When a sufficient number of participants commit to help and/or actually help out they are given tokens that will deliver to them the “winning payoff” when the grand vision is realized. In the meantime, late arriving participants to the system are allowed to increase their number of tokens and therefore their relative stakes in the eco-system by using cash to buy tokens directly from current token holders. This provides early monetization opportunities as a type of “failure payoffs” to those who have already earned tokens but who don’t want to let their entire holdings ride until the ultimate determination of the “winning payoff” amount.
The genius of Satoshi’s model that wasn't demonstrated directly in the Bitcoin example is that the rewarded activities don’t have to be solely related to token infrastructure management (e.g., paying hardware miners for solving the math problems needed to update the blockchain). They can also be directed to reward activities that support the actual growth in the size and utility of the startup’s eco-system. The Kik.com launch of the KIN coin is a great example of this.How Kik’s KIN Eco-system is a Better DAC
Over the coming years, Kik.com will deploy 10 trillion KIN in the following manner:
(NOTE: this section is taken from here: https://steemit.com/ico/@cryptotraderclub/kin-ico-report )
Total supply of Kin: 10 Trillion units
10% allocation: 1 Trillion units will be sold in the Token Distribution Event (TDE) and be used to fund Kik operations and to deploy the Kin Foundation and to execute additional features development planned for the Kin to integrate into Kik. The company will sell 1 trillion Kin tokens for $125 million through the TDE. Of that amount, $50 million has already been sold in a pre-sale, which received a 30% discount, comprising 488 billion Kin tokens (investors included Blockchain Capital, Pantera Capital, and Polychain Capital). The rest will be sold for $75 million during the TDE, comprising 512 billion Kin tokens.
30% allocation: 3 Trillion Kin will be allocated to Kik as the founding member of the Kin Foundation. In exchange, Kik will provide start-up resources, technology, and a covenant to integrate with the Kin cryptocurrency and brand. They will be unlocked and distributed to Kik at 10 percent per quarter, for 10 quarters.
60% allocation: 6 Trillion Kin will be under the purview of the Kin Foundation, locked under the Kin Rewards Engine scheme and will be used for the growth of the Kin Ecosystem and fund the operations of the foundation.
– administration of the Kin token supply and Kin Rewards Engine – 57%
– marketing – 1.5%
– operational costs – 1.5%
The 57% allocated to the Kin Rewards Engine will be introduced into circulation as periodic rewards. Every year, 20 percent of the remaining rewards allocation will be issued as periodic incentive payments, diminishing over time as the currency gains overall value.
Kik == $100 Billion Company Prediction
Given the fact that KIN is being dropped into an eco-system of hundreds of millions of Kik messenger clients, my belief is that Kik will become the next $100 billion company based on the strength of KIN and that KIN will have at least a 10x growth from their TDE price. If one doesn’t participate in the KIN TDE or buy KIN with cash shortly thereafter, the smart play is to start doing things to grow the Kik platform and earn your share of each day’s worth of KIN allocation.
Ted Livingston is the genius CEO of Kik who, along with his advisor William Mougayar, explains here how this will work:
What interests me most about this model is how the Kik Messenger app becomes the beneficiary of an army of participants in the KIN eco-system with no dilution from either the KIN token distribution event or the Kik-friendly token distribution system. This represents a very entrepreneur-friendly method (i.e., 0% dilution) of funding any startup that requires a large number of financially-motivated participants (i.e., the people we used to call employees, contractors vendors and sometimes even customers) with a cash alternative that comes from these early participants’ belief in the future value of the currency.
Something similar could have been created in a traditional Silicon Valley startup but all the employees would need to receive only options in the company (i.e., no cash salaries) and they would have to wait for their “winning payoffs” to occur via an IPO. In addition, there would need to be something like a pre-IPO, secondary-market in this startup's options that would allow the employees to cash out a little bit of their equity along the way to pay their bills. Although the SEC won’t allow such an option-only, compensation approach for US-based startups, Satoshi and Livingston have found a way around this.
Kudos to them and kudos to those of us who find a way to apply token-powered DACs to our attempts to crystallize consensus, coordinate collaborations and change the world.
(c) 2017 Altura Ventures Inc.