J.R. Willett is a crypto veteran. He not only administered the world’s first ICO, but he invented the very practice. Invest in Blockchain has previously featured his story in ICO’s Cornerstone Personality, and in the following interview, we get to know the man behind the name.
You got into Bitcoin by begging your wife and conducting secret mining projects via Craigslist. When did it hit you that crypto wasn’t going to be just a basement hobby but something you’d base your life’s work around?
Yes, I disguised the bitcoin mining software inside another program, and I paid random strangers to run it on their video cards. At that time (2011), video cards could mine bitcoin quite profitably. I ended up with people all around the world – mostly college students – mining bitcoin on my behalf. I paid them in advance every month. Many of them thought that I was cracking passwords, but they liked the extra income.
I discovered bitcoin in 2010, and almost from the beginning, I knew bitcoin (or something like it) was going to become very big. My wife did need a lot of convincing, but I knew that cryptocurrency was worth building a career around. However, it took a couple years to figure out what that would look like.
How did the invention of the ICO come about?
It happened because I spent endless nights lying awake and trying to imagine what would happen with bitcoin. I eventually came up with a theory, which became a whitepaper about how to stack a new protocol on top of bitcoin, and how that new layer could add features such as smart contracts.
The only problem was that I needed a way to pay for it. I came up with the idea of the “token sale” simply as a means to solve that problem.
The world’s first ICO: you raised US$500,000 worth of bitcoin. Thinking back, how was that experience?
My white paper was published in early 2012, and I hoped someone else would run with it. I didn’t want to be an entrepreneur – I just wanted to be a passive investor in this idea. People were excited about the concepts in the paper, but nobody ran with it. I literally waited a year and a half. There’s a video of me in 2013 at the San Jose bitcoin conference, where I’m begging the audience to implement this idea so I can send them my bitcoins.
Finally, I got tired of waiting, and I decided to do this token sale myself. I put up a bitcoin address on the bitcoin forum, and people – random strangers whom I had never met – sent me $500k worth of bitcoin!
If that wasn’t surreal enough, it got even more bizarre after that. My new coin (which I called Mastercoin – it’s called Omni today) very quickly went up in price 100-fold after the token sale, while the price of bitcoin went up 10-fold. Suddenly my project funds were worth $5M instead of $500k, and there was a ton of attention on the project. It was, frankly, terrifying. It was extremely stressful to have so many people counting on me to make this dream happen, and I didn’t want to let them down.
Today, ICOs are touted as a genius way to circumvent the VC jungle. Yet, as you say, it took you more than a year of spreading the message before someone took you up on the offer — what you call your “long history of sounding like a crazy person”. What was the initial cross-industry response to the concept of ICOs?
The industry paid no attention to it whatsoever until it actually happened. I remember immediately after I started the token sale, I got messages from people saying that my token sale was an illegal securities offering and that they had reported me to the SEC.
To this day I have no idea what the SEC thought of those complaints. It’s easy to imagine a scenario where I got in legal trouble and had to pay a fine, but they never hassled me. Perhaps there was some enlightened regulator who wanted to leave room for innovation and decided to let it go.
I think a more likely explanation is that it simply takes a bureaucracy a long time to do anything, and by the time they understood what was going on, ICOs were already an established pattern and there were plenty of blatant scams for them to investigate. Eventually a nuanced understanding of “utility tokens” emerged, and it became clear that my project would not be treated as a security.
If you look at the state of ICOs today, is this what you had envisioned? What’s better? What, if anything, did you not foresee?
I didn’t intend to create a new fundraising model. I assumed my crazy token sale idea would be a one-off fluke by a guy who didn’t have time to do things the “right way” by making the rounds to talk to VCs. I didn’t expect anybody to follow me, but they very quickly did.
Maidsafe is the next token sale I remember – they raised millions of dollars in just a few minutes using our Omni platform, and they’re still one of the biggest cryptocurrencies today. And of course, the Ethereum crowd sale wasn’t long after that. It has been delightful to see how many innovative projects have gotten their start this way, even with all the inept and fraudulent coin sales sprinkled among them.
Where do you stand on governmental regulation of ICOs?
