EB54 – Daniel Peled & Tom Kysar: Gems, the social messaging app that pays you for your attention

Transcript

hello welcome to epicenter Bitcoin the show which talks about the Technologies projects and startups driving decentralization and the global cryptocurrency Revolution my name is Sebastian cuccio and I'm Brian probably and crane we're here today with Daniel pellet of gems and Tom kieser of coinify now I'm really excited about today's episode it's been quite a bit of time reading my gems today and I think it's particularly interesting because having anyone who's been in Bitcoin for a while has heard the idea of a killer app and the idea is to have something that people really want to use that maybe you don't care about creating a

new world currency or something and that perhaps could fuel that mainstream adoption and reading about gems thinking about James James I think this is one of the best candidates for the other perhaps the best that I've come across so I I'm really excited about going into that today it's a super interesting project and uh it's it's great to have you guys on thanks for joining us so perhaps Daniel uh do you want to get started briefly introducing yourself and um also the project gems sure and thank you for having me happy to be here

um my name is Daniel pillard I am 28 I'm located in Israel um in Tel Aviv I wasn't one of the early adopters um I joined the Bitcoin ecosystem a little bit more than a year ago when it was getting a lot of traction and after um understanding the potential of blockchain technology I was really fascinated with it and started learning everything I could about it and regarding other altcoins also which have Innovations in them and we started the project gems and right after a counterparty and crowdfunding period the

proof of burn period and their protocol of building the secondary platform on top of the Bitcoin blockchain and opening a lot of new innovating options and really inspired us and very wanted to make a product that can utilize um counterparty platform in order to bring a Bitcoin to a wider audience so we have two goals in mind our first goal when we started with this and we thought um what is the best way to bring a Bitcoin and cryptocurrency to mainstream users and after thinking about that

um we got we realized that in order for that to happen and the user experience has to be very very simple very very intuitive and the best example of that is uh WhatsApp it's instant messaging if I try currently to bring a new user to the Bitcoin ecosystem it's not easy I go to blockchain info I open them a Bitcoin wallet I need to explain about the public key and private key about security about Google Authenticator it's not an intuitive process even to people our age and trying to explain it to all the people to my younger brother or my

parents and it's very difficult but instant messaging social media WhatsApp it's something everybody is used to is all of us are already using it so if you can take a Bitcoin into a mobile application it's something that can be viral and usable very easily so we copied WhatsApp model our application looks very similar to it and what's up was successful because the username is your mobile number so they were able to grow very quickly everybody was able to invite their friends to join the network and see when they join because of that so with gems and your

username is your mobile number but it's also Alias to your Bitcoin wallet so the registration process takes only 10 seconds and you get a passphrase and to your Bitcoin wallet which is also a gems wallet obviously because we build it on top of a counterparty and automatically you can start using gems just by participating in the network you receive gems which you can start sending to your friends and just like we do with the Bitcoin or any other cryptocurrency so it makes this process of opening an account and very very simple the second thing we had in mind is um because we went to social messaging

and social network is how can we actually incentivize users to join our Network obviously WhatsApp is very successful and same with the telegram and WeChat and other application so we had to have an edge it's not enough to have a messaging app with a Bitcoin wallet we wanted to give our users something extra so um in order to do that we reward the users for their participation if you compare it to Whatsapp which have more than 400 million users and they sold for 19 billion and the users didn't get a lot out of this obviously we get a good

project a good product a free product and which we're happy to use and the same with Facebook but all the revenue and all the success goes to a small group of funders or creators even though the users are the one that's producing all the content users are worth um a lot to any social network we can see it with the Instagram and WhatsApp and Snapchat and all the rest so under our model and when you invite people to the network you get rewarded with gems and when you participate in the network you get rewarded with gems so the value goes straight to the user and not to the company we don't cut a profit from the share there

so um before uh before we kind of go deeper into uh gems uh I just wanted to give a Tom a brief chance to introduce himself so we will come back to to Tom later especially when we talk about the crowd sale uh but Tom do you want to maybe even introduce yourself and maybe also quantify although for those who are more interested in quantify uh you can also check out an episode we did about six weeks ago perhaps uh with the CEO of uh of corny pie Tom ding yeah yeah most definitely uh yeah I'd like to you know thank you guys for you know having me here as well um yeah so uh we're from quinify where we will be uh hosting the gems uh token sale uh

launching December 1st so um as they were saying you know as we get uh further into the show and talk about some more of the details of the crowd sale I'll be happy to fill in and uh explain anything but um we'll be hosting the gem sale uh starting December 1st um we have some invites rolling out beforehand so um get in touch with us if that interests you but yeah we'll uh we'll get into more details afterwards foreign thanks so much for for joining us as well so there's one thing I thought was interesting Daniel about what you were

saying is that you came from this idea of facilitating Bitcoin adoption so when you came up with the idea of gems is that where you started is you really asked like what how can we bring Bitcoin to the masses uh and then it's like oh maybe WhatsApp and a social messaging tool versus how can I build for example a great Bitcoin startup or a great startup in general and then you sort of at the cryptocurrency on star on top of it but uh you really the original motivation for you was was that achieving adoption of cryptocurrencies is that correct yes and definitely because you know I was following we were following a lot of

