Another well-established social media startup is going all in on cryptocurrency.
For the past year, the makers of the live-streaming video chat service YouNow have been quietly developing a new app that will be fueled by crypto tokens minted on Ethereum, a digital currency network that rivals Bitcoin and lets programmers spin up their own virtual currencies. (For background, read this Fortune feature on Ethereum and its founder, Vitalik Buterin.)
Adi Sideman, CEO of YouNow, shared the news with Fortune in advance of a talk he is slated to give at the ICO Summit, a confab for cryptocurrency enthusiasts held in Zurich on Friday. YouNow’s new app, meant to supplement its existing one, is named “Rize,” and the tokens associated with it are called “Props,” he said.
To kickstart the business, YouNow is planning to host a token sale, also known as an “initial coin offering,” or ICO, in the very near future, Sideman said. ICOs represent a newfangled way for ventures based on blockchain technology--shared ledgers that power cryptocurrencies--to raise funds and create their own miniature virtual economies. They are indisputably today’s hottest trend in the world of financial technology, although they are not without controversy: China banned them in early September, lumping them in with pyramid schemes.
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“It’s definitely ballsy,” Sideman said of his plan. “The projects in the industry haven’t yet proven themselves. That said, we’re taking a very practical approach.”
YouNow, which reports having attracted 40 million registered users since its founding in 2011, is the second established social media startup to pursue a cryptocurrency-based offering in recent months. The first, Kik messenger, which has garnered hundreds of millions of users in its lifetime, held a token sale of its own this week.
Like Kik, YouNow has already proven that its users are willing to earn and spend an in-app currency. YouNow users conduct more than 60,000 transactions per day using a video game-like currency called “bricks” that allows them to buy and send each other virtual gifts, Sideman says. The company has taken in more than $50 million in revenue over the last three years, mostly by taking a cut of these transactions.
YouNow’s new app Rize operates similarly to its flagship live-streaming service, where broadcasters and audience members interact over a video feed while swapping virtual gifts. In addition to allowing people to buy a standard in-app currency, Rize allows people to earn the cryptocurrency Props for their various contributions to the network.
A broadcaster can earn Props for hosting a lively group chat, for instance. Or software developers can earn these tokens by designing new apps and features, like mobile games, auctions, or karaoke apps, that incorporate Props.
According to YouNow’s plan (which you can read more about here), Props tokens will be distributed out of a nonprofit group called the Props Foundation. That body, which the team hopes eventually to automate using so-called smart contract software, will decide how best to equitably split the rewards among content creators and developers, Sideman said.
YouNow plans to mint 1 billion Props tokens in total. Half will be reserved for the Props Foundation, in charge of rewarding users who contribute the most to the ecosystem. Of the rest, 30% will be set aside for the company and its advisors, and 20% will be reserved for the token sale to the public.
Sideman said he aims later this year to transition YouNow to a “B Corp,” a specially certified type of company built around concepts such as sustainability and transparency. He said he also intends to open source the Rize code next year so that developers can build on or adapt it.
Despite many indications of a crypto bubble and the recent clampdown on cryptocurrencies and ICOs in China, Sideman remains undeterred.
“The question is, ‘Is there going to be a revolution here?’ And I think, yes,” Sideman said. “We have a few entrenched social networks and big media companies and they"re going to need to be disrupted.”
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