This ICO ended on November 7th and raised 5881.34 BTC, equivalent to $4,126,290.77 at time of sale end.
The project in a nutshell (and S+C’s rapid reaction):
Decent aims to be a content-distribution network in which authors can upload digital content into a torrent file-sharing network and control how it gets accessed. Participants can remain anonymous, and a reputation system should help sort content and combat spam. The sale involves DCT, which will be the main currency on the network.
They’ve done their homework for content distribution, and the wealth of materials available would support the interested reader. Read more below.
Here are some questions that came to mind following our review [note: edited on September 14th, after an interview with Decent, to be published soon]
- Copyright infringement will remain an issue with all file-sharing content-distribution networks, particularly if anonymity will remain important for the network.  Decent has clarified (interview forthcoming) that copyright will be handled in the short-term by a layer on top of the Decent core software, and that in the future, they will try to implement DRM into the core itself. Further details on this would be helpful.
- Decent has stated that there will be gateways for fiat payments, but that payment protocols will always involve DCT. One risk of coins that exist primarily as a means of payment is that accepting other currencies “over the top” would render the underlying currency largely superfluous.  However, Decent intends that even fiat payment mechanisms (such as the recently announced partnership with Anoon) will still involve DCT on the backend, in theory supporting its value as the network grows.
- More clarification on the economics of file storage would be helpful. We’ve done a deep dive (see below), but there are some uncertainties, such as the inflation schedule for DCT. Decent says it will be releasing updated information about the compensation for nodes soon.
- They are framing the sale as a ‘software sale,’ though as with all of these crowdsales, the language surrounding the sale will likely matter less than the economic function of the token being sold. If such tokens do get classified as securities, how will Decent respond?
What is the project?
Decent software will be a digital content-distribution network, with a soft focus on video content. Their whitepaper lays out several challenges in existing content-distribution that DECENT aims to solve, including censorship, poor relationships between consumers and content-producers, and existing distribution channels taking a large portion of payments.
When an author uploads content of any type, they have full control over publishing and pricing. ‘Publishers,’ similar to blockchain miners, store the file and ensure it is available. It is designed to operate like a torrent file-sharing network, but rewards for storage should make it more reliable than existing file-sharing networks. Authors pay a storage fee (.00001 DCT per MB per day per publisher). The system controls access to content through a multi-key distribution system, with more details given here. The whitepaper states there will be a .000001 DCT per transaction fee paid to publishers.
Publishers and consumers can remain anonymous–a feature targeted at journalists and whistleblowers.
Decent uses its own blockchain, which stores file metadata, proof of custody/authorship, proof of payments, and feedback from consumers about the content itself. Nodes (called ‘Publishers’) store content, issue keys for accessing the content, and hashes new blocks through a proof-of-consensus mechanism. S+C reviewed some of the rule on node compensation (see below), but there are some high-level takeaways on node incentives. Hosting large files that aren’t popular would be the least rewarding. It is possible some special publishing nodes will emerge that focus on emerging content. Hosting many small popular files would be the most rewarding: a node focusing on viral cat .gifs could be very rewarding. Overall, the economics do seem viable.
Some additional observations about the ICO.
- Decent held bounties before the actual ICO, and materials are currently available in 17 languages.
- They have conducted extensive media outreach, and have articles in many cryptocurrency news network.
- They just published their code in Github
- One of the slack moderators is the CEO of coinmedia.info and was responsive to our inquiries
What is the token being sold?
The token being sold is DCT, which represents the fuel and payment mechanism for the network. It can be used to buy content on the network and to pay storage fees for Publisher nodes. The whitepaper references that it can be used to purchase other tokens or assets, but it is unclear if this means there will be other payment mechanisms that don’t rely on DCT.
What are the terms?
The total amount of DCT sold will be determined by how much is raised. The price schedule is given below. There is no minimum or maximum.
Based on the price schedule, the approximate value of a DCT token should range between $.08 and $.20.
Who is the team behind the project?
The team behind the project is extensive, as are the array of partnerships they have been announcing. Almost all team members have linked LinkedIn profiles. Co-founders (there are three) Matej Michalko and Matej Boda have been active in the cryptocurrency space for many years, starting with the co-founding of several cryptocurrency exposition events in 2013 and 2014. At time of writing, Josef Sevcik was the sole Github code contributor. 70% of the funds raised are slated for development, so Decent could plan on further building out its technical team.
1: This wouldn’t just attract the attention of regulators. It could also hurt one of the goals of an open-distribution network like DECENT. Research suggests that file-sharing ended up benefiting popular artists much more than smaller independent artists. Users shared popular content more, and users downloaded popular content more. Artists already on the blockchain could publish first to establish proof-of-authorship, but users could presumably publish content not yet on DECENT and claim authorship.
2: If users can pay in another currency without going through the native token, then there will be much less demand for the native token. If, for example, payment in dollars or even BTC gives one a redeemable receipt (like a colored coin), then you don’t really need the native token and there are few reasons it would appreciate in value.
The economics of storage and distribution are such that compensation for hosting content is based on three factors: size of the file stored (a storage fee), file popularity (payment per access), and total network contribution (probability of getting block-creation rewards). The payment mechanisms and timing are slightly more complicated, but the above demonstrate the basic set of incentives–the “economic hydraulics” of the network.
We did some quick calculations on hosting to see how a node could earn hosting two different sets of files: a set of popular feature-length video content and all of Wikipedia. The former consumes a lot of space, while the latter is much smaller in size but accessed frequently. We estimate that a small home-based node (contributing 1 TB) could earn over $500/year hosting the videos, assuming DCT does not appreciate in value and earn over $2500 hosting Wikipedia.
This spreadsheet contains our calculations and all the assumptions we’ve made. Even tweaking assumptions about the network size, content characteristics, and inflation schedule suggests that hosting content can be rewarding enough to incentivize both home-based and commercial-scale providers.
Please comment in the file or otherwise let us know if any are incorrect.
Smith + Crown does not collect money or bounties for posting these announcements. All of Smith + Crown’s announcements for ICOs should not be construed as investment advice or an endorsement. In addition, some of the information contained above may be changed after we posted this; we urge the reader to read all source material before investing or passing judgment. If you see anything that has become obsolete, let us know.