coal coins especially in the altcoins every one two days there's a new altcoin with the new blockchain and some of them do add their Innovation which is uh it's important because um it's hard to innovate right now in the Bitcoin blockchain because the big coin the big market cap so the core developers are very careful with the changes so it's good to have um art coins to try to do Innovative stuff but a lot of the of the different altcoins don't bring a lot of Innovations and don't add too much to the Bitcoin ecosystem so we wanted to do it to be different we especially wanted to build on top of counterparty to

utilize um and the Bitcoin blockchain if you compare counterparty tokens to other altcoins every new art coins that create a new blockchain they have to protect it and in order to protect it they have to incentivize the miners and so all the inflation of their currency is is going towards the the protection but because we are using a counterparty and the Bitcoin uh blockchain we can use the inflation in our model to incentivize users for the things we actually want and not just for mining if we take example Litecoin you know they have a more than 1 100 gigash of mining it's a

lot of money being wasted to protect the blockchain but I'm not sure how much it helps for Litecoin adoption or for interesting the user base so under our model we're utilizing the Bitcoin blockchain securing Security in order to protect the gems ecosystem but we can actually um reward users for their participation and for increased adoption of our token so you mentioned you guys are using counterparty can you go a little bit into that because is the gems currency running on top of

counterparty uh or is it just a crowd sale yep um so there's actually a token which is called gems which is running on top of a counterpart in counterpart is on top of the Bitcoin blockchain counterparty um provides you the possibility to create an asset um over the over counterparty of their Bitcoin and then you can utilize it by by giving it value and building a product around it so this is what we are doing it's important to note that um gems and Bitcoins inside the gems application

have different use case and because um Bitcoin users that download the gems application the utility that they will enjoy is obviously a Bitcoin wallet and the ability to send Bitcoins to their friends and usernames and not the Bitcoin addresses which makes everything much much simpler and more more easy user friendly but germs are more directed to the new audience entering the Bitcoin ecosystem most of them don't have Bitcoins obviously um so just by downloading the app and

inviting the reference and using it they get rewarded with gems which they can start using uh you know to um send it send each other unsolicited messages or to pay for products or anything we we want to do same as we do with Bitcoins but they get rewarded just for their participation so it's much easier for them to start using cryptocurrency we all know that once you do the the first transaction that you see how fast it is and there is no boundaries and the fee is minimal and everything we are not used to with the with normal fiat currency and then you your attraction towards the cryptocurrency and becomes much much

bigger and because your wallet is also a Bitcoin wallet it's not a problem for people to start sending you Bitcoin to the same wallet address and so you can use gems and Bitcoins for the different use cases so I think what's important to take away here is that what gems really creates is is Val is the currency that really has value because it brings a feature set to its users uh which other altcoins perhaps uh don't like like Litecoin like you mentioned or other coins that aren't very are used very much uh don't uh in effect yes exactly um the way we bring value to the Token

is by uh inside the application utility most of altcoins they're only used is as a as a payment but uh Jam tokens is much more uh it's much more it's actually a product it's being used inside the application for um for sending unsolicited messages and the advertising to people that are not your friends so it's very simple it actually serves a lot of spam problems that social networks usually have and so to make things clear sending messages to your friends is obviously free because they are your friends you want to

contact them by sending messages to people that are not on your friends list will actually cost you gems and this open up say a very interesting possibility and use cases which we can go into later foreign let's yeah just uh before we go into that and I agree it's super interesting let's um let's talk a little bit more about the technical side so as as far as I understand normal gems transactions so I I send my friends some gems etc those are off-chain transactions um so can you explain a bit when are transactions on chain uh when are they off chain

um as a user let's say I have a substantial amount of gems maybe I invest a lot or I help a lot of people sign up for the network in the beginning um is there a way for me for example to take to save my gems out of the app let's say are are there going to be paper wallets or could you put it in a normal counter wallet uh send it somewhere else or are they sort of in that closed ecosystem or of the gems app um no so basically what we did we took a counter wallet and we modified it in order for it to work inside our gems mobile application so the passwords you get

um for your gems wallet uh James Bitcoin wallet it can be usable also on a counter wallet on the web wallet so you'll be able to transfer your gems to the gems application or to hold them inside counter wallet or to haunt them inside cornify a website they also have a built-in token wallet which is a much more simplistic than a counterparty because counterparty are giving users a lot of other features which are not specifically relevant to tokens so you can you're able to hold them any way you want the way we build gems is that

yes sorry I I cut you off um so did they say HD wallet correct yes yeah when you create your wallet you're the only one holding your passphrase it's not saved anywhere on our servers or anything like that it's your responsibility to write it down and to save it in a safe location you don't have to enter it every time you enter the gems application it's enough to to put a pin inside but let's say you lose

your iPhone or your mobile phone you will need that passphrase in order to create a wallet under a new iPhone and then the other ones your other phone will get locked because it's uh it's uh it's close to specific phone and once you open the new one with the passphrase you'll be able to redeem your gems there would there be some way to do some sort of a multi-signature uh model where you would hold one uh key and the user would hold a his personal key and the backup key I asked this because last week we interviewed bitco which is who's doing this for uh for Bitcoin Holdings is this something that you could Implement as an

