![https://basicattentiontoken.org/](https://cdn-images-1.medium.com/max/880/0*0pqTwy4k_tndD2nM.png)

Intro

There’s a lot going on with this one — a browser, a token, and re-imagining a 170 billion dollar industry. It probably bears repeating — this is not investment advice and for full disclosure — I own some BAT. The thesis the Brave/BAT team is putting forward is that the digital advertising space is all jacked up and there is a way to do things where everyone save the scammers can do better. What attracted me to this project is the focus purely on the incentives of each of the participants and building a solution on top of that. If the solution does what it says it does and if everyone is true to their stated incentives then everyone should win.

The Attention Economy

For likely the first time since the agricultural revolution (check out Sapiens by Yuval Noah Harari for more on this) humanity is approaching a future where there is going to be “enough” for everyone. Enough what? Food, Money, Resources, Knowledge, anything. Ability to access it (whether imposed by those incentivized to restrict access or by the structure of the system itself) can be debated but theoretically if you flattened out the collective resources in the world right now everyone could chug along pretty happily. I know what you’re thinking — that’s a great lead in by a coastal liberal, **but not so fast!** https://cdn-images-1.medium.com/max/1760/1*m7yaOcWkYBUk8C20ioXy3g.gif I am not here to talk about how we get to that point, I am here to talk about where value will be found in this “post scarcity” world. If strict control of physical assets and resources is lost and artificial demand drops then the value in those networks will drop as well. Where does that leave us? What is the one thing we cant control? **TIME** ![yet.....](https://cdn-images-1.medium.com/max/1760/1*0YKoY5uMcUHI2nCPwmrK7A.gif) **Relativistic aside** — Yes, we all know time is an artificial construct dependent direction and degree of our current acceleration in relation to other gravitational bodies. For the sake of this discussion I will assume we are all on earth and that earth will maintain its current orbit and rotational velocity. To monetize anything it must first be scarce. And while time itself isn’t scarce (or really even objectively exist) there are a finite amount of people who are bound by a limited length of existence. People (for now) control the movement of value, so what do you do if you are facing a world where it is difficult to create new value? You convince people to shuffle the existing value your way. How does one do that? — Advertising! https://cdn-images-1.medium.com/max/1760/1*bXhZVEfdib676CXAcloHyA.gif If you don't think advertising is that important I will wait here while you look up the market cap of Facebook and Google. While it could be argued both Facebook and Google are providing services that people find valuable what they are really doing is siphoning your attention to an area where it can be sold to advertisers that would like you to shuffle some of your assets their way. There’s your setup, these two podcasts really helped codify some of my feelings on this topic and piqued my interest in BAT and the Brave project. https://soundcloud.com/consensys/state-change-40-the-weaponized https://soundcloud.com/consensys/state-change-43-the-battle-for

Overview

I would recommend checking out [the whitepaper](https://basicattentiontoken.org/BasicAttentionTokenWhitePaper-4.pdf) if you are interested, there is some really great information, it isn’t a terribly boring read, and there are copious charts and infographics (no gifs though). The main overarching goal is to “fix” online advertising. Throughout the online ad supply chain there is rampant fraud and deception, leading to a frustrating and inefficient system for all participants. Lifted from the whitepaper: * **Users:** strong privacy and security when viewing advertisements, improved relevance and performance, and a share of tokens. * **Publishers:** improved revenue, better reporting, and less fraud. * **Advertisers:** less expensive customer attention, less fraud, and better attribution. There are further designs on how best to leverage this new value system that will be built into the browser but striking the balance of providing increased value to all legitimate participants is the initial goal. The whitepaper lays it out pretty well >Users face unprecedented levels of malvertisements and privacy violations. Mobile advertising results in as much as $23 per month in data charges on the average user’s data plan, slow page loads, and as much as 21% less battery life. In response, over 600 million mobile devices and desktops (globally) employ ad blocking software and this number is growing. Traditional publishers have lost approximately 66% of their revenue over the past decade, adjusted for ination. Publishers face falling revenue, users feel increasingly violated, and advertisers’ ability to assess effectiveness is diminished. Only one method in history has worked against malvertisements and I doubt we will employ it any time soon. https://youtu.be/SlKao_Pox5A

People

THE most important part of any project are the people working on it. With BAT/Brave its a pretty easy discussion. [Brendan Eich - Brave - Reinventing the Monetization of Content and Attention](https://epicenter.tv/episode/185/) The guy created javascript and was key in founding netscape and mozilla. He’s done this before no reason to think he cant again. The rest of the team looks quite accomplished and they are leaning largely on advisors on the blockchain/token side. Most importantly they dont appear to be scared of the limelight or hard questions.

Product

It is pretty difficult to distinguish the Brave browser from BAT (resisting every urge to write “the BAT Token”) but they are separate components. I recommend trying out the browser, I am using it right now — its a bit buggy still but I do really like the theory behind it. The product discussion will be more about the ecosystem they are trying to foster, token focused specifics will come later. Below are the incentives they are trying to balance. https://cdn-images-1.medium.com/max/1760/1*L3vlKgyu8oRcj5nUVi93VQ.png Ideally all three components of the triad end up with a better experience, the simple model is as follows. * Advertiser wants specific types of users to view their adds * Publishers provide a means of delivering ads to a categorized audience * Advertiser is willing to pay to ensure their ad is making it to appropriate category of user and to confirm the user was exposed to the content * Brave browser ensures the attention supply chain is not subverted * BAT is used for distribution of value A few key components to call out. * Users can eventually be paid for viewing adds * The Brave browser has a NO AD option which is currently free (and intended to be kept free) * It is encouraged though to donate to frequently used sites - there is a model for this built into the platform * Once BAT balances are built up they can be used for other in-browser transactions (subscriptions, accessing premium content, etc.) ![http://www.businessinsider.com/the-ad-fraud-report-bot-traffic-2016-3](https://cdn-images-1.medium.com/max/1760/1*pC71sGTk1dH-IkT-hNq6gA.png) The whitepaper goes into greater detail but the rub is basically that there are endless ways that bad actors can interfere in he advertising supply chain that is either annoying for the user, disruptive to the publisher, or costly to the advertiser. ![Bad bot seen enjoying your clicks](https://cdn-images-1.medium.com/max/1760/1*iB_DBKS-sPZVInvRNdqHYQ.gif) Like other blockchain enabled projects they are leveraging the things blockchain does well — trustlessness and efficient writing of events to a ledger to address these problems.

Token

The token is used as the transfer of value back and forth between publishers, advertiser, and users. A token sale was held on 5/31/2017 and 156,250 ETH were raised. * 1.5 billion total tokens created * 1 billion sold in the token sale * 200m went to Brave team * 300m kept for user growth pool *BAT was issued as ERC20 token on ethereum blockchain * When live, transactions will occur in a ZKP (zero knowledge proof) enabled state channel on ethereum The initial use case for the token is advertising focused but there are some other economies that can be enabled once the value has flowed into the system through advertising. There are two blockchain integrations in play here. * BAT — Token issued on Ethereum used for value transfer * Basic Attention Metrics (BAM) — Tracked in the Brave browser ledger system to ensure user attention is being accurately and reliably tracked and reported Both are needed to solve the digital advertising problem but they can also be used independently. The details of how the browser tracks attention is best left to Brendan to explain in the podcast above and the whitepaper. High level — it knows what you clicked, how long you were on a page, which tab was active for how long, etc. stores it locally at the browser/session level and writes to the Brave ledger in an encrypted, cryptographically secure manner. That is a ridiculous over-simplification, please check out the referenced resources if you are interested in how it actually functions.

Financials

There was a projected $7.2 billion in online ad fraud in 2016. This runs the gambit from statistics being misrepresented to malicious ads replacing legitimate ones. That number alone should be reason enough for advertisers and publishers to be open to alternative ad delivery platforms. The benefits on user side will manifest in a smoother browsing experience and the allure of directly being rewarded for their attention. Global digital advertising revenue was projected to be over $170 billion in 2016 and is only increasing. If one is to assume that BAT will only be used for value transfer based on advertising, to break even with the current price (~15 cents), once all tokens are in circulation, BAT would need to account for **.1324 percent (~$225 million)** of global digital ad revenue to break even. There are some clear initial hurdles * Getting people to leverage the Brave browser or integrate with other browsers. This is where the user growth pool comes in. * Bringing publishers and advertisers onto the platform. But also some things that skew the numbers positively * Currently over 10% of BAT are held on exchange (Bittrex). That will fluctuate but it will remain a good portion (Analysis of tokens used in ecosystem vs traded on exchange and affect on success/price is another topic on the list for further investigation). * BAT is intended to be used beyond advertising, for any in-browser value transfer. Users will need to sit on a balance to make sure they have tokens when they need them. A quick aside on my dirty math here — I recognize this market cap calc (price * tokens) doesnt necessarily align with a representation of annual revenue. That would basically imply that each token is transacted once a year. It is also impossible to compare the Brave/BAT model to the existing system. The current system is one-way — advertisers pay publishers, period. In this new system, advertisers will pay publishers, advertisers will pay users, users will pay publishers, and users can pay users (essentially breaking down barriers to being a publisher). Trying to work out a better system for token economics comparison and valuation remains a work in progress. ![underpriced, overpriced, one fish, two fish](https://cdn-images-1.medium.com/max/1760/1*YHhmUtIrw31qKhsDvcCNiw.gif) How is the team involved making money? There is generally a lot of discussion about aligning incentives of actors in a network but not much about the incentives of those building and managing the network. To me, this is a massive oversight, unless great grassroots communities pop up immediately around a token, the success will largely hinge on the original team. For the Brave team I believe there will be a percentage taken on transactions within the browser. I haven’t been able to track down specifics, folks don’t really seem to care too much about this question after the token sale, but the funds from the token sale aren’t going to keep the lights on forever. If I find out details or if someone corrects me I will gladly update but a small transaction fee in the browser seems to be a model that would make sense for everyone involved. Good enough for now? cool. https://cdn-images-1.medium.com/max/1760/1*hJEoRRgbfe5xTrGgKaLgHQ.gif

Activity/Transparency

The Brave/BAT team is very active and it seems like they are very committed for the long haul. It is a daunting task but the team involved has achieved daunting feats before. Brendan recently published their current roadmap. They also recently added two community managers to keep everyone informed. [BAT Roadmap 1.0](https://medium.com/@AttentionToken/bat-roadmap-1-0-988ed947cf0d) It is an open source project and Brendan at least to his point has been popping up on podcasts/conferences and posting to medium. the smart contract holding the Brave funds is available to query and coin distributions have come with clear explanations. Adoption is going to be what makes or breaks it (see a theme here with these crypto projects?) so I imagine we will continue to hear a lot about them.

Conclusion

By end of the year we should have a decent read on how long it is going to take to catch on (if it does). The basic integrations will be complete and there will be an active focus on growing users and adding publishers and advertisers. They claim to have a group of publishers tee’d up and ready to go [but can only release information on a few of them](https://basicattentiontoken.org/some-common-questions-about-bat/). When thinking about this project I cant help but contemplate the nature of global value transfer. $170 billion is a lot of clams, but advertisers aren’t knocking on the door of each publisher and handing them cash every month. That value is largely synthetic. The only thing tying it to reality is when the value is taken out of the system in the form of fiat currency. In between all of that its really just “value units” getting passed around and being represented in various accounts in whatever format they prefer. Nike sends x “dollars” to ESPN for the ad running on their front page, ESPN adds x to their balance sheet, balance sheet is rolled up to Disney, Disney reports earnings based on balance sheet at the end of the quarter, Disney stock goes up in small part because Nike paid for their ad, Disney execs and Disney stockholders get a little “richer”, employees at Disney/ESPN maybe get compensated better or have a better chance of keeping their jobs, maybe they put some of that compensation into some (still synthetic) investment vehicle, but maybe they also cash out and go to their local greenmarket and buy some produce. If you use it to buy Nike products then we run it back! https://cdn-images-1.medium.com/max/1760/1*l3XTjDE0B6lbMotKJmOsog.gif That is the shortest route I can think of to real value being associated to this network. Stripping out the fraud and the fat should allow all participants to have a better experience and have a better chance to “get what they pay for” but the numbers could be incredibly inflated due to all of that fat so one must be careful when projecting network value……… As always, do your own research before investing and only put in what you are willing to lose. Feel free to suggest a coin to tackle next. If you have enjoyed my articles, try out my referral codes/links. ![](https://cdn-images-1.medium.com/max/1760/1*SRCwSo7NLV7Sw7iIO5WxyA.gif)

Good luck out there!!

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