The paradox of presales - pondering Gems

A few weeks ago during one of the Vancouver Bitcoin Meetups, we were introduced to the Gems platform. Gems is a social messaging app that allows the users to talk with other people securely and send them crypto tokens easily. Another big feature of the platform is that people can get paid to receive ads in the application straight from the advertisers, creating a new kind of relation between them and the consumer. The topic that sparked the most interest and a heated discussion, was the token presale and a small paradox it created.

Gems platform is issuing its own currency in a form of 100 million gems. Some of those tokens will be airdropped over the course of a few years, some will come in form of bounties, and a number of them will be sold during the presale to fund the project. The gems will have value on the platform because they will be used to create and pay for ads that will be displayed on the Gems network. In other words, advertisers will have to buy gems so they can pay people to view their ads. Seems simple enough.

However, as is usually the case with token presales, the first thing people ask is "why would I want to use gems if I can just use bitcoins?". The change would be simple enough from a development perspective - if a network can handle payments in gems, it should also be able to handle payments in bitcoins. Starting from this assumption, gems are an unnecessary level of abstraction - most people will prefer to be paid in Bitcoin, and most advertisers will be able to pay them in Bitcoin, so going in and out of gems just to display the ads seems unnecessary.

However! There is a third side to this coin. The most basic function of any presale is to earn money for the developers to be able to actually create the product. As such, if the Gems platform did not use gems instead of bitcoins, the developers wouldn't be able to keep the current platform design and still have money to build it. By introducing the gems, the developers can sell the tokens to raise the money to build the Gems platform.

And here lies the paradox of (a lot of) presales. In order to create a compelling product through a presale model, a developer needs to create a new token and integrate it with the platform. However, by the simple fact that the platform uses a new token rather than Bitcoin, it becomes less desirable to the end users. Without the token, there can't be a presale and thus the end product might not be made.


  1. It is an interesting paradox (not new).
    See some analysis here: https://github.com/DavidJohnstonCEO/TheValueofAppCoins

  2. Seems like more of a compromise than a paradox, to be honest.