added layer of security to uh to to basically eliminate I mean reduce the the the um the chance of someone losing their keys and not having access to their to their wallet um it's definitely something we can explore we know a couple of companies in this field that are specifically expertising in in multisig wallets and they are selling their technology as white label uh right now we are concentrating on our own things like advertising and giving value and use to the gems tokens inside the application

but it is something we are looking into or we can look into with other companies in order to have maximum security to our users yeah I mean I think it's a security thing but it's also a usability thing uh because because having having a key phrase is something that perhaps not a lot of people are used to in the sense that most people are used to using passwords and I agree that it is uh best practice to enforce people to use a higher level of security password than like something that you normally use on every website but I think that for a lot of people coming into the gem secret system having never had to touch cryptocurrency or having to deal with a wallet or a counter wallet or how that

works uh and being used to the passphrase thing that might be a little a little jarring for some people yeah what are your thoughts on that for sure and that's why um logging into your phone once um you created your wallet it's only with a pin uh it's not comfortable to write down the passphrase every time and it's not needed because it's a physical phone that adds protection um to the user and they will actually need to steal the the phone and enter the PIN code if they want to try to steal the the money using the a web wallet they will have to know the the pass first and um but it's all it's important to note

that you know the way I see um web wallet um Mobile Wallet it's just like uh how I say wallets that are holding cash in our everyday life I would not I would put most of my savings um you know in a cold storage and then I will put a little bit of Bitcoins maybe on an online uh wallet and then I will put a the list in an actual Mobile Wallet it's because each each wallet adds more protection so the same with regular users they will download the gems application they will start using it they will start at earning gems which

have value but it's not their life saving obviously and as long as they start learning about the crypto and the ecosystem and they will realize that once they they get a a bigger amount of gems so once they want to buy some Bitcoins or get some Bitcoin from their friends they will need to learn more about those other most secure all options obviously you're not going to have a thousand dollars in your in your wallet when you walk in the street the same shouldn't be with your Bitcoin Mobile Wallet absolutely uh this is all very interesting and uh we'll get to talk to a little about a lot more in just a minute before we do that we'd like to mention uh good friends at Fairleigh fairly is a Bitcoin prediction Market

where you can place predictions on the likelihood of sport spring events the Bitcoin price current affairs a lot more things uh and uh if you if your predictions are correct well you actually earn money and so uh Brian can perhaps go into some detail as to how fairly works all right foreign it's of course uh it comes a little bit from the sort of Bitcoin side and that it's a peer-to-peer Marketplace so it's a Marketplace for predictions um where like you're not taking a position against the house but against other people so it's interesting because um one can look at a lot of uh actual

events that are happening and we'll see what are people thinking what positions are they are taking so we asked them uh just before this episode that they create uh also prediction on gems so you can actually take a position on the success of the gems crowd sale so I hope that at the end of this episode you will be uh better informed than most people and perhaps you will be able to take a better prediction on that right so the the statement there is um the Champions pre-sale will raise more than 1 500 BTC that's exactly 50 of of the goal um and yeah you can take that prediction I think there's been about 40 predictions

made and and actually uh it's also slightly in favor of no which I don't know I think they will reach it so I took the other prediction but we will see so um if you're interested and of course there are a lot of other things like the Bitcoin price mining difficulties sporting events and things like that so if you are interested uh head over to fairly .com App Center uh oh you have Sebastian you have the the page uh yeah I was just showing I was just showing the gems presale uh head over to fairly.com so uh the the domain is

f-a-i-r-l-a-y.com uh you can sign up there deposit some Bitcoin to and give it a try so um we want to thank them a lot for their support of Representative Bitcoin so so coming back to the marketing moving on coming back to the marketing aspect of Fairly because I mean it I mean I want to kind of bring in marketing uh uh user experience product design and that whole thing uh for those of you listening

we're having a bit of a delay so sometimes Brian comes in a few seconds late um I'm interested what are some of the selling points that you plan to put forth to sell like in a sense gems uh as a superior alternative to Facebook and WhatsApp I mean I think we could probably there are probably some that are obvious but there are network effects and I think those are going to be hard to uh to break up I mean like people use Facebook people will use website uh how do you plan on getting people to come into to this ecosystem in masses yeah so um obviously

um we can't compare ourselves even closely to uh WhatsApp or Facebook or WeChat and user base and we're not trying to um obviously we'll be more and then happy to you know in the future and to maybe you know have a threat on them but what we're looking at right now is actually the the Bitcoin ecosystem and other alternative currencies most altcoins out there they don't have a big user base I think except for Dodge Coin and NXT and xcp maybe a lot of the other art coins

um having a very hard time to build their user base and even a Bitcoin and is still in a very very early stages of maturity and becoming a mainstream yeah so um our our our goal is to really reach a for gems um a hundred thousands of users if you can get to a few million users that will be a huge success for the Bitcoin ecosystem for cryptocurrency so our goals and you know we know there will be very a lot of difficulties and holders along the way but we are very committed to this project and the added values

that will bring the the users compared to those applications is uh one putting them in the center you know I think there's a famous saying that if a product is completely free usually you are the product and because WhatsApp and Facebook are making money and a lot of money out of their users because they can take their um their content and their and the users and information and to use it for their advertising which they are the beneficiaries so we are trying to take it to a different location of actually rewarding the users themselves and I think there is a big Trend in that

