Key Person Risk
How susceptible are Cryptocurrenices to Key Person Risk and which ones do we need to worry about?
Key Person Risk
BusinessDictionary.com defines key person as: Individual whose knowledge, creativity, inspiration, reputation, and/or skills are critical to the viability or growth of an organisation, and whose loss may cripple it.
In the tech sector, many companies are driven by visionaries, leading the way but we have entered a new paradigm where tech meets finance.
Finance
The financial world likes stability and predictability. Crypto does not have these qualities but if it every wishes to go mainstreem these qualities would be desirable. Events from yesterday highlight just how dependent some Currencies are to Key Persons. Maybe there are lessons we can learn from finance that can help protect these new forms of tech/finance/crypto organisations. Disaster recovery planning, separation of responsibilities, backups. The events of yesterday lay bare how unprepared we are today. What would happen to bitcoin if we discovered who Satoshi really is or if he suddenly dumped all his coins on an exchange?
Crypto
Ethereum and Monero are the top of my list of currencies with Key Person Risk. If Vitaliak or Fluffypony had an accident these two alone would knock billions off the market cap and create contagion that would spread across hundreds of other coins.
What currencies are you concerned about?
Thank you for reading this. I write on Steemit about Blockchain, Cryptocurrency, Travel and lots of random topics.
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This a great post that got me thinking about this issue. I think key person risk is heavily dependent on whether its seen if the key person is seen as critically vital for the platform or company. For instance, there is a similar worry for instance if Warren Buffet of Berkshire Hathaway is disabled or passes away. I think whether it becomes an issue or not is dependent on how a company is set up. Companies should have a good plan for corporate succession in case of emergencies with regard to their key people.
I completely agree. I wonder how the cryptocurriencies fare in this regard and if there are some which are more exposed than others.
When does a crypto currency 'passion project' become a 'used chewing gum' project ? When Mike Hearn leaves Bitcoin or Gavin Wood resigns as DAO curator or 2 or more Core Devs exit a crypto project or face 'An Act of God'?
Core Dev creativity and project management skills become even more important as the crypto coin universe exceeds 700.
Binding terms and conditions in the ICO would ensure that 'KeyDevs' stay with a project for a minimum of 3 to 5 years depending on project scope. Performance Covenants could be written into the ICO. When these are achieved the KeyDevs can exit. This is essentially a matter of governance, but the problem is that the founding team will rarely agree to bind themselves before they have funding in place.
This raises the possibility of some kind of peer-to-peer insurance pool as a back up pay out mechanism if ICO founders abandon their project before key benchmarks are achieved.
Lastly, a reputation penalty could be exacted against KeyDevs which at the extreme would ban them from the ICO community.
On the positive side, super stars like Vitalik are unlikely to take decisions that would kamikaze their reputation but they might be boxed into absurdly risky decisions by other members of their Dev Team acting in a cabal. This is another reason why governance and transparency are so critical in the cyrptocverse.
Really interesting post.
I invest in steem and etc now. When i get some more money i will invest in monero too. ETH is too expensive for me.
Steem has proven quite resilient to key person risk. @dan left earlier in the year and there has been continuity with the other developers.
There are however always ways we can strengthen our processes to make them more robust.
nice post @eroche
Thanks.
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Interesting analysis and important to think about before investing! What is your analysis of Steem with respect to this question?
I was just commenting on this on another comment :)
Steem has proven quite resilient to key person risk. @dan left earlier in the year and there has been continuity with the other developers.
There are however always ways we can strengthen our processes to make them more robust.
Thank you, that feels reassuring! I thought that this was the case but it is always nice with confirmation!
That's my opinion anyways, it seems more robust comparing to other currencies and it's probably related to the governance structure and witnesses which are a strength of steemit.
I agree, the witness system seems to be a brilliant idea that provides long time stability.
Interesting topic
Everyone believed Dan was a key person risk for Steem. When he left, the price dropped briefly in a panic. But it was only days after that it began the rally which has led to where we are now.
I think both with Vitalik and Dan the 'key person risk' is more a reflection of an anxious market. In both cases it is widely perceived as dependent on one person, but is not in practice.
An interesting comment about @dan leaving was by @ned at the time
I took that to mean that Steemit sort of had a contingency plan in place, with more delegation of duties and development with @sneak which as a result meant there was continuity after @dan left. So is @sneak the key person risk now for Steemit and have they learnt lessons following @dan leaving?
Key Person Risk is a real risk for any business, I have seen it numerous times in my own work, and the smaller the company and more specialised the work the bigger the risk.
I think the events of the last few days have been a consequence of an anxious market and the Vitalik news was the straw that broke the camels back but it has highlighted a real issue for me and one I will be considering more when I am investing in currencies in the future.
I agree, I just think that in the particular cases of Dan and Vitalik, people overestimate just how dependent the projects are on them because they are both visionaries and highly visible figureheads. But there are many technically competent people around them and the vision has been disseminated into the communities in both cases.