June 7, 2017
. . . in an information-rich world, the wealth of information means a dearth of something else: a scarcity of whatever it is that information consumes. What information consumes is rather obvious: it consumes the attention of its recipients. Hence, a wealth of information creates a poverty of attention and a need to allocate that attention efficiently among the overabundance of information sources that might consume it. – Herbert Simon, 1971
Chances are, you've already heard of a new browser company Brave Software founded by former Mozilla CEO Brendan Eich, which raised $35 million from its ICO — and it did it in less than 30 seconds. For its ICO sale, Brave Software created its own coin — The Basic Attention Token (BAT) – and sold one billion of them. That collection of BAT cost 156,250 ETH, which is just over $35 million. A further 500 million BAT is stored for user growth and BAT development.
According to Coinbase, only ~130 people were able to buy the BAT tokens, with five buyers scooping up about half of the supply. The top 20 addresses in the token sale control more than two-thirds of all BAT, according to Joseph Lee, Founder of Magnr bitcoin exchange, who conducted a post-sale analysis.
The BAT, a token based on the Ethereum technology, can be used to obtain a variety of advertising and attention-based services on the Brave platform – a blockchain-based digital advertising system. User attention is privately monitored in the Brave browser and publishers are rewarded accordingly with BATs. Users also get a share of BATs for participating.
As the company explained in its whitepaper, The BAT system provides:
With that in mind, let's take a closer look at three refreshingly interesting things about Brave – the monetization model, the business model, and possible loophole for abuse.
Brave has an embedded payments service – Brave Payments (currently in beta) – a bitcoin-based micropayments system that can automatically and privately pay user’s favorite websites. Brave users can reward the sites whose content they value and wish to support while remaining untracked by anyone, including Brave Software, Inc.
Brave is partnering with BitGo and Coinbase to provide wallets and purchasing tools for the Brave Ledger, and will also allow users and publishers to opt into a better, privacy-preserving ad model that shares revenue with users as well as publishers.
Users can add their funds to a freely provided bitcoin wallet (from BitGo) in which users can deposit money from any other bitcoin wallet. For those who don't have a bitcoin wallet, Brave’s partnership with Coinbase allows them to add money directly from credit or debit card at the five-dollars-per month level. A wallet is created automatically when users enable Brave Payments in the 'Payments Preference' panel in the browser.
Brave explains that the ownership of BAT carries no rights other than the right to use BAT as a means to obtain services on the Brave platform and to enable usage of and interaction with the Brave platform.
Users can turn the Brave Payments system on or off at any time, and change the contribution amount at any time via the monthly budget menu. Out of the contributions flow, Brave takes a 5% cut, which is used to cover Braves Software’s infrastructure costs to allow the company to offer Brave Payments to users of the always-free Brave browser.
There is one ultimate value that digital businesses seek – a consumer’s attention. In the publishing business, the reader’s attention and time are what makes it worth the effort. In exchange for valuable information that a publisher provides, the reader spares his/her own resource – attention. Although it seems like a simple exchange of ‘goods,’ the reality is much more complex as publishers operate a business and need to turn earned attention into revenue. So, how does Brave redefine this model?
As Brave laid out in its white paper published in May, at present, the publisher is paid by monetizing attention via a complex network of intermediary players through ad networks and other such tools. The publisher isn’t paid directly for the attention given by the user. The publisher is actually paid for the indirectly measured attention given by users to ads.
While publishers are used to working with this model for print ads, the web ads remain problematic for many of the reasons stated above. Users are subjected to the negative externalities that come with the present advertising ecosystem, such as ‘electronic pollution’ consisting of threats to security, threats to privacy, costs in inefficient download times, financial costs in extra mobile data fees, and in the case of the many ads, excessive costs to their attention. As a result of electronic pollution, the sought-after resource – attention – is getting rapidly exhausted, with readers learning to ignore the ads or simply, use ad-blockers.
In fact, Brave’s research suggests that mobile advertising results in as much as $23 per month in data charges on the average user’s data plan, slow page loads, and as much as 21% less battery life. In response, over 600 million mobile devices and desktops (globally) employ ad-blocking software – and this number is growing.
Brave offers a solution to, as it calls, a broken digital advertising – a decentralized, transparent digital ad exchange based on blockchain.
The Brave browser is the first component – it's an open source, privacy-focused browser that blocks third-party ads and trackers, and builds in a ledger system that measures user attention to reward publishers accordingly.
With its currency equivalent – BAT (Basic Attention Token), a token for a decentralized ad exchange – it compensates the browser user for attention while protecting privacy. BAT connects advertisers, publishers, and users and is denominated by relevant user attention, while removing social and economic costs associated with existing ad networks, e.g., fraud, privacy violations, and malvertising.
As the company explains, BAT is a payment system that rewards and protects the user while giving better conversion to advertisers and higher yield to publishers. The company sees BAT and associated technologies as a future part of web standards, solving the important problem of monetizing publisher content while protecting user privacy.
The new monetization model for publishers with the Brave browser:
All of the analysis by Brave is done without disclosing user’s identity, over the network via the Anonize protocol and on-device via statistical voting, so that neither Brave Software, Inc., nor any other entity can correlate browsing page views with payments.
In the whole process, Brave servers never have custody of the funds in users’ wallets because the company does not have any key to any user’s multi-signature wallet. Therefore it is not possible for theft of funds from user wallets to happen via attacks against Brave’s servers.
Brave Software emphasizes that the browser does not know which bitcoin wallet is associated with the lists of sites that users choose to support. In other words – you, the user, have access to your browsing report but Brave (the company) does not have that information. Brave Payments is more than an anonymization service. It is also the system that does payment reconciliation (makes sure that payments are processed correctly and securely).
While Brave Software is still developing the system, now entirely in the open source on github.com, the company states that it will use BTC only for permissionless payment delivery to user and publisher wallets that it will create using BitGo’s APIs.
The company hopes to keep funds in BTC only in monthly payment buffers, to reduce effects of volatility, and intends to let expert users to ‘bring their own BTC’ to self-fund their wallets and auto-micropay for as much of their browsing as they like.
Couldn't help but notice a probably unlikely to be used, but a possible, loophole Brave could open for those with malicious intent – the opportunity to send money from one entity to another ‘under the table’.
While Brave doesn't allow outflow of BTC from the browser’s wallet at the moment, possession of BTCs itself is of value.