direction and it's something used as relative we can see that with the yellow which started a social network and not built around advertising at all they have signed a contract saying there will not be any advertising and they're getting a very big support and same with the two which started social networking also paying the users and they're getting a lot of supports the users are looking for something different than the normal status quo which is that and they get a free product um but they are not a part of the of the of their of the network of the social network users relate to if they're in partnership with the network they use

and it brings them a lot of added value that's a one and the second thing is actually for bringing the the blockchain advantages to the users and we for us we're very used to it that is sending value between our friends and overseas and it's very simple the fee is minimal and so on using a Bitcoin but most users haven't experienced this feeling uh yet and we think that once they do it um it will it will actually have a big benefit of using our mobile application compared to even Snapchat that you know they introduce payments but you have to

connect your bank account and you have to pay higher fees and you have to give your Anonymous you have to be completely public and and so on about it in the end there isn't any uh value value sending um ecosystem as good as Bitcoins and we just need to introduce it to mainstream people so I I agree with you that there perhaps was a trend towards uh uh well a trend where people are starting to get annoyed with advertising people are just starting to get annoyed with uh with um attacks on their privacy and things like that uh do you think that that is

I mean basically what I mean is it only takes a Facebook or a WhatsApp to copy that sort of model where they already have a a substantial user base to bring those existing users into that new type of model I mean if it is a trend you can also imagine that Facebook and WhatsApp and others will also follow that Trend uh how do you think startups I like yours and and others that may enter this space would uh would would be able to compete would they would they have an advantage whereas they're sort of like the underdog in in the in the ecosystem or or would those large players have the

advantage of having existing users first of all I don't necessarily agree with you that they have an incentive to change their model they're making a lot of money out of the current status quo and they would like to continue with it as much as possible if this trend and the gems is part of takes off and you know Facebook changes their model will be very happy you know we made a change just like we see it now with the Western Union you know they're still charging um five to fifty dollars for every wire transaction and they're making their remittances a network there's billions in it and they don't want to give it

away obviously but you know Bitcoin is starting this change because it's taking off because it's a very big comp competition to the regular status quo so if we can make them changes um we we've done a you know a very big percentage age of our mission and if not I hope will be able to take them down just like a big companies that you know didn't build themselves to be handled with changes it went down and we said many times during history now with regards to Bringing people into the ecosystem there seems to be a a push

towards building like blockchains apps and services and I I agree that this is the sort of the the good strategy is what you're doing is you're you're building an app which essentially brings people into the Bitcoin ecosystem without them really having to know that they're in the Bitcoin ecosystem the functionality is transparent and I mean it's transparent for them that they're that they're using a blockchain um moving forward like what are uh [Music] um some of the sort of advantages that people will I mean you mentioned this a while ago being able to pay and things like that what are some of the other advantages that people uh just regular people that aren't necessarily technically Savvy or not uh in the ecosystem would uh would benefit from uh being in in the in

using cryptocurrency based uh app like gems yeah for sure so one of the biggest problems with any social network is um there's a big problem of spam uh like you said a lot of people care about their privacy if I if you would give your Gmail your email you wouldn't be happy throwing your email you know over the internet and signing everywhere with your normal email because a big chance it will get into the wrong hands and you will start getting spam the same with your mobile number you keep it quite private because you don't want to to it to be completely

public so what we introduce there with James is actually a good solution for this and you can register with your mobile number you give it out only to your friends but you can give your hashtag a username and to anybody you can have it on your blog or in the internet or any location you want because you won't be able to get spammed in order for people um to send you an unsolicited message people that are not your friends they will actually have to pay you in gyms so let's say um you're uh for example a celebrity you're using a Instagram or something like that you're getting a Spam not spam but a lot of people are using your hashtag it's not possible to

actually get in turn in contact with that person what we can do you as a user you can say anybody that wants to send me an unsolicited message has to pay me a hundred gems for order for me to get it and you can say I want to receive only up to five unsolicited messages a day this means that we can control and the um you know you can control your how the way you want to be reached by people that are not your friends and they actually pay for your attention in gyms and this can become very viral because there's a lot of people you know for example I want to talk to or I would

like to get the opportunity to talk to her or I don't know their personal details but if there was a way for me to get in touch with them directly and I will need to pay for it which is okay because it's for the intention this can become a very viral and a very good use case inside the social network which is this is a question that I had and uh after a the question is uh does the user decide what his attention is worth is that what you're saying basically is I decide I want like this is how many gems it'll cost for someone unsolicited to contact me yes and you can decide how much it cost and you can also decide how many

messages you want to receive so let's say for example um you want to receive only three messages a day and there will be a bidding system let's say a hundred people sent you want to send you a message and some of them be the 1000 gems and some bit 500 gems so you will get only the top three bidders to contact you so you have a minimal uh number of gems you want to receive and the maximum goal is a bidding system very similar to Google AdWords everybody is competing on the same thing um

something just occurred to me before which I think is is really fascinating so um I presume most of you know but but for those who don't know the sort of the background of proof of work uh that I was developed by Adam back of course the idea originally was that it was going to be some sort of spam protection so when I would send an email out I would have to do some work essentially mining on my own computer I sent that proof of that work with the email and the idea was that then this would become costly to send email and it wouldn't be economical anymore um to send spam and that never called on because uh I guess large email about mail sender didn't want to

