Everybody seems to be talking about bounties these days. We tried to figure out what they are.
What are bounties?
Bounty is a term for reward in the online gaming world.
Yes, the term is borrowed from gaming. But the application is the key difference. Blockchain and cryptocurrencies provide new ways of leveraging reward mechanisms through smart contracts. Have you ever heard of Pavlov’s dog? Russian Nobel laureate Ivan Pavlov showed how dogs could be conditioned to salivate to a bell ringing once they learned the bell would be followed by food. Since then, behaviorists have spent more than a century exploring how rewards can extrinsically motivate individuals to engage in a behavior to satisfy a need or desire. Decentralized technology is also introducing a new generation of reward applications.
How do bounties capture cyber criminals?
Bounties integrated into Blockchain applications are emerging as a mechanism for policing all forms of cyber crimes.
Hackers were the first digital criminals targeted by bounties. It’s the result of fed up Bitcoin traders whose Bitcoin accounts and emails were being hacked. Soon websites such as Bitcoin Bounty Hunter emerged, offering rewards in BTC to people to locate the crypto thieves.
The structure of a smart contract enables innovative ways of policing cyber crime—the most common and fastest growing area of crime. Piracy, which costs the media and entertainment industries billions of dollars in revenue, is one of the many areas where bounties are applied. Piracy bounty hunters will be able to collect a bounty when they expose digital media that circulate on pirate sites. The media owners embed Bitcoin—the reward—in the digital media. When an individual recognizes a pirated work on a filing sharing site, the Bitcoin bounty will be released to the bounty hunter.
Transparent Blockchain transaction records allow media owners to easily confirm if an illegal copy is indeed circulated. Eliminating a middleman, bounty payment can be instantaneous. When a stipulated action of a smart contract is performed according to the rules, the cryptocurrency is released. Even digital pirates may sometimes rat on other digital pirates.
How can I earn bounties solving problems?
They can offer solutions to issues that seemed to have none.
Bounties are offered in both fiat and digital currencies to solve technical problems.
Science Bounty hunters can be rewarded by solving problems in science, technology, engineering, and mathematics, i.e. STEM. When posted problems are resolved, a bounty is released. By placing the solutions in a digital library accessible through custom tokens, information sharing is promoted and research duplication reduced.
Bug bounty hunters find security “loopholes” in software code to prevent hacking. The Ethereum Bounty Program, for instance, has played an important role in the development of a more secure Ethereum Blockchain. It managed to find and take care of security and other flaws. Users of bug bounties range from large companies such as Nintendo to the US and Chinese governments.
The cryptocurrency ecosystem provides additional motivational levers. While most rewards are for a predefined amount, this type of payment has the potential to appreciate in value. Similar to stock options in which the potential for appreciation increases their motivational value, an award in cryptocurrencies also has upside potential, as well as downside risk. Immediate gratification is another motivational level. Bounties can be released immediately to anyone who has managed to solve a problem or attain a performance level.
What do bounties have to do with initial coin offerings?
In the real world, most bounties are used for purposes other than catching bad guys.
You may have noticed bounties being offered in more initial coin offerings. Under their coin distribution plans, an ICO may show an allotment of their coin allocation to bounties.
In some cases a gamification strategy with the potential to reward winners with additional coins is used to entice investors to invest in the ICO. For example, the first 100 investors may have their coin purchase increased by an additional 10 percent to motivate them to participate in the offering.
In other ICOs the bounty allocation is earmarked for use in the running of the business. The Coinlancer project, for example, uses bounties to create a community of freelancers who benefit from promoting and participating in the growth of the online job marketplace.
How does it work?
The project offers six types of bounties.
The freelancer website has allocated two percent of its 300 million tokens to bounties.
Coinlancer tokens (CL) will be used to pay for freelancer services, buying or selling freelancer services on its platform. They may also be traded in the secondary market.
Social media users can receive tokens helping to promote the project through BitcoinTalk and other social media; referral marketing is a popular form of Internet PR campaigns. Payment in cryptocurrency provides added potential for the coin’s value to increase as more people join and use the service.
As these early applications demonstrate, the combination of reward theory with the smart contract has vast potential to be used in the industry.
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