Art by: Jing Jin
Update: Moments before this article went to press, BitNation began its crowdsale. The original article remains below:
Bitnation has been one of my favorite projects to think about the past few days. It was intended to bring government services to those who needed because their government failed to provide those services. It's a great idea that showcases just how far blockchain technologies could take us, if the human race can get on board with it happening.
Its crowdsale was set to launch this past Friday, despite some concerns about a lack of demonstrable progress. Firday came, the countdown finished on the site, and no crowdsale was initiated. Late last night we were informed by Nathan Wosnack that most of the core development team is resigning from the project, citing serious moral and legal concerns about how Bitnation is run. They also issued letters of resignations, published by Bitcoinmagazine.
It is important to note that this is only one side of the story. CEO and founder Susanne Tarkowski Tempelhof, has reached out to us and will be speaking more on the matter at a later date, but that may not happen until after the crowdsale.
Considering the implications of these accusations and the very real money people may be considering investing into the initial IPO, we have decided to publish this interview as soon as possible, to get the information out there. Assuming nothing changes due to this article, we should have Tempelhof's response in the coming days.
Three main members of the BitNation team have resigned: The aforementioned Nathan Wosnack, Bitnation's former Chief Communications Officer, Matt Mckibbin the former Chief Marketing Officer and David Mondrus, who was serving as an advisor and we are told was under consideration for Cheif Technology Officer.
Among their concerns is that there is no multi-signature account set up, no corporation set up in any country and no recourse, legal or otherwise for investors if the Tempelhof backs out of or otherwise doesn't deliver on her promises. There are also concerns about how any crowdsale equity will work legally, which we covered extensively in the past.
CoinTelegraph: Why don't you guys start with when you first noticed something was amiss with BitNation?
David Mondrus: I saw things a few weeks ago when we were discussing where we were going to be incorporated and the answer was "nowhere"
Matt Mckibbin: When a call occurred and the answer to where we would set up the corporate entity was only on the blockchain. This doesn't protect investors or set a clear legal structure for recourse.
Nathan Wosnack: Mine would be when I was told that, in spite of pleading with our CEO that we needed to be incorporated at least as a holdings company, that it wasn't what she wanted. Her reasons were not rational and had more to do with her personal opinion rather than anything in objective reality in relation to contract law. The concerns with investors having dispute resolution through conventional means was not a concern of hers, as she kept pointing to a dispute resolution form that simply didn't exist. That the dispute would happen "on the block chain" and the terms of such would be written as we went along. You can't lay out terms for investors and staff that binds them from the beginning, and then make up resolution terms later on.
When I was told that we'd only have one lawyer, and that lawyer is the CEO's husband, I had major concerns for the clear conflict of interest this posed us and investors. I informed the CEO we needed more than one lawyer, and was told "then find one for yourself, but you won't get free legal advice as we have otherwise." When the company's lawyer is also the husband of the CEO, that was hugely concerning to me. That along with a lack of formal contracts for any of the staff. And the Terms of Sale and other legal documents being written by non-lawyer staff.
Other concerns: 1) The developers leaving the company quickly, recycling through new ones, 2) and the public berating of staff in front of others on Skype (very unprofessional)
David Mondrus: Right, and I brought a lot of these developers in, and they quickly left. (for good reasons obviously)
CoinTelegraph: You guys have also expressed that the system itself isn't ready. What kind of stuff still needs to be completed, coding-wise, for it to be a successful and honest crowdsale?
David Mondrus: Well, at the moment there is no code other than the front end. The idea was to use other open source code like Id coin and integrate, but that integration and development takes time and that time has not been spent.
Matt Mckibbin: Integrating others open source code into one platform was the idea so having our own code wasnt the first thing necessary.
David Mondrus: But even that integration effort takes time and none of it was done.
Matt Mckibbin: IMHO that would need dedicated developers and resources currently not on board.
Nathan Wosnack: As far as the back-end infrastructure, I had serious concerns that a lack of having a CTO with a computer security background managing this while we had 3rd party developers on the system, to be a major one. Sure we were to implement SSL and Content Delivery Network for load-balancing and DDoS protection, but we didn't have anyone overseeing possible hackers breaking into our servers to do a number of well known attacks.
For one, no one was hired to even set up the servers nor implement anything, so it was basically volunteer staff who were told to put together some hodgepodge of hosted and virtual private servers together. This just left open major opportunities for exploitation by either rogue contractors, or outside hackers who had access to a number of the chats in semi-public rooms.
