What Are Bounty Methods?
Bounty programs are incentives introduced to an array of individuals for various movements associated with an initial coin offering (ICO). An initial coin offering (ICO) is the cryptocurrency industry’s style of an initial public offering (IPO). A company looking to raise money to create a brand spanking new coin, software, or virtual international cash supplier launches an ICO with the intention to carry price range. A bounty program doles out rewards or tokens for individuals completing specified tasks that help promote it the ICO.
Bounty programs have their origins throughout the digital video gaming world. Slightly a large number of forms of perks are from time to time introduced to avid players who help with game construction—specifically those that identify bugs throughout the game.
Key Takeaways
- Bounty programs are used by crypto-coin developers to incentivize actions previous than the initial coin offering (ICO) by means of developers and marketers.
- After an ICO, bounty programs could also be used to get feedback on the challenge’s code from external developers or to reward promoting the coin in media channels.
- Bounty programs carry out in a legal gray area between promoting and pyramid-scheme-style fraud. The SEC has used ICO bounty programs as proof of legal wrongdoing.
Working out Bounty Methods (ICOs)
Bounty program individuals are spread all the way through various ranges of an ICO, ranging from patrons to ICO promoters and developers. The incentives can take the kind of cash rewards (even if this is unusual) or loose (or discounted) tokens that can be cashed in later when the tokens are listed on an industry.
The collapse of the ICO market in late 2018 and 2019 dramatically lowered the number of vigorous bounty programs. Additionally, bounty programs which may also be excited about promoting were used during the heyday of the cryptocurrency bubble to promote it fraud, which must make crypto-coin developers wary of using them.
Widely, an ICO consists of two ranges: pre-ICO and post-ICO.
Pre-ICO
Inside the first level, which is ceaselessly known as the pre-ICO, the offering is marketed to doable patrons and other folks ready to do tasks to make the ICO further a success. Pc programmers, social media influencers, blog writers, marketers, and other occasions artwork to create awareness regarding the challenge and the upcoming ICO. In this level, bounty programs most often focal point their property on social media platforms.
Developers download a sizeable chunk of tokens as value for their participation in coding the challenge. The ones tokens can be redeemed for fiat international cash when the tokens are listed on an industry. For example, Ethereum and Zcash every had substantial bounty campaigns in place for developers who helped organize the blockchain.
Social media influencers and blog writers make films, write articles, or spread the word regarding the ICO on widespread platforms. They get paid in keeping with their content material subject material’s engagement with the objective target market. Bitcointalk Signature Bounty marketers are people of bitcointalk, a popular discussion dialogue board for crypto enthusiasts.
Publish-ICO
After the ICO, bounty programs can be used to incentivize developers to go looking out bugs or give feedback on other design portions. Coders who check out and uncover flaws throughout the blockchain are given a kind of reward that is specifically known as a computer virus bounty.
The focus after an ICO shifts to fine-tuning the introduced blockchain. So bounty rewards may also be introduced to translators, who help ensure a world succeed in for the blockchain by means of translating forms associated with construction and promoting.
Criticism of Bounty Methods
Inside the wake of the bursting of the Bitcoin bubble in 2018, some ICO bounty programs began to be scrutinized for their similarity to pump-and-dump schemes in over-the-counter (OTC) stock markets. Many corporations use bounty programs on account of they need to capitalize on the selection to outsource promoting to commonplace other folks, thereby taking advantage of an fairly priced and atmosphere pleasant option to spread the word about their ICO.
Critics claim that pretending to be a disinterested birthday celebration, while promoting the cost of an investment of any sort (and being secretly paid for that promotion) is unethical, even though it is not illegal.
In 2018, after investigating a fraudulent ICO, Robert A. Cohen, Chief of the Protection and Change Rate’s Cyber Unit, issued a warning to patrons and conceivable fraudsters: “Patrons must be alert to the risk of old-school frauds, like oil and gasoline schemes, masquerading as leading edge blockchain-based ICOs.”
The SEC’s investigation found out that David T. Laurance and Tomahawk Exploration LLC attempted to raise money to fund oil exploration and drilling in California all the way through the sale of a digital international cash known as “Tomahawkcoins.” Although the ICO didn’t carry any money, Tomahawk issued tokens in industry for promotional services and products via a bounty program.
