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The Problem With Minds.com Business Model (and why it is not sustainable)

MadChadJul 31, 2019, 5:35:44 AM

On  July 13, 2018 Minds.com held an ICO for their erc20 Minds token with a price tag of twenty-five cents each. They labeled it as a 'utility token' and promised each token would be used to deliver one thousand views to boosted user content. Minds would continue selling this token on their site for fifteen cents each.

Since the beginning of the Minds token, Minds has rewarded users free tokens based on their overall usage of the site. This is akin to those old sites that would pay users to view ads, but this time it is paying users to view other users content. While in theory this sounds like a great idea, in practice it is nothing more than handing out free tokens that Minds is responsible for providing views for as one Mind token is a literal contract between the holder and Minds.com and is redeemable for one thousand views on their boosted content.

Minds token is literally a contract

Fast forward to almost exactly a year and 8,000,000 tokens later and Minds raises the price to $1.25 due to high usage of the token in content boosts. They have been unable to provide enough views to satisfy their debt so by raising prices and prioritizing onchain boosts they hope to lessen the demand on their services. 

We can already see several problems here. First of all they have eight million tokens to provide services for. These tokens represent EIGHT BILLION views that they have agreed to provide. Secondly there are not enough viewers, whether this is due to lack of advertising, shadowbanning by google search or some other reason is unknown but offering a paid membership of twenty tokens a month to allow plus users to avoid having to view boosted content probably doesn't help reduce the boost queue much.

Erc20 tokens are designed to function as a tradable smart contract. As we already know there are eight million onchain tokens currently in existence of which about two million are held by users (this is an estimation based on public data provided by the ethereum blockchain, assuming the largest wallets are held by minds.com). 

The two largest token wallets appear to be held by minds.com

These tokens are either sitting unused in onchain accounts or being actively traded. There is no way of knowing how many offchain tokens exist as these are the centralized version of minds.tokens and stored on minds.com's servers. One would assume it would be less than the amount of tokens minds currently hold but as stated in the token specs their contract allows for the minting of up to one billion tokens. Also stated in the specs is that 90% of these tokens are to be allocated for rewards while only 10% are to be sold.

Minds.com has been touted as being the site users can go to to get paid for their content such as here, here, and of course here. These articles brought in many users interested in making a living as content providers so naturally they want to get paid. So how do they get paid? Well you can't buy food with minds tokens so they trade them for other cryptocurrencies they can cash out (namely ethereum, since minds token is a erc20 ethereum token).

Now this brings me to the reason why minds.com business model is not sustainable. Given that these tokens are being actively traded for a lot cheaper than minds.com wants to sell them for (and always will as long as people want real money in their pockets) the smart money would be buying onchain tokens, not offchain tokens. 

So how is minds supposed to make money off this? Well the truth is as of now they are 100% dependent on outside funding and sales of tokens on the site. Since minds.com is giving away free tokens many users have no problem selling these free tokens for much less than minds.com is selling them for. Eventually everybody will know they can go buy tokens on a erc20 exchange and save a lot of money. This is not sustainable unless minds can sell more offchain tokens than the free tokens they hand out.

What needs to happen to make minds profitable is to reduce the amount of tokens in circulation. As it stands today they only have two ways of doing this, providing content boosts and selling plus memberships. We already know they cannot provide boosts fast enough because of the choked boost queues we have been seeing lately. Also, twenty tokens per month for a membership is probably not enough to eat up all the tokens out there especially when said membership removes the user from the possibility of providing boost views.

Increasing token prices to $1.25 is probably a step in the right direction but will take time to manifest itself because there are going to be a lot of tokens out there that were attained for fifteen cents (or less) for a long time. Also this means that they are paying more in rewards now that the token is of much higher value (not sure why they did not decrease rewards to reflect higher token prices).

There are a lot of ways they can fix this. One would be to institute a buyback program. This would incentivize users to sell their token directly to minds.com or minds.com could simply create a buyback program to buy back tokens on a token exchange of their own choosing. They could also add more money sinks. Minds already sells merchandise on their site. What if they sold their merchandise for minds tokens instead? There are probably thousands of other services they could create on the site itself to serve as money sinks as well.

One thing is true though if they cannot provide enough services to backup the minds tokens they will not survive and someone will have to come up with a better, more sustainable business model on a new minds-based site with the existing open-source code.