Lighthouse Tackles Decentralized Crowdfunding

The 21st Century has seen the rise of a new crowdfunding industry, providing entrepreneurs and investors with an internet based direct funding model. A May 2014 report, "The State of the Crowdfunding Nation" released by The Crowdfunding Centre, presented data showing that more than $60,000 USD per hour was raised through crowdfunding initiatives during March 2014.

Bitcoin Core developer and Google engineer Mike Hearn launched an open source application called Lighthouse in January. The application enables crowdfunding, purely in bitcoin.

Alternative platforms, such as Bitcoinstarter and Coinfunder, aim to raise Bitcoin with crowdfunding. Both have a range of completed projects. However, Lighthouse is fully decentralized. Shutting down Lighthouse would be a similar challenge to shutting down Bitcoin itself. The resulting platform is a unique crowdfunding option where no middlemen and no fees exist. All money is sent directly from the donor’s bitcoin wallet to a project manager’s wallet, within a smart contract.

"In this way you can give money, conditional on enough other people also contributing. If you discover you suddenly need that money, no problem, just revoke the pledge and it will be immediately returned to your wallet without involving the fundraising party."
— – Hearn

Hearn applied decentralization to as many aspects as he could, not just handling funds. Users of popular fiat platforms, kickstarter and indiegogo, are used to seeing large galleries of projects to fund. Lighthouse has no such gallery of projects to browse through.

In the place of a centralized gallery, Lighthouse allows you to load project files found elsewhere online. These small project files can be made by anyone, with the lighthouse client software, and can be distributed through a variety of channels.

“You find them via the web, social networks, etc. Lighthouse does not include a global list of all projects or a search function, because a global list would rapidly become cluttered without centralized and ongoing curation and search is a hard problem better solved by companies like Google, Bing, Facebook etc.”
— – Hearn

While Hearn has created a decentralized core platform, he expects third party services will add the functionality seen on legacy services, “We think that web developers will be able to do a great job of providing social and community building features when freed from the hassle of securely managing money by Lighthouse” states Hearn. “Whilst projects that are large enough will probably just do marketing and awareness through their own websites, other projects will need someone to provide them with a temporary home.” states Hearn.

“we hope that the community will step up and start building Lighthouse project galleries. These are just websites that bring together people looking for crowdfunding with people who want to fund.”
— – Hearn

Galleries showcasing Lighthouse projects are already up and running, including Hearn’s Vinumeris project gallery  and the Reddit Lighthouse Projects board.

In addition to being decentralized, Lighthouse is also open source. A situation Hearn struggled to achieve,“I planned to make the first version crippled and locked down to only my own projects. The reason was a plan to raise the development costs of the app using Lighthouse itself, presenting a catch-22.” states Hearn.

Hearn was able to provide free and open software, with help of the self-described Bitcoin millionaire Olivier Janssens. While Lighthouse was in early development Janssens awarded Hearn $40,000, part of a bounty on Reddit.

"By working with Olivier it has become possible to release Lighthouse as open source as soon as development is far enough along, without having to go through an intermediate locked down release first. This will allow the whole community to benefit from easy, point and click Bitcoin crowdfunding. You don’t even need a website!"
— – Hearn

The original $100,000 bounty was offered by Janssens for a solution to his question, “What is the best platform to replace the Bitcoin Foundation?” Janssens noted, “the main thing they are doing right now is funding some of the core Bitcoin developers. And I might add, they are not doing a very good job at that.”

Janssens funded Lighthouses development so that he could ultimately fund Bitcoin Core Developers, with the majority of the remaining bounty.

"Olivier has committed to investing 50% of the bounty into Bitcoin development projects crowdfunded through the platform. This should provide an immediate boost to development, by allowing developers who are currently on the sidelines to start earning money writing Bitcoin upgrades. " States Hearn

Since Lighthouse’s architecture is both open source and decentralized, without a central point of control nor containment, there are no restrictions on the range of projects that can be funded. As Janssens stated when picking Lighthouse as the winner of his bounty:

“The sky is really the limit. And it will not create any political overhead, we can select the projects we want to support directly.”
— – Olivier Janssens

Anyone with any project ideas, big or small, can crowd fundraise through Lighthouse, and be directly funded by bitcoin users anywhere on Earth. There are neither restrictions nor limits on what kind of project you have.