One of my most surprising discoveries upon diving into the world of cryptocurrency development was the bounty system. Here was a system that let anyone contribute their time and skills to a project in exchange for an airdrop of said projects' tokens.
It's an interesting proposition. On the one hand, it enables people with twitter followers, writing (or other) skills - some projects even offer bounties for whitepaper writing (?!) - with retribution for their work in the form of early participation in coin/token holding. On the other, it is clearly a ploy to recruit others to pump their crypto project.
Probably the most famous place to look is the Bitcoin forum bounties list. An old school web 1.0 bulletin board where anyone can post their project.
So influencers of all kinds (mostly those without the cash to invest) began to scour these posts, follow the projects on social media, post, create youtube videos, host AMAs - you name it to get these projects out there, and in turn grow their coin reserves.
Most recently, a high profile crypto project called Bounty0x launched their own ICO and their own coin to promote and manage bounties. This project had a huge following, and the coin, available for $0.15 at the ICO, is now worth about $0.82. And they got so much traction why? Because, no doubt, they paid bounties.
Am I the only one that sees this whole thing as a giant unregulated pumping scheme?
No.
The SEC has raised some concerns (specifically regarding bonuses offered for bounties) in the Centra ICO case citing the Howey Test, which really just says no pumping and dumping. But that's about it.
So, maybe I am the only one. But I shouldn't be.
Here's why I think they are bad:
- Creates an artificial sense of community when there is none through Telegram numbers, social media followers, posts, youtube and dtube videos, etc.
- Gives incentives to "free" token receivers to sell when the token is available at market
- There is no way to tell whether hype surrounding an ICO is an active, market-ready community or a well-incentivized group of bounty hunters
- Incents this group to pump any news, increasing crypto volatility
- No differentiation between someone who is genuinely promoting a project and someone who is posting for a reward
- I have no problem with incentivizing and mobilizing a community - this is just good marketing - but I think there needs to be some rules. And if we don't impose them internally, someone will.
The way we overcome this is really quite simple. Full disclosure.
- ICO projects should require their bounty hunters to somehow identify themselves when they are posting or doing an action for bounties.
- Bounty hunters should voluntarily disclose when they are posting or doing an action for bounty.
- Bounty programs should be disclosed during the token sale, so that anyone interested can clearly see what kinds of bounties are being levied and for what.
- If we do these simple things, I think it will go a long way to increase the legitimacy and stability of ICOs and token markets.
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