do that so I think it's it's super fascinating I've been kind of coming back to that and we're actually now using cryptocurrency uh as a Spam protection in in this case and what's also fascinating is that in a sense here we actually do have it a back by proof of work because the jams first were of course purchased or at least a large part of it with Bitcoin which again remind uh with uh with the exact mining algorithm that adding back developed so that's a is something that occurred to me which is a extremely fascinating how sort of over a lot of um around a lot of Corners we have sort of ended up now with this at a point where

a proof of Works actually used for sperm protection yeah definitely I agree with you um it's gotten a little bit to a point that we can say it at least with the Bitcoin blockchain that there the minimal fee um obviously it's much lower than if you compare it to Western Union or any Fiat monetizing system uh money transferring system and but still the Bitcoin blockchain makes it hard and at least on the r model to reward the mainstream users so to have this scalability to be

able to approach a big user base with their daily air drop so what we're doing we actually built uh [Music] we build a tonight you know a hybrid system that on one side and we have off chain so all the the rewards the gems reward for participating in the network and for adding friends to the networks uh being done off chain but at any moment anybody can transfer these gems onto the Bitcoin ecosystem uh blockchain by doing a Bitcoin tax ID so we can utilize the blockchain protection and

decentralization but we can also incentivize users on a mass based scalability using the off-chain technology so we're utilizing both right now um so I think we can move on to the the gems pre-sale which is a very big topic as well um Tom do you want to briefly introduce how the gems pre-cell is going to work yeah yeah for sure so um the way we have

the gems token pre-sale structured is that the uh public gems uh token launch will be on December 1st at uh 9 00 a.m Pacific Standard Time actually so the way that the actual pricing for the gems has worked is that during the um initial pre-invite phase that we're currently in um the gems are set to 17 225 x gems per BDC um funded um this is a 2250 uh ex-gen bonus on top of the base which is up 15 000 gems per PDC and um this carries for the initial invite period along with the first 48

Hours of the public sale so that everybody's kind of on the same playing level here um there's no there's really no competitive advantage to being into this early invite phase um we're just kind of rolling people into the platform slowly um before the actual public sale so um December 1st the floodgates you know will open though and um all community members will be available to purchase X gems um we have a built-in coinify counter wallet so um the purchase flow is actually it's all automated and it's about two clicks of a button so um when when you have access to the platform it'll be you know purchase you scan the QR code and the purchase flow is automatic and extends are instantly credited to your account so um we're

pretty we're pretty pumped over at quantify to finally get this up and going um you know we're really looking forward to gems you really think Daniel has a great team over there we're really just excited and supportive and um yeah so you know keep an eye out uh we're going to be rolling invites out this month along with uh the actual launch on the first so I was interested in in this token distribution uh so there are 50 000 50 million tokens which will be sold in the pre-sale and there's 30 million in an airdrop which will be allocated to airdrops and symptoms things like that and then there's about 12 million to 12 million for marketing and promotion and then eight million for the development team so that totals to 100 million uh

how did you come to to these numbers how did you budget this distribution and also maybe just kind of briefly mention in some of the earlier discussions on bitcoin talk there was mention of a hundred billion or sorry 10 billion uh total coins uh why why did you scale that back to 100 million yep um the way we calculated the the the number of tokens we want to have and it's based on the user adoption the hardest part is you know to grow from zero users to a thousand year users on former thousand users to ten thousand

users and those are the hardest parts and from 10 to 100 if you get more viral obviously there is a very big Network effect but the beginning is the most difficult so in the beginning we did thought about starting with a very very big number like 10 billion and that if we do reach a hundreds of millions of users and each user will still feel like he's holding a lot of gems it's more from a psychology point of view and but then later on we did decide to move to a smaller number because we understand um that the hardest part is in the beginning and if we do achieve the later

stage Mass adoption we can always say change how you see the the change value per trade inside the application like we have a Bitcoins and people are thinking to switching to a milli Bitcoins when it became over one thousand dollars everything token is divisible by a decimal point so we don't have really problems of scalability but we did want to give a mainstream users and there's a feel like they are holding a good amount of chance but not a huge amount of gems which is unnecessary in the beginning and also to point out um the airdrop we don't want to get to a

decimal fractions and the way it works is that every day 27 500 gems uh dropped uh four users for their participation and adding people to the network so let's say you added the 10 users to the network and I added 10 users to the network on day one then we will split the airdrop of 27 500 between us and so we incentivize early adopters of the network because let's say in the beginning it's 10 new people joining a day by after a month it can already be 100 users joining per day but the airdrop is still a fixed number of 27

