Bounty: What It Means, How It Works, FAQs

What Is a Bounty?

The term bounty refers to a sum of money paid by a government or business entity to reward certain activities or behavior. The goal of a bounty is to reach an economic goal or to solve a problem. Bounties are often used to help track criminals and criminal activity. They can also be used to boost and encourage development in specific industries and sectors of the economy.

Understanding a Bounty

As noted above, a bounty refers to a monetary reward or financial incentive paid for by governments and companies in exchange for certain actions or behaviors. For instance, governments may pay people bounties to track criminals and illegal activities. Some governments might offer a bounty or a subsidy to an individual who enlists in that country's armed forces.

Bounties may also come in the form of grants. These are typically paid for by governments to encourage players in certain industries. They can also be paid as subsidies to incentivize entrepreneurs in the market. As such, bounties and related economic awards are commonly found in the cryptocurrency market and the technology sector, where entities are paid to track and combat hackers.

Bounties and Cryptocurrencies

Bounty programs are commonly used by coin developers in the cryptocurrency market to incentivize actions before the initial coin offering (ICO). A bounty program gives rewards or tokens to those who undertake specific tasks to promote the ICO. There are two stages during which individuals can be compensated:

• The Pre-ICO Stage: Social media influencers, bloggers, and digital marketers promote the ICO on their platforms and receive compensation based on the amount of audience engagement. Meanwhile, developers often receive bounties in the form of tokens for their part in coding the project.
• The Post-ICO Stage: Bounties are used to incentivize programmers to detect bugs and provide feedback on other issues. These are called bug bounties, as coders are rewarded to specifically test for flaws in the system.

Bug Bounties

Bug bounty programs are offered by websites and organizations where coders are incentivized to detect and report bugs, particularly those related to security weaknesses. These programs are designed to find and fix bugs before the greater public is aware of them and prevent large-scale hacking abuse. Organizations can leverage the power of a large group of coders and hackers.

Several technology giants use bug bounties, including:

• Meta (META), formerly Facebook
• Alphabet (GOOGL, GOOG)
• Apple (APPL)
• Yahoo!

Wall Street firms like Goldman Sachs (GS) and the United States Department of Defense also have bug bounty programs in place.

Bounties and the Securities and Exchange Commission (SEC)

The Securities and Exchange Commission (SEC) uses a bounty program, officially called its Whistleblower Program. This program incentivizes whistleblowers to report possible securities law violations.

Whistleblowers help the SEC identify possible fraud and other violations, limiting damage to investors. The SEC is authorized to provide monetary rewards for those who report high-quality information that leads to an enforcement action in which over $1,000,000 in sanctions is ordered. The range of rewards is between 10% and 30% of the money collected.

The program also provides protection against retaliation to anyone who submits a tip. Whistleblowers can file a complaint in federal court if they feel that their employer has retaliated against them. If courts side with them, whistleblowers may seek restitution in the form of double back pay, reinstatement, attorney's fees, and other costs.

Bounties and Subsidies

There are different types of bounties and subsidies that are paid to industries and taxpayers in the United States. For instance:

• Farm subsidies help support farms
• Sugar subsidies bolster the agriculture industry
• The energy industry has received subsidies like loan guarantees for clean energy, tax credits for expenditures, as well as money for research and development (R&D).

A bounty or subsidy can help industries invest in capital equipment designed to better the country or reach a desired outcome like cleaner-burning fuel. For instance, the coal, nuclear, wind, solar, oil, and gas industries all receive subsidies or bounties from the U.S. government each year.

The Bottom Line

A bounty is paid by a government or business entity to reward certain activities to solve a problem. The SEC pays bounties through its whistleblower program and in the world of cryptocurrency, bounty programs are used by coin developers to incentivize activity before an initial coin offering.