Financial Cryptography

Kickstarter and task markets

Back in 1997 I wrote about task markets, where people would propose an idea, collect funds, and when 100% was reached, the contract would be made. Now Kickstarter is more or less doing it. Here's one of their contracts:

A year ago, I began writing poems to strangers on the internet. I would keep a specific person in mind: a blogger, a penpal, a sort-of-lover. Then I'd set a timer for 5 minutes and let the thoughts pour out, unfiltered.

The 5 Minute Poems were sent through email, published immediately on my blog or written in Gchat. They were slices of mind. Internet Intimacy. Poetry as communication.

Some of the people I corresponded with were also living in New York City, but some of them were in Texas, Paris, Melbourne, London. The poems filled the hours at the height of insomnia when my head was stuck in strange frequencies. The year-long experiment amassed enough poems to fill a chapbook.

Instead of traditional publishing methods, I want to do something more organic. I want to get the book into the hands of the readers, friends and strangers who inspired it.

I am using Kickstarter to raise the funds needed to self-publish the book and get it the hands of the people who want to read it.

Now, when I did it, I also built the software and tested it out. The reason I stopped was because of the money. It wasn't that I didn't have enough, but the money -- whichever money one had -- wasn't efficient enough. Transactions cost too much money, and innovative ideas like this used several transactions ... and often had to be unwound. People don't like losing money that way.

So several of these ideas popped up and faded away (it seems). My guess is that the payments ate away at them like a cancer. Consider using credit card, and hitting the CC 6 months after the transaction... who's picking up the cost of mistakes there?

This site however solves the problem by just collecting pledges. So it is entirely a credit operation.

When is my credit card charged?
If this project is fully funded on August 11, 01:00am EDT your credit card will be charged along with all the other backers of this project.
So my card is only charged if funding succeeds?
Yes! That's part of what makes Kickstarter special. If a project isn't fully funded, no one pays anything.

And therefore likely works by assuming that pledges can disappear at the end of the day, but as long as a good percentage come through, the margins can make the rest work.

Our fee is 5%.

Kickstarter collects 5% from the project creator if a project is successfully funded.

Why has it taken so long? Well, the money system is so damn inefficient over the net that everything else has to be very good. If we had efficient monies, we'd have done this 10 years ago, and another 1000 ideas as well.

Big question then is, why is the money so damn inefficient? Well, you know the answer to that already, otherwise you wouldn't be here :)

Posted by iang at July 4, 2010 11:55 PM | TrackBack