500 and which means that only if more than 27 500 users join every day then each user will receive a fraction of a gym which is something we don't want to get into but it will pay take time until we get this kind of growth so we feel quite comfortable with the numbers and obviously it's divisible by age so we can always play with how we portrayed it okay it occurred to me though when thinking about the air drop that there might be uh there might be opportunities for abuse where if so maybe I don't understand how those verification works but if I can just create as many gem wallets as I want wouldn't I then be able to invite as many people as I want and take more of

that bonus away or is there some kind of a mechanism there that I'm not understanding that would not but prevent people from doing that yes so we actually are you know thinking about those problems with abuse and civil attacks so we we build the we're building a algorithm that can find this kind of abuse and each user his trust will be score is actually built from a a couple of different um um

different elements uh for example I just say mention a few of them how we flag fraudulent activity so one is your account age obviously in the beginning when you just open an account you start with the initially low traffic score if you decide to be completely Anonymous you're not using or connecting your mobile number again you will be a bit of very low trust score and the other things we check is how many gems you have available in the account if you have it reflects on your trust score and we can do a user usage frequency proteins to see if you just created it and you're

sending one message or you actually using it on a daily basis um if we feel that you have a very low transfer we can send you a push message to fill a capture in order to to make sure it's not a boat and it's an actual user we check your communication network with your friends if you're talking with people that have a high high score and then obviously there's a bigger chance that you're a real person if your relationship connections um uh you know if they look uh good if you're connected just to both which all of them have low trust scores obviously it will reflect a on your trust score and

also there is a the community can flag if there is a boat or something like that that's trying to speak with a reputable somebody that has high reputation and it feels like he's not speaking with a real person he can obviously flag him as being a bot so we take this different criterias and we build that trust score around each user and only if you're above a certain threshold you're eligible to use the to receive gems from the airdrop so it's not as easy to just create votes and and game the system that's that's really interesting and and I think it's a lot better than uh probably some of the some of the abuse mechanisms that are in place on on platforms like Skype where

essentially there there are none so I think that's really good yeah because Skype is not giving any um you know value for participation or daily rewards and so on so we are much more careful um with how the airdrop system work and even if somebody is able to gain the system um the airdrop is fixed to a daily amount so we will be able to track him and without losing too much of the gems reserve and because it's not like if he creates even one million users on a specific day that he will get more than um The Daily air drop so we're doing a

lot of protection and I think mainly mainstream users will attach their mobile number because they want to see their friends that join the network and they want to invite their friends and this by itself adds a lot of a lot of protection but we do have the other measures if people want to stay completely Anonymous in order to and to be able to build their trust School okay now come back just to the crowd sale briefly uh so part of the mechanism with regards to selling uh the just the token sale is that so there's there's 50 million tokens uh allocated for the x-gem token sale and what you said is

that any unsold tokens after the end of the crowd sale will be burned uh by being sent to an uh verified unspendable address this seems to me different from other crowd sales perhaps where we've seen that like the fate of remaining coins is voted by the community or things like that uh can you explain your why you decided to do it this way yeah um obviously the crowdfund is very important for gems success and we are trying to build a a very high-end product we're developing the iOS version in Objective C and Native and also the Android is going to be developed in in Java in Native and it requires funds to

maintain the network and develop the network and all the ideas and that we have lined up and we don't think that [Music] um giving the onboard gems on a based on a proportional ratio is a is a good decision because basically what it it brings in the end of the day is that everybody is a little bit um you know on the fence looking what other people are doing because for them it doesn't matter if the crowdfund if it reaches 300 BTC or or 1000 BTC they just look at their percentage of their holding and so in order to incentivize people to buy gems and to take and to

have a bigger vested interest in the project and to help us promote it which is a big part of doing the crowdfund and not going to venture capital they actually want to build a user base with vested interest and the project that would help us promote it and and enrich their friends and and mainstream people and we think it's a better way of conducting a crowdfund instead of just saying we're sending 50 and it doesn't matter the amount we raise because it gives people the wrong incentive during the crowdfund but so one thing I think that's kind of

interesting if we look at this and you know maybe Tom you guys have an opinion on this as well is that if if we talk of 100 million uh gems being issued uh then if I understand correctly right so 50 million will go to the investors then if 30 million will be given out to new users and people signing up new users essentially uh rewarding activity uh another 12 million also sort of community giving out to people so that just leaves 8 million so eight percent essentially for uh for the founding team I I and it's of course interesting if we

contrast that to um Regular startups where typically I would say after a first a funding round um after first funding round people are tend to be left with I don't know 70 percent uh things like that can you talk a little bit about how you know how you arrive at having a very a small ownership percentage of those tokens and um how you feel that it's gonna influence incentives in the long run because of course all right what happens for example when you run out of the BTC you raise here

because you won't be able to do another crowd sale of those tokens right foreign yeah so I think when we deal with the cryptocurrency and the tokens and you know and networks that are being built by the community obviously us as the founders and developers we are we are leading the effort but it it's very important to achieve uh a good balance between um you know uh the founders reward and the community reward uh for participating one of the and you know a startup usually

um they keep a lot to themselves because they are more build around them adding the value uh compared to starting a an ecosystem with the token or cryptocurrency that you're very much supported by the community Bitcoin has value only because the users wants to use it the same with the with all the other cryptocurrencies so you think you need to be very careful with the with the number and after studying other use cases um you know for example a mastercoin Jr will it was holding a very very big percentage of the total Master coins it

makes the community um think if they if this is the project they want to support uh compared to counterparty for example that their distribution was much more much much better and you can see the contribution and the ecosystem that was built around counterparty and so we think this is a a good number to be in and I I don't know how many um other coins or cryptocurrencies um you know I'm not holding even one percent off so it's a it's a good number I think it's a number that gives us very motivated a very uh in a big incentive to uh to deliver the milestones and to

