Traditionally you have a separation of capital and labor in business. In simple terms, this means that you get investment money from people that don’t work for you. For example you get a loan from the bank, the bank doesn’t work for you. They don’t help you manage the business or provide any service for you, all they do is loan you money.
Same situation with an initial public offering or crowdsale, the investor put up money to get something in return, most likely equity in the company or maybe a physical watch in the case of a crowdsale…but the key thing is never there a situation where I investment money and then I come work for you, unpaid. Ultimately under the guise of protecting my investment.
So basically I’m paying to work for you for free. In fact it’s even more fun when you look at Counterparty. They have no investment money, no capital to build the business…read on.
You are investing money that is to be 100% destroyed forever and this is creating enough of a psychological incentive to then work on a project so your money wasn’t burnt in vain. Vanity, is that what real incentive comes down to? The principle of burning money to create a bonding asset is very powerful, but can it last? Can the burners truly support all the functional roles a company needs to get real software development done? I doubt it, software development is way beyond writing code and thinking outside the box. You need project managers, milestones and other organizational structures and techniques to be able to safely control and release your code to the public being fully tested and production ready.
How Counterparty Succeeds
They have to find revenue streams immediately or else they won’t be able to pay for the basic infrastructure needed to run a decentralized company. Basic infrastructure is going to be a few full time people to manage daily activities like managing development check point meetings, testing results, new feature requirements, etc…the list goes on as far as how the software development cycle needs attention the whole time. This doesn’t even begin to mention the need for a full time security/hacker to be pounding away at everything public to holes and exploits
Also, more traditional hard costs like hosting and advertising need to be addressed. Even a service like fiverr.com won’t pay for itself and so you need an active budget to get the word out and perform modern advertising.
Overall the challenges of the ‘burn money’ model are huge, as you don’t have the capital to hire labor and so you’re relying on getting an absolute perfect mix of investors who are able and willing to work for nothing to create a company. The odds of this perfect mix of people willing and able to work for each-other is impossible, or is it? Is the incentive of looking like an idiot strong enough for someone to motivate them to make it work. Is there a whole other thing that XCP has created that is working? Time will tell, but without investment money it’s way hard to get the labor you need to complete the simple block and tackle stuff.