Blockchain

Attention-Based Economics on Blockchain: Taking a Closer Look at a Startup That Raised $35 Mn in 30 Seconds

MEDICIGlobal Head of Content

“. . . 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

brave browser

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.

Attention-Based Economics on Blockchain: Taking a Closer Look at a Startup That Raised $35 Mn in 30 Seconds

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:

  • Users: with strong privacy and security when viewing advertisements, improved relevance and performance, and a share of tokens
  • Publishers: with improved revenue, better reporting, and less fraud
  • Advertisers: with less expensive customer attention, less fraud, and better attribution

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.

A redefined monetization model powered by cryptocurrency

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.

Attention-Based Economics on Blockchain: Taking a Closer Look at a Startup That Raised $35 Mn in 30 Seconds

Source: Brave

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.

Moving from ‘electronic pollution’ to attention-based economics on blockchain

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?

  • The problem with existing business model in the publishing business

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.

  • The new model (Basic Attention Metric, or BAM)

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 monetization model for publishers

Attention-Based Economics on Blockchain: Taking a Closer Look at a Startup That Raised $35 Mn in 30 Seconds

Source: Brave

The new monetization model for publishers with the Brave browser:

  • User’s monthly contribution is split among the visited sites.
  • The Brave browser calculates the percentages based on a combination of how many pages the user visited and how much time was spent on each site.
  • If there is a publisher that the user visited but wouldn’t like to pay to, each entry has an “include” switch. The user can turn the switch off to exclude a particular website from receiving a portion of the monthly contribution. This setting is remembered by the browser.

Attention-Based Economics on Blockchain: Taking a Closer Look at a Startup That Raised $35 Mn in 30 Seconds

Source: Brave

  • The contributions for each user – upon reconciliation – is sent to a bitcoin escrow wallet which is managed by Brave Software, Inc. When contributions for an individual publisher are equal to about $100.00 USD (in BTC), an email is sent to both the webmaster of the site and the registered domain owner, and the verification process begins.
  • Verification of a bitcoin wallet with Brave Software is a lot like verifying a domain name: Brave Software generates an unpredictable token and the publisher uses that token and their bitcoin address to construct a TXT record in the DNS that Brave Software verifies.
  • Security

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).”

  • How will Brave Software use BTC?

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.

A possible loophole

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’.

  • The model behind Brave can be used for illegal transactions between two organizations/individuals, where one entity funds the wallets of a pool of hired readers (like a click-farm).
  • Those readers then visit random websites out of which only one is a required destination (the recipient's website).
  • At the end of the month, when the transaction is supposed to happen, hired readers remove all other random websites from the list of the publishers their contribution will go to (or to make it even less obvious – the sender can allow a certain level of ‘leakage’ to any other random publishers), and leave only the intended recipients website (the website can be just a media outlet supported by any organization as a cover).

While Brave doesn't allow outflow of BTC from the browser’s wallet at the moment, possession of BTCs itself is of value.

Elena Mesropyan

MEDICIGlobal Head of Content

Global Head of Content, MEDICI

Elena is a research professional with a background in social sciences and extensive experience in consumer behavior studies and marketing analytics. She is passionate about technologies enabling financial inclusion for underprivileged and vulnerable groups of the population around the world.