Republic Protocol: Analysis and Valuation

Full Report by James Todaro, Joseph Todaro and John Todaro

Disclaimer: The managing partners of Blocktown Capital own Republic Protocol token (REN).

Moniker: Republic Protocol

Ticker symbol: REN

Current price per token: 0.096 USD

Current market cap: 49,887,123 USD

Blocktown Capital is bullish on Republic Protocol as we expect the platform to gain significant market share in the growing yet nascent sector of dark pool digital asset exchanges.

• In traditional equity markets, dark pools constitute about 15% of total market volume.
• As institutional and high net worth investors enter digital assets, the demand for dark pools will increase.
• Republic Protocol will be the first decentralized dark pool with an anticipated launch in Q3 2018.
• With an ICO raise of 35MM USD as well as strategic partnerships with institutional funds such as Polychain Capital, Republic Protocol has the resources to launch and grow a viable platform.
• Our valuation model implies that the Republic Protocol token REN currently trades significantly below its fair value assuming reasonable adoption of the platform.

Background

Republic Protocol is an open-source, decentralized blockchain protocol facilitating private, over-the-counter (OTC) trades of digital assets on a hidden order book. In traditional markets, dark pools are private exchanges or forums for the transfer of large blocks of securities, usually equities, by institutional investors and high networth individuals (HNWI). It is estimated that up to 15% of all equity trades are executed in dark pools. Employing Ethereum smart contracts and secure multi-party computations, Republic Protocol provides an anonymous orderbook and asset transfer algorithm with the goal of launching the first decentralized dark pool for digital assets.

The founding company of 13 team members is based in Singapore with most of the team residing near Canberra, Australia. Development on the Republic Protocol commenced in Q4 2017, and in February 2018, Republic Protocol sold out their ICO for 35MM USD, distributing 60.2% of the fixed supply of REN to investors, which notably included Polychain Capital, FBG Capital, Signum Capital, ZhenFund and Huobi Capital along with a few others. REN is currently traded on OKex, IDEX and Liqui with average total daily volumes between 1MM and 4MM USD.

The Republic Protocol is still under development with the upcoming launch of its platform on public testnet in June of 2018 and mainnet launch in Q3 2018.

Protocol

The stated objective of the Republic Protocol is to create a decentralized, hidden order book which allows for the matching of orders from two or more parties without revealing any information regarding specific assets, participating parties or order size. In order to construct such a protocol, Republic is utilizing secure multi-party computations and a cryptographic concealment scheme known as Shamir Secret Sharing. Additionally, zero-knowledge proofs are used to verify the secure multi-party computations which occur without revealing underlying information to the computing parties or other observing parties. In the Republic Protocol, the computing parties are decentralized nodes, essentially high-speed order matching engines, which act to locate and match orders based on asset type, quantity and price.

These nodes that run the Republic Protocol network are labeled darknodes as they do not reveal any information about the underlying orders they match. Any individual or group of individuals can obtain a darknode as long as they acquire and stake at least 100,000 REN. These darknodes will earn fees for matching orders on the network. The Republic Protocol has an upper limit of 10,000 darknodes. Darknodes will also need a high speed internet connection and some basic hardware to remain competitive as they will compete amongst each other to match orders and, therefore, collect fees. It is reasonable to assume that as the Republic Protocol order book grows, the standard equipment needed to run a darknode may increase.

The Republic team will launch the first decentralized darkpool exchange, RenEx, that taps into the underlying network of darknodes to match orders. Additionally, 3rd parties will also be able to launch their own darkpool exchanges that utilize the Republic Protocol darknodes. In accordance with standard exchange practices, darknodes will be compensated with a fee equal to a given percentage of value traded across all darkpool exchanges on the network following a basis point system (bps). These fees are set by the darkpool exchange and are awarded to the darknodes that match orders. RenEx will utilize the fee model of 0.2% (20 basis points) per trade. Since each side of a trade will pay 20 bps on any given trade, darknodes will receive 40 bps per trade. The darknode operators who participated in matching a trade evenly split the fee amongst themselves. Approximately ⅔ of all active darknodes at any given time need to participate in matching order fragments to complete an order. This reduces the collusion attack vector as bad actors will need to control a supermajority of the darknodes in order to obtain significant information about the hidden order book. On the other hand, setting the fraction of darknodes required to match any given order too high would make the network susceptible to sudden darknode drop-off attacks. In this scenario, either maliciously or unintentionally, if too many darknodes were to fail or abandon computations at a similar time, there would be insufficient fragments available to successfully discover matching orders. With the percentage of computationally truthful nodes set to a supermajority, up to ⅓ of nodes could fail to execute appropriate computations and the network would still be able to truthfully match orders.

Prior to the matching process, each order is fragmented and encrypted whereby no underlying information is able to be discerned. Once orders are matched, assets are manually swapped via Republic Protocol’s decentralized exchange network. The asset exchange is then settled on the blockchain of the underlying assets (i.e. settled on the native blockchain of the digital assets that were traded). Once the asset swap is publicly initiated, this information becomes observable and can be identified by examining the underlying blockchain.

In order to better understand Republic Protocol’s concealed order book, we must first understand Shamir Secret Sharing. Adi Shamir pioneered this cryptographic approach to sharing sensitive information in 1979 while a faculty member at MIT. This cryptographic scheme allows for the fragmentation and dispersal of secret information within a network. Each participant is given a unique part with some number of the given parts necessary to reconstruct the original secret. Mathematically, we can diagram this secret sharing scheme as such. Any given secret, x is divided into nfragments where k is the number of fragments required to reconstruct the original secret. The fragments are then randomly distributed to participants within the network to maintain a sufficient amount of randomness so that any one group of related participants does not hold a large number of fragments for any one secret. Given that each participant holds one fragment from secret x, a number greater than or equal to k participants (or fragments) is then required to reveal the secret.

While regulated markets have specific laws in place to prevent various false order tactics (to varying degrees of success), decentralized platforms must have built in mechanisms to prevent this behavior. False orders are a specific attack vector conducted by traders attempting to reconstruct a portion or the entirety of the hidden order book. This attack is conducted by submitting many orders to the network at varying prices with the hope of discovering matches from within the orderbook. Once an order match is found, some pricing information can be assumed by each trader participating in that match. The nefarious trader could then abandon the order thereby never completing the asset swap. This attack allows nefarious actors to gather information about the order book regarding specific assets and prices listed without actually completing an asset swap.

The Republic Protocol is able to limit this attack vector by requiring all traders to post bonds in REN as collateral for each order they open. This bond requirement places nefarious actors at risk of significant capital loss. A trader’s bond may be temporarily locked, slashed or forfeited if they fail to follow through with an asset swap once an order pair is matched. Furthermore, negligent traders who abuse or ignore general trading parameters, such as failing to swap matched orders in a timely or appropriate manner, may have their REN bond temporarily locked or slashed by darknode owners as well. In this way, darknode owners act to punish traders who misuse the network. This misuse could be through simple negligence or the intentional abuse of darknode computational resources. Darknodes are fully intended to have the ability to punish nefarious traders. Although, at this time, the precise governance model which underlies this process has not yet been publicly detailed by the team.

Dark Pools

Dark pools are liquidity providing services offered by alternative trading systems (ATSs), electronic communications networks (ECNs), and broker-dealers, which are often Wall Street banks. Dark pools do not publish real-time bid/ask information or size, thus concealing trade details from other market participants. In traditional US equity markets, dark pool prices must occur at, or inside, the National Best Bid Offer (NBBO) so that prices do not widely differ from those on public exchanges, such as the NYSE or Nasdaq. Dark pool operators are required to report trade details to the consolidated tape, and thus become public information within 90 seconds post-transaction. Dark pools have become attractive alternative sources of liquidity as they offer opportunities for reduced market impact, lower transaction fees, and less information leakage — thus concealing market participants’ intentions and strategies.

As of 2016, dark pools accounted for 14.49% of equity volumes as reported by Cowen & Co while total off exchange volume hit 36%. Off-exchange volume includes not only dark pools, but also internal trades on behalf of two separate trading desks within the same bank, high touch cash block OTC trades, and wholesale retail trades. With increased regulatory scrutiny over the past several years, growