Special Q&A Edition - Unqualified Opinions
Our weekend reads plus a Q&A with Ocean Protocol founder Bruce Pon
|Ryan Selkis||May 10, 2019|
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This week we have a special feature for our readers. Don’t worry, we still have your weekend reads below.
The Ocean IEO - Q&A with Bruce Pon
As many of you may know, Ocean Protocol, a Messari Registry member, recently raised $6 million through an initial exchange offering (IEO) conducted on Bittrex International. The token first started trading on an exchange called Bilaxy, which had announced that they would list Ocean, but they never had any contact with the Ocean team. The price quickly fell from $0.12 to $0.08 and after trading started on Bittrex the price fell even further to $0.03, an 80% decline, just 36 hours later.
So what happened?
We asked Bruce Pon, Founder of Ocean Protocol, to share his thoughts on the IEO including, why they chose an IEO, why they chose Bittrex International, mechanism behind the price decline, the lessons learned, and what’s next for Ocean.
After doing more traditional private sales, how did you decide that an IEO was the right choice? How much did your experience from the CoinList sale impact that?
Bruce: At the start of February, we decided that a traditional ICO with Coinlist & Fractals would allow us to access all major markets. We felt that it was important to include the US by offering a Reg D option for accredited investors and a Reg S offering for the rest of the world. After hitting 23% of our goal, we had the option of either a direct listing or an IEO.
An IEO offered both a guaranteed listing and the chance to bridge the funding gap from the ICO, which was important to give us the runway to continue building to Ocean Protocol’s goal has always been to unlock data for AI and to address challenges in business and society. It is a long term project with 5 years of work behind it.
How did you choose Bittrex International over other platforms?
Bruce: As a reputable exchange, we felt very comfortable with Bittrex International. Their global footprint, partner exchange network, and reasonable volume were very attractive for us. One of the lessons from the ICO was that we hadn’t addressed and spoken to the Asian community enough and Bittrex had a strong presence in countries like Russia, Korea and Vietnam.
What was the diligence process like going into it, both from Bittrex & potential investors?
Bruce: We applied online for a direct listing and in the course of the application, we expressed interest in an IEO. After we supplied extensive materials on our project, we held a 2 day workshop with Bittrex International.
In the workshop, we deep-dived into the project goals and progress, iterated on the token supply schedule, verified the collaborators and use cases, ensured that all advisors were legitimate, reviewed the CVs of key team members and had our legal teams examine the deal terms.
How did you set the price in this round vs others?
Bruce: We’ve always wanted to give control to the community as early as possible. Once we released a working beta network, we felt that the time was right to release the token. We spent months and polled a hundred advisors, contributors and new investors to decide on a price for the ICO.
When the ICO missed its target, we read that the price was likely higher than what the market felt comfortable with. After another intensive round of feedback and working with Bittrex, we cut the price 50% and gave ICO contributors the option to receive the same terms as IEO participants.
How did the price dump happened exactly?
Note: this part is an extract of Ocean’s own disclosures about the IEO. The full version can be found here.
Bruce: There was no price manipulation or conspiracy to dump. Instead, there was a chain reaction sparked by weak demand that spiraled increasingly downwards as people panic sold until the panic ended.
In the first day, 94m Ocean Tokens went into motion representing 30% of the total token supply. These tokens came from multiple sources including Bittrex International IEO (56.4m), Coinlist ICO (16m), Pre-Launch (93m), Seed (8m), Foundation (47m), Founding Teams (94m) — totaling 314m.
At the maximum period of trading, 79m tokens were on Bittrex International and Bilaxy, and of these no more than 20m on offer at any single moment in time.
Below is a breakdown of the movement of Ocean Tokens on Friday May 3 by group:
99.8% of Foundation tokens and 95.4% of Founding Team tokens stayed completely at rest on the first day with no movement.
Foundation tokens were issued to advisors, bounty hunters, airdrops and grants. Only 0.2% (0.08 million) went into motion on Friday, May 3.
For the Founding Team, 4.6% (4.3 million) tokens were transferred. These tokens were in the possession of existing team members, ex-employees and equity shareholders of BigchainDB and DEX.
Several large movements of tokens did not go to Bittrex International or Bilaxy, but to OTC services which kept tokens out of circulation for trading.
The largest movement of tokens came from the Pre-Launch cohort where 24% (22m) of tokens shifted, which added to the existing 56.4m already in the Bittrex International platform. A smaller portion of ICO and Seed tokens also moved but not in meaningful quantities.
There has been no dumping and no selling from the Foundation.
What advice would you give to other teams that are considering doing this in the future?
Bruce: The combination of a fundraise and guaranteed listing is a clear advantage. But there’s also a huge benefit to broaden distribution of the token globally to a wide group of acquirers.
What I can recommend to others is to raise less and aim for having more demand than supply so that when the token is listed, there’s residual buy-demand to help make the listing successful.
Now that the sale was successful and your token is live, what's next?
Bruce: We feel a deep responsibility to the more than 8,500 contributors, advisors, ambassadors and partners to Ocean Protocol, as well as the broader community.
Our primary goal is to release a production network as soon as we can, and in parallel continue to build the ecosystem around the protocol and on-board users.
