Thu Dec 17, 2015 2:39 am

I would also like to understand why you sold factoids rather than allowing federated servers to simply sell entry credits for Bitcoin? Is the obfuscation simply so you could call them software licenses and do a crowdfund, or was there some other reason they were needed for the purpose of consensus?

Yes junseth, we could have built a centralized protocol. The set of servers would have to choose what servers can be in the federation and who cannot not. And they would have to coordinate how they sell entry credits and how they share revenue. If the right to sell entry credits was desired by some other party, they would have to negotiate with the Factom servers, and make arrangements for that process. This is pretty much how the current financial system works, so it is possible. But not without centralized control by one more more parties.But to build a decentralized protocol, the incentive must be paid out by the protocol itself. As we have built it, each server gets paid the factoid token, and they can in fact never hand them to anyone at all, and sell Entry Credits by converting said tokens into Entry Credits as they make their sales. But notice they cannot sell more Entry Credits than they earned, so they cannot abuse the rest of the network by over selling Entry Credits.Furthermore, the protocol can be used to select servers and boot servers out. Because the code is managing all of this, no coordination with the servers is required to participate, and no coordination with the servers is required if a server leaves.But if a server didn't care to go into that business, they can transfer the right to sell Entry Credits to someone else that does. How? By simply selling their factoids to the aspiring Entry Credit store. And again, the store cannot over sell Entry Credits, since the factoids naturally handle the accounting.This is because Factoids neatly represent the right to obligate the protocol.And Entry credits neatly represent the right to use the protocol.Nice, clean, and tidy.: Let me add why we did a crowd sale. Yes we did do it to help raise money. Of the tokens distributed, only 30% went to early contributors (i.e. developers and founders like myself) and the rest were purchased either in the pre sale (20%) or in the crowd sale (50%). The numerical number of tokens everyone actually received was determined by the number sold in the crowd sale, with these percentages fixed.The result was a bit over 4 million tokens sold, so the total supply now stands at a bit over 8 million.This is a more fair way to distribute tokens than doing no sale at all. If you do no sale at all, it will be the parties that are issued the tokens first (like early Bitcoin miners) that will corner the majority of the tokens. In some cases this will be the developers. When this is done today, you get floods of "parasitic" miners that run in to mine early coins for that reason. Well, we don't have mining, so we would have been dictating who got the tokens by the selection of the initial set of Federated Servers. Instead under the current plan, most of the tokens went to people that bought into the project to make it possible. Some tokens went to the developers (like it would have in the mining scenario, only less so). And the Federated Servers get a paid a fixed schedule of tokens from now till forever.The token supply can grow (if speculators drive up the price) until the price stabilizes. And the token supply can fall (if speculators drive the price down) until the price stabilizes. But in both cases, the stable price is when the value of the token matches the money real applications are spending to buy Entry Credits in order to put data into the protocol. That is because the 73K factoids generated each year naturally trends to the value of the factoids drained from the supply to write into the protocol. If people are spending 1 million dollars to put data into factom per year, then 73K factoids should be worth 1 million dollars.This equilibrium is best kickstarted with a reasonable body of tokens to begin with. This is because all tradable commodities are subject to speculation, so that is a fact of life. But if the purpose of the token is to drive a protocol, it is important that its value be tied to that use, and not to speculation.I hope this additional information helps.