Op-ed: BitTorrent’s New Crypto Token is Stupid

Recently, BitTorrent Inc. announced the creation of a new crypto token to be used within the BitTorrent network. The new token is called BitTorrent Token (BTT).

The idea of combining BitTorrent and cryptocurrency has been around for years. For example, Joystream Classic is a BitTorrent client that has already combined the BitTorrent and cryptocurrency worlds. The basic idea is that allowing users to pay for priority on the BitTorrent network will incentivize the seeding of more niche content and create a fastlane where users can pay to prioritize their leeching of popular content, which should incentivize more users to seed the popular content too.

The backing of the BitTorrent Foundation brings added credibility to this new project, but there are a variety of issues with this new plan to integrate a token into the BitTorrent protocol.

Appcoins Don’t Work

The core issue with the Bittorrent Foundation’s new crypto token is the fact that a new token is being created at all. Thousands of cryptocurrencies already exist in the wild, so it’s unclear why none of these could get the job done.

Of course, the reason for creating a new token is to raise funds for the project through an initial coin offering (ICO). While these ventures are great for raising money, these kinds of tokens do not work the way the initial “investors” think they will work. In other words, ICOs don’t act as equity in network protocols or decentralized applications (dapps). There’s no direct connection between the growth of a network or dapp and its associated crypto token in almost all cases (see an explanation of this point here).

Since there isn’t really a way to properly value ICO tokens and they are wildly more volatile than the already relatively volatile bitcoin, users should prefer not to hold these niche tokens. Instead, they’ll limit their exposure to the ICO token by only using it to gain the functionality of the app or network. Users would likely rather store their value in bitcoin, traditional fiat currency, or some other asset.

The issues around appcoins (what people used to call ICO tokens) have been well known since at least 2014, but that hasn’t stopped thousands of projects from trying out the concept. Having said that, it’s difficult to turn down free money.

The Problems with TRON

On top of the issues that come with creating a new token, the BitTorrent Foundation chose a horrible platform for their cryptocurrency: TRON. Of course, BitTorrent Inc. was recently acquired by TRON founder Justin Sun, so that explains that.

TRON is best known in the cryptocurrency space as the project that raised $70 million on the back of a plagiarized white paper. Additionally, some of the TRON codebase was also copied from other projects without attribution.

https://twitter.com/bedehomender/status/950062636984659971 

On top of the plagiarism, a former BitTorrent Inc. executive recently told BREAKER there’s no way the TRON network will be able to handle the transaction volume associated with a native token for tbe BitTorrent network.

“[TRON is] basically a marketing machine layered on a very thin veneer of technology,” former BitTorrent Chief Strategy Officer Simon Morris told BREAKER.

Morris went on to tell BREAKER that he thinks the BitTorrent Token is more talk than anything else.

Morris suspects the real token will be much more centralized than what is being talked about today — this is, if anything is released at all. To Morris’s point, the BitTorrent Token white paper mentions the use of a “high-performance private ledger” as part of the system.

How Should BitTorrent Use Cryptocurrency?

Having said all this, there still may be merit to the idea of combining BitTorrent with a cryptocurrency. But the proper solution is much simpler than what the BitTorrent Foundation is attempting to do.

Instead of creating a new, application-specific token, software could be built that allows leechers to pay seeders for data on the BitTorrent network via Bitcoin’s Lightning Network. Bitcoin is the oldest, most reliable, and most liquid cryptocurrency, so it makes sense to give users the ability to use it. Additionally, making payments via the Lightning Network will allow them to happen instantly at basically no cost.

Notably, BitTorrent creator Bram Cohen is an advisor to Lightning Labs.

There’s no need to reinvent the wheel. The tools for adding better economic incentives to BitTorrent already exist with Bitcoin.