Funding secure technologies through crypto strategies

June 18, 2021 / Digital Security / By Sam de Silva

Creating secure technologies is not easy. Software engineering expertise in cryptography and networking comes at a premium, and the work we’re doing at the OPTF requires significant funding. 

Many of the secure technologies that are being used by human rights activists and journalists have been supported using government or philanthropic funding. The Open Technology Fund (OTF) — which was set up in 2012 — is funded by the United States government. It is mandated to support the creation of internet freedom technologies. In less than a decade, the fund has supported over 100 projects, including granting millions of dollars to support the development of the popular services Signal and Tor. Programs like the OTF have become a key support infrastructure for technology projects which aim to protect and preserve human rights, and seek to avoid potentially predatory monetisation policies.

It would be useful to access external grant funding especially while we establish ourselves, however our long-term funding model is fundamentally different to the majority of tech builders. The infrastructure behind our products and technology is designed to be self-sustaining, and we’re optimistic that we can sustain our work and grow without becoming dependent on government or philanthropic support. 

OPTF — which was originally called the Loki Foundation — was conceptualised in 2017 when our founders met and aligned their ideas around solving key issues in digital rights. They focused on the privacy and security challenges for those working in human rights as well as people who wanted to opt-out of surveillance capitalism and the ability of corporations and governments to collect our data and influence our behaviours. 

Secure communications technologies had already become mainstream with WhatsApp popularising end-to-end-encryption. Apps like Signal were also popular, as were a handful of other messaging apps that claimed to protect the privacy and security of users. However, after surveying the existing landscape, a gap was identified: there was no easy-to-use messaging app that offered security, true privacy, and anonymity in the digital world. 

Our founders quickly formed a small team and started planning the project. From day one, we recognised the need to have a model that gave us sustainability and had incentives to help grow our network of collaborators. We tapped into emerging blockchain technology and (more importantly) the ideas and theories around cryptocurrencies to build a model that would support a secure and private network as well as the long term sustainability we needed. 

We also knew that building successful solutions required a significant budget that could provide 2 or 3 years of runway. Our vision required dedicated software engineers with unique skills, plus marketing, legal, travel, hardware and general costs related to running an organisation. Back then, there were startup investors we could have gone to for funding — but we felt it was important to ensure no single entity or individual was able to exert pressure on the project and control the direction of the technology. 

We decided to fundraise from the blockchain community that was looking to back decentralised projects. After three months of conversations, we reached our funding target with contributions from approximately 80 investors. 

The OPTF team was then able to focus on building the service node (SN) network — a globally distributed server network that supports onion-routed information packets and secures and maintains the blockchain— to facilitate secure and anonymous communications. Tor, the most widely-used implementation of onion-routing, has a number of fundamental weaknesses: we were committed to improving its design through Lokinet. At the same time, our goal was to offer secure tech products for free, while ensuring financial sustainability without depending on government funding or a handout from a billionaire. 

We used an innovative crypto-economic model to address our sustainability challenge. In a nutshell, we would establish the $OXEN crypto currency (initially called $LOKI) that would increase in value as our network expanded and our products gained in popularity and use.  The $OXEN also underpins our SN network and the secure tech products we build. 

From day one, the community had been critical to the success of the OPTF. Another important role they play is to contribute to the operation of the decentralised SN network by owning and maintaining the server resources that make up the network. To minimise the possibility of one entity establishing hundreds of nodes and performing a Sybil attack, we created a financial barrier which requires operators to stake 15,000 $OXEN to establish one node in the network. Once an operator has staked a node, they earn rewards, which is an incentive for them to keep the server maintained and functioning. Currently, there are over 1,700 nodes located all around the world and the network is continually growing as more and more people hear about what we are doing. 

OPTF also operates a number of foundation nodes, and like everyone else, we are also provided with regular rewards. As the value of $OXEN increases, the value of the reward will also increase, providing us with the longer term sustainability we need to support the project and the secure tools we are building. This relationship also ensures that the foundation remains steadfast in its commitment to the development of usable, functional applications. The success of the applications is directly tied to the financial sustainability of the foundation. 

OPTF currently has two secure  apps — Session and Lokinet. Both demonstrate the power and impact of our vision. Session — which was launched in March 2020 — has surpassed 100,000 active users — and is a tangible product which validates our security and privacy model and gives $OXEN credibility. While both apps will be free to use, we are also working on premium services that users can choose to purchase. These monetisation strategies will benefit all the operators involved in the SN network, including the OPTF itself. 

Of course, the model for generating funds is still linked to the overall cryptocurrency ecosystem, which is still emerging and growing. However, because $OXEN underpins demonstrable projects that provide utility, we are confident that our model will provide the OPTF with the ability to continue creating and maintaining secure technologies and raising awareness and promoting digital privacy and rights.

We are entering a new and exciting era in which there’s real potential to re-think funding and financing innovative and important projects. In many ways, it is like the early days of the internet. Back then, early adopters jumped in and got their hands dirty and both for-profit and not-for-profit organisations took advantage of a new medium that provided them with instant global communications and an audience of millions. Now is the time for us to imagine the possibilities offered by the crypto ecosystem, and to experiment and create new solutions underpinned by an infrastructure that could truly decentralise power and also provide new sources for sustainability and growth.

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