The idea to unlock data is so unbelievably compelling to so many enterprises and organizations. We have many more inquiries from both enterprises and governments than we can handle. We’re very eager to develop more use cases, help businesses build data marketplaces and support data scientists to get access to resources.
The world needs to unlock a Data Economy where data is fully accessible and we’re going to work very hard to make it a reality.
We thank Bruce for his time and if there are any other Q&A sessions you want to see let us know by responding to this email or tweeting us.
As for other members of the Messari Registry…
And now on to a packed edition of weekend reads.
📚 Messari’s weekend reads:
What SHOULD we learn from the Bitfinex/Tether story? - CoinRoutes
A modest proposal regarding Bitcoin mining - Nic Carter
Crypto evolution - Mutating toward preeminent protocols - Tom Shaughnessy
Announcing the Open Money Initiative - Open Money Initiative
Bitcoin's gravity - Gigi
Ethereum Co-Founder: “My biggest disappointment is how toxic this space has become” - Emily Parker
10 point checklist for auditing cryptoasset investments - Steven Miller
The madness of nuclear deterrence - Mikhail Gorbachev
Useful and overlooked skills - Morgan Housel
Have a good weekend y’all. Hope to see some of you at blockchain week.
- The Messari Team
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Messari Compression Algorithm
Content and thoughts from around the web as summarized by the Messari team.
🌳 [Analysis] The Schnorr signature & Taproot softfork proposal
BitMEX Research recently reviewed the Schnorr signature and Taproot Bitcoin ($BTC) softfork proposals, finding little downside if any at all. Schnorr signatures would replace the original signature scheme implemented by Satoshi, the Elliptic Curve Digital Signature Algorithm (ECDSA), a replacement that would make all Bitcoin transactions appear homogenous on the Bitcoin blockchain. BitMEX roughly estimates adoption of Schnorr signatures would also increase effective network capacity by 13.1%. MAST and Taproot upgrades are focused on transaction privacy through masked spending conditions. BitMEX argues that the softforks can hardly be called contentious due to the obvious scalability and privacy upgrades. (share or read more)
👀 [Analysis] Bitcoin has no intrinsic value , and that’s great - Connor Brown
Bitcoin ($BTC) has no intrinsic value, but that doesn't take away its claim to be the best money. Typical attacks on Bitcoin's intrinsic value are either appeals to histor (past currencies have been physical, so Bitcoin can't be currency) or appeals to authority (Austrian economics says commodity money must be physical, so Bitcoin can't be money). Yet even Austrian economists like Ludwig von Mises knew commodity money had real limitations due to supply constraints: industrial use and mining change the supply and therefore its value. With Bitcoin, gold's potential utility can be totally unlocked, as its store of value feature evaporates in favor of digital gold.(share or read more)
Quick Bits (Don't read that, I read it for you)
Choke Points (Exchange News)
💰GSR Capital and Overstock's tZERO have concluded investment negotiations, with the former agreeing to a $5 million equity purchase. $1 million will be in U.S.D., $1 million in Chinese Renminbi, and the rest in 'certain securities.' The total investment is a far cry from the initial $404 million discussed last summer or even the $30 million planned last April. (share or read more)
🐡 In a blog post, Binance CEO Changpeng 'CZ' Zhao says the exchange is updating its API, two-factor authentication, and withdrawal validations in light of the recent 7,000 Bitcoin ($BTC) hacking. Specifically, Binance is working on its risk management system and know your customer rules to fight phishing attacks. The extra is planning to open withdrawals and deposits early next week. (share or read more)
Startup Signals (ICOs, Cryptos, and Startups)
🍯 Crypto mining company Honeyminer has launched its long awaited MacOS version for CPU/GPU plug-and-play home mining. The update, once only available on Windows, was the result of nine-month program. Touting its organic growth, CEO Noah Jessop says Honeyminer can now be found in 167 countries with a six-figure user base. (share or read more)
🔖 United States Commodity Funds LLC (USCF) and Crescent Crypto have filed to launch a Bitcoin ($BTC) and Ethereum ($ETH) based ETF with the SEC. Dubbed XBET, the ETF application has been filed while two other pure Bitcoin-based ETFs await approval. The co-sponsors believe their XBET investment will break even within a year and have planned initial sales priced at $20. (share or read more)
The Powers That Be (Legal/Reg/Policy)
🏛 SEC commissioner Hester Peirce worries that "heel-dragging by the SEC in crypto" could mar the reputation of U.S. securities markets. Speaking at the Securities Enforcement Forum Peirce reiterated that while the SEC has done a good job of reaching out to startups in the space the tools used to asses regulations, like the Howey test, are out of date. (share or read more)
🚫 Speaking in front of the House Financial Services Committee, U.S. Congressman Brad Sherman (D-CA) has called for Congress to adopt a bill that would ban Americans from purchasing cryptocurrencies. As Sherman argued, "I look for colleagues to join with me in introducing a bill to outlaw cryptocurrency purchases by Americans...in part because an awful lot of our international power comes from the fact the dollar is the standard unit of international finance and transactions." (share or read more)
Did I miss something?
Send me the link, your twitter handle and your best imitation compression algorithm write up. If I like it, I’ll include your bit next issue (with attribution).
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