achieve the goals we're looking for yeah um to to go on top of something uh what Daniel was just talking about with that as well um you know it's we think it's great that you know um we actually usually you know in this usually in this scene and field you have the issue of the community saying why are the developers taking too much money so uh it's quite interesting to get almost a little bit of the reverse flip side but we think it's a we think it's a great number to incentive to continue to uh bring incentive to develop this product along with we really think that these Milestone investing um periods are really going to help contribute to that as well

um but because it's not you know you get eight percent of the stockpile right off from the beginning and you're good to go um you know gems team and Daniel's team needs to uh continually produce an actual you know product and progression to continue get to continue to get the money that's raised in the crowd sale um they you know they don't get all the money all at once so um there's Milestone structures such as the advertising platform Andrew Droid release um and uh additional features that um we also believe will really help keep you know gems on track keep this project high quality and keep you know the development process and the incentive for the project at a very high level for the community foreign

yeah I mean I I you know I I was asking that question also sort of provocatively because I do think uh it's an interesting question right where do you balance the incentives for the founders and and that Community thing which is super important I totally agree it's interesting you guys chose a similar number that ethereum chose I think it was something like that too I don't remember exactly um and of course the incentive then for you guys as Founders is very much to make this huge because if it's not going to be huge then uh that's not going to be worth a lot of money and and I I like I think that's also great what you guys are doing on coinify is that that vesting thing is so important I think that you really have accountability

transparency yeah and and that people can't just you know come in and get it and get out and sort of keep their shares so um yeah I think I'm really I'm really excited about you guys are doing two on on that uh on the front from 25 I think that's that can play a really important role in the long run uh in making sure these crowd sales are running a good way and then making sure that um that the trustworthy teams and that we hopefully get um down the level of scams so there's a one more topic I'd like to come to and um it's sort of a perennial a perennial topic we keep coming back to again and

again which is the topic of Regulation so of course the question comes up right so you have this app now and you're gonna send around James in there now do you think of James's money or not there's one question but of course there's also Bitcoins uh we send around so what are your thoughts on the regulation of this uh is that something you guys worry about uh in particular um do you think you will have to do kyc at some point that that you know maybe Anonymous users won't be allowed to use the app uh or do you think you may have to limit transaction amounts or things

like that uh perhaps you can go a bit into that yep so it's important to point out two different things and gems is uh uh uh you know it's on one side it's obviously using a blockchain technology so it's not a closed system um the intrinsic value that we are bootstrapping into gems is derived from the use as an advertising credit inside

the systems that advertises can use in order to send the unsolicited the messages and to the gems users and I think that's something and that is much more exciting for the users because they get they're paid directly by the advertising so it's a partnership it's not uh usually spam advertising that we're used to if somebody is willing to pay for your attention I think the quality will be higher and there's a bigger chance that you will like to to read or receive a specific targeted materials and that you're interested with but from the technical point of

view obviously gems can be used outside the the gems application and if it grows and there is a bigger user base and there is liquidity and stability it might be able to use as a as a paying to pay for for things just like a Bitcoin organically grew with the user base and liquidity and so on we can't um control this aspect um what we can is ADD um you know as much as we can features inside the gems mobile applications like um

sharing a economy type of activities like crowdfunding and cool features to give users usability with the gen's tokens so there is needs to be a separation between the purpose of gems inside the mobile application and the outside uses that people will be able to do and because the blockchain technology and that the gems tokens is built upon so um you know down the line um you know it's more consumers or so

um or more exchanges and third-party applications and that will I think need to be regulated with these policies as you mentioned kyc and anti-mondoring and so one thank you yeah so if if I may paraphrase maybe the way I would describe perhaps uh the position here is that you say uh first uh James is a product right it's a it's used as a product in-app if it has some value somewhere else you know that sort of like magic cards that have values elsewhere you can sell them or or whatever uh and then I guess the other

side as soon as people start using um as soon as start people start using a Bitcoin in it it's sort of like you guys are just providing the wallet and in that case I guess you will fall into several a similar regulatory category as let's say a blockchain or info or other wallet providers that you know provide the software but don't hold the private keys which I think is a perhaps a good position to have and then I can imagine that it prevails I guess we will always see how crazy uh it gets in New York with license and similar approaches

yeah I think the what um currently The Regulators are trying to put their attention on is the conversion between um Fiat money to bitcoin or to cryptocurrencies and and this is more relevant to um exchanges and coinbase and third parties that are providing this infrastructure um inside the application we have specific uses for gems tokens as we we said and soliciting messages and advertising and so on and so right now um it's less less effective on us