I hope the governments of the world keep their distance, only going after the most blatant frauds. Playing with ICOs is kind of like going to a casino – the possibility of losing your shirt is very real, and perhaps even the most likely outcome for the unsophisticated.
However, unlike most casinos, if you really do your homework and due diligence, the odds can actually be substantially in your favor. Foolish people are going to lose their money one way or another, and I don’t think we should try to protect them from themselves at the cost of squashing all this lovely fintech innovation.
As someone who’s been in blockchain for over half of the technology’s lifespan, what are your thoughts on the recent rapid-onset industry growth?
I first discovered bitcoin in 2010 when it was barely a year old and bitcoins were worth 25 cents apiece. I actually mined a block of 50 bitcoins in December of that year using a desktop CPU! So yes, I’ve seen it grow almost from the beginning.
Frankly, every year of bitcoin’s existence could claim “rapid-onset industry growth”. I’ve also seen some big crashes along the way, and I think we will continue to see rapid growth (and crashes) for the foreseeable future.
Your blockchain journey has evolved from Omni to UpToken, although I believe you’re still quite actively involved at Omni Layer as chief architect. What have been some of the most important lessons you learned along the way?
It’s amazing how important it is to hire the right people. I can’t take credit for the success of the Omni platform – the real work was done by the dev team over the course of several years as they built out the functionality I had imagined, solving numerous problems along the way. Without them, I would be that guy who took a bunch of money from the world and never had anything to show for it – I’m extremely grateful to all of them.
What is next for Omni?
The dev team is really excited about digital objects right now, and they are getting close to a major release to support them. Our CTO Craig Sellars gave a talk about digital objects which you can see here.
You’re a busy guy. What’s a typical day like for you?
Most of my busy-ness comes from having four young children. I’m very strict about how much time I spend on anything work-related. I almost never travel to conferences. I never work weekends or evenings. Lately, I’ve been spending most of my work time talking to folks about UpToken, but I hope to get back to writing software at some point – that’s where I find the most satisfaction.
You have stated in the past that the most valuable currency on the distributed economy is individual and business reputation. Where do you see blockchain taking us from a socio-economic and political standpoint?
The blockchain world is full of starry-eyed optimists who think that we will achieve a sort of financial utopia where many of the woes of previous centuries are vanquished. I’m in a very tiny minority of people (perhaps consisting only of myself) who think blockchain will hurt more people than it will help. I think we will see vastly increased wealth disparities, and I think government-issued currencies will eventually collapse under their own weight, causing tremendous upheaval and human suffering. In 2012, I wrote about “Bitcoin’s Dystopian Future” and that still accurately describes what I think will happen.
Your MarketCoin white paper is arguably the only such publication out there that includes the topic of cryptocurrency’s “new rich” and their moral responsibility towards the world’s needy. You’ve also been criticised for being too “dystopian” in highlighting a possible dark side to cryptocurrency’s future, including saying, “If you are involved in Bitcoin now, you should prepare to be almost universally hated someday.” In your opinion, what, if anything, will work towards preventing such a future?
One thing that will help will be getting cryptocurrency into the hands of more people. Right now, cryptocurrency ownership is largely in the hands of highly technical people who are already pretty wealthy. Getting cryptocurrency into the hands of everyday non-technical people is an explicit goal of the UpToken project, and one of the main reasons I’m involved with it.
You’re backing UpToken, where you now serve as a blockchain developer. Why do you feel crypto ATMs are the answer to widespread adoption and that UpToken, in particular, is “the perfect token sale”?
Crypto ATMs can reach anyone – even people who have no bank account or who are intimidated by the technical jargon. Attaching a token to these ATMs creates what I call the perfect token sale.
In a gold rush, I don’t want to be digging for gold, but selling shovels. Nobody knows what the big cryptocurrency will be 5-10 years from now, but we are pretty confident that people will want to interact with that currency on crypto ATMs, and we think of UpToken as a rare opportunity to sell shovels in this crypto gold rush.
What is the single most important thing the world should know and understand about cryptocurrency?
The first and most important thing I tell anybody who asks me about cryptocurrency is this: never put any money into any cryptocurrency that you can’t afford to completely lose. There’s never been an asset class with so much risk (or so much potential upside). Please be careful!