When Ted Livingston was bitten by the Bitcoin bug in 2011, he became convinced that cryptocurrency would change the world—except for one fundamental hitch. Hardly anybody was getting paid in and using it.
Livingston, the founder and CEO of Kik, a chat app used by 15 million people monthly, never shook his early conviction. Now he believes his business has a shot to make cryptocurrency, if not Bitcoin, go mainstream.
Kik plans to debut its own cryptocurrency called “Kin” later this summer. The Waterloo, Ontario-based company is planning a crowdsourced initial coin offering or ICO, which lets startups mint their own digital money, raise funds outside the traditional venture capital world, and develop their own miniature economies. The exact date has yet to be determined.
Kik’s cryptocurrency will be built atop the Ethereum network, a developer-friendly rival to Bitcoin.
If any of this sounds vaguely familiar, well, it should. Kik unveiled a sort of virtual currency called Kik Points in 2014, which it shuttered in the fall. After that initial experiment, the company is betting that the time is now ripe to introduce a new digital token based on Ethereum, considering how far Ethereum has recently risen to become one of the hottest areas in all of financial tech.
Livingston’s decision to mint a cryptocurrency for Kik comes in response to the growing tendency for online advertising revenue to be soaked up by giants like Facebook (FB) and Google (GOOG). This trend has made it difficult for scrappier upstarts that depend on online ad sales to find their footing and develop sustainable business models.
The giants “copy and crush the few that do break through, leading to a future where a very few number of companies own and control the vast majority of digital services we use every day,” Livingston told Fortune. “We think this will be bad for society.”
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The business model that will be startups’ saving grace, in Livingston’s view, is the cryptocurrency-fueled meritocracy wherein users can hold something akin to an equity stake. In this system, those people who contribute the most—whether by designing successful apps or by creating the most-viewed content—are rewarded with more cryptocurrency.
As the network, like Kik, increases in value, so do the digital tokens that keep it all humming. Or at least that’s the theory.
In Kik’s case, the company is planning to generate 10 trillion Kin tokens in total, a percentage of which will be doled out on a daily basis as rewards to developers and users through a separate non-profit foundation called the Kin Foundation. The leadership of that independent body, which will own 60% of all Kin tokens, will be determined over the course of the year, depending on the community that organically forms after Kin’s launch, Livingston said.
In order to avoid a major blow-up, like last year’s hack of the DAO, an earlier Ethereum-based project that sunk after a hacker discovered a flaw in the project’s code and stole about a third of its funds, the distribution of Kin tokens will initially be handled in a centralized and discretionary manner, to make sure no one can game the system, Livingston said. Eventually, the company plans to let the distribution of rewards be handled by a so-called smart contract, a piece software that automatically executes business dealings through a blockchain, which is essentially a public ledger of transactions.
More details about the upcoming token sale are available in on the company’s website, and further information will become available in coming weeks, Livingston said.
Fred Wilson, a Kik board member and partner at Union Square Ventures who has for years been one of the biggest bulls about cryptocurrency, endorsed the move. “We believe cryptocurrency is the next important business model innovation in tech,” he said in a statement. “Kik will be the first mainstream application to integrate a cryptocurrency. This could be a watershed moment for the blockchain sector.”
Other companies are hanging their hopes on the nascent technology, too. Coinbase, a cryptocurrency broker and one of the best funded startups in the space, recently built a chat-and-payment app called Token that’s also based on the Ethereum network. Next week the ad-blocking web browser Brave plans a sale of Ethereum-based “Basic Attention Tokens,” which are designed to let people pay publishers directly through micro-transactions.
“The most under-appreciated thing about cryptocurrencies is just how much economic power they unlock,” Livingston said.