[Music] um so where are you guys Incorporated right now is is that something that you've already established or is it still is still working on that question um no um we are organized they were Incorporated in Israel and the development team is in Israel um we're doing everything we can and by the book okay and how has uh we I mean we talked

to Manny Rosenfeld a few weeks ago about about the ecosystem in Israel how do you think things will evolve there with regards to the government accepting or rejecting uh cryptocurrencies and there was a inside Bitcoin uh Tel Aviv and two or three weeks ago so there was a representative from the Bank of Israel that talked regarding this question as I understand it um you know there are understanding that there is innovation here there is a a chance to empower small businesses and you know the the movement of value

between countries and between the users so it seems to me that um they are studying it carefully but they are looking of ways and to regulate it in a way that um won't hurt the the centralized nature of of Bitcoin and cryptocurrency and there's a lot of things that this ecosystem can bring to businesses and to Applications that weren't available before okay now just before we wrap up uh I'd like to come back to the app actually because we've been talking about this app uh for almost an hour but I haven't really

talked about the application itself so you mentioned that it it will look like like WhatsApp or perhaps Facebook's messenger um is there anything else that you want to add to that about how the app will look and how what will be the experience essentially of using the app um yeah so like I said and we want to create the user experience as simple as possible that anyone that logs in can is able to use it right away in our opinion they're a dedicated Bitcoin wallet is not a good enough for mainstream users because um you know they might use it once to

receive their first Bitcoin but it won't keep them attached and to the to the application but when you bring this added value of a social network of a messenger building built around this Bitcoin or gems wallet it makes things much more interesting um there's going to be a uh like in a in WhatsApp you see your messages from your friends so if you get a promoted messages that somebody paid you gems is going to be highlighted uh differently so you'll be able to know if it's a paid message or a regular message um obviously the wallet will be will

display the amount of gems you hold and the the value and the ability to send the and client to client encrypted message and the ability to send their gems and Bitcoins and it's going to be um very easily portrayed in the in the in them in the keyboard so you'll be able to easily just as you send a text to send the the BTC or gems to your friends and to other users okay so the app will be available on Android and iOS but is there going to be a web client as well or a desktop client because I mean a lot of times you're

sitting by your computer right and not necessarily always on a mobile device yeah and if the community if this will be a demand we can actually implement it very fast and right now there is a walking beta Alpha version of the iOS version that we're gonna release during the the crowdfund period and then Auto priority is a is developing the Android application also if there is there will be a demand for a web a desktop application we can do that and WhatsApp still don't have uh desktop application so I'm not sure how much the demand is

big but if it is it will be easy and fast to implement it okay and so it seems to me that there are perhaps some interesting opportunities for Brands to utilize uh uh a platform like gems um now to two things I guess one is how do you think Brands can use gems and so as sort of you know for from the perspective new business models I guess and uh also do you think that in the future there would be some sort of a developer platform where developers could come on build apps on top of gems and perhaps monetize those I guess I'm

thinking about like new business models new types of uh ecosystems that we can build on top of this platform yep um so uh one of the the ways we can get the advertising active inside the application um I before I I said that um you will be able to send the unsolicited messages between users that is something very interesting by itself but we we're also going to have uh um advertising uh page a little bit similar to a zero block that they're getting their feed from Reddit and from the Bitcoin website so you will be able

to select the things that interest you if it's a e-commerce if it's Bitcoin or if it's a other other things and the most it's it's again it's a bidding system to get uh to be on the on the highest point in this news feed um so this is one way for Brands to um to to to actually bring awareness and to what they're doing and regarding third-party applications I think it's still obviously we're very uh we are very supportive and that's why we are living a a bigger percentage to incentive this kind of contribution uh

it's something that haven't been done before that there is a social network filled with a token monetization monetization system inside so it's a little bit [Music] um early to speak about the the possibilities but like doing a inside the crowdfunding or you know building a um more usability surrounding the the tokens and groups and what you can do with it I think will be very interesting to see what they what people come up with and we are very interested in the community contribution to this cool well thanks so much guys for

joining us today it was really interesting talking about James and I think it's one of those projects that I'll be extremely interested in watching where it goes how the crowd sale goes and especially how it goes on afterwards how people will use it and especially if you will we will see that kind of mainstream adoption that we are hoping for that it will serve as a hopefully as a great tool to introduce people to um to cryptocurrencies so thanks so much for joining us today guys um so for those who want to learn more about gems you can go on their website it's called getgems.org so that's

getgems.org uh really nice website by the way like design wise I think you guys seem to be uh maybe like some of the best we've seen in uh I've seen in the Bitcoin space um you can also check out queenify especially if you're interested in participating in the in the the token sale they have a blog post there that goes into their economics some of what we've talked here but if you are interested in in purchasing some I recommend you have a look at that so that's queenify.com that's Queen if I have a k um so you can check it out there and um thanks so much for listening so if you you know if you want to support the show

you can do that in a number of ways you can follow us on Twitter at the episode of BTC uh you can also um uh subscribe or follower or Google Plus page so you will see the next Hangouts coming up um and you can of course also donate to us which we do appreciate for the work we do it's a Epson bitcoin.com tips our next hangout is coming up on Wednesday November 26th at 7 30 UTC now what's UTC in normal so Cemetery that would be 7 30 um GMT so London time that would be 8 30 European time and I think that would be 330

Eastern as a New York time if I'm correct but that may be wrong so that will be with with solid X solid X is a company that does something totally different and they're trying to sort of get institutional investors to buy Bitcoin so help them buy Bitcoins and do really rich people that may have some other barriers especially regulatory kind totally different thing but I think very interesting too uh so yeah please join us for that one and uh thanks so much we look forward being back soon foreign