"volunteers" were brought on without a major vetting process. It would be extremely easy for a hacker to social engineer their way into getting admin rights over the servers for Bitnation.
CoinTelegraph: There was no whitepaper or anything either I believe you said? So what is being sold in this crowdsale, presumably set to begin today or sometime this week?
Nathan Wosnack: There was a whitepaper, but it was not ready for viewing by the public until literally hours before the initial crowdsale was to happen, around midnight on Friday October 10th. So while the whitepaper was certainly suitable for public consumption and peer review, the fact it wasn't released at least one month prior, was cause for concern for the public and most of our team. The whitepaper was to be combined also with a "dev" plan which again was not ready until moments before the initial crowdsale was to happen. And the business plan was not at all ready - it wasn't even what I'd consider to be "rough copy".
David Mondrus: "So what is being sold in this crowdsale, presumably set to begin today or sometime this week?" -- not sure how to call it. Tokens? Equity? Currency? Somethign that doesn't have voting rights, but provides dividends (maybe) sometime down the road.
Nathan Wosnack: As it is dubbed "Equity" but with no voting rights, it's essentially not equity, but rather unregistered securities. The SEC and other regulators will surely have an issue with this.
Matt Mckibbin: The whitepaper had the ideas together the reasons why people could spread bitnation around the globe in order to help people get registered on the blockchain to engage their communities. The biz and dev plans needed work for sure but all of this should have been released at least a month before the crowdsale for digestion and comment by the public.
Nathan Wosnack: If it is being listed a crypto equity with no voting rights, without a corporation (only one person listed as the owner of Bitnation). The financial projections were also very questionable and pie in the sky. We've seen the financial projections and many of our core team members were baffled by what we saw.
CoinTelegraph: So, this probably isn't the start to Blockchain governments you were all imagining. Do you think this unfortunate event will set that movement back? Do you think blockchain governments will be a viable option for people soon?
David Mondrus: The reason I'm resigning is to precisely mitigate that problem. “Soon" is a question. My answer is this: "How do you eat an elephant?" One bite at a time.
Matt Mckibbin: I think that distributed consensus networks and the applications for governance such as land titles, incorporation, lending and reputation are sorely needed in the world and will be utilized by everybody in the future. They will help the unbanked have access to capital markets and those without reliable governance services attain them.
Nathan Wosnack: I think that blockchain governance services, not blockchain governments, are a fantastic concept, something that I always believed in and will continue to believe in. When opt-in, with proper contracts and code behind it can help free people. The key is in giving people an option. Where Bitnation fell short, others will grow from. I always said this from the beginning; "If Bitnation fails, people will never think of the blockchain in the same way again." So in a way I'm proud of that. I encourage everyone to fork the idea of Bitnation start their own, and begin competing for better governance services. There is plenty of room in this space for DApp development and collaboration.
CoinTelegraph: What would you say to someone considering investing in Bitnation's crowd sale?
Nathan Wosnack: I'd tell them to talk to their lawyer, their investment adviser and ask for the incorporation details, the terms of sale, and a full disclosure on the dispute resolution. Along with seeing all of the books. I am not here to tell anyone whether they should or should not invest in Bitnation. Ultimately that is their choice. All I want is for the public to ask for transparency, accountability from Bitnation. Do your own due diligence before investing in anything.
CoinTelegraph: Will you guys be moving forward as a group, sort of a Bitnation alt team, or will you be moving onto your own projects?
Matt Mckibbin: I am going to be monitoring the space. I have a current day job and will be continuing to work there. When and if other offers pop up I will meet them with the passion I have with this project.
David Mondrus: I will be working with members of this team in the future to construct other similar systems. We are a great team IMHO (with one exception)
Nathan Wosnack: I still run uBITquity, a consulting company, and will continue to do that, along with working with David Mondrus and others on a few projects and business ventures. More on that in the future. Certainly I will be focusing on governance services on the blockchain. This is not the end, but merely another fork in the road... I continue to march forward.
CoinTelegraph: Do you guys have anything else to add?
David Mondrus: We as a community, both BTC and Bitnation specifically distinguish ourselves from the government world by our honesty, transparency, and compassion. (or at least I would like to think so). How could we participate in something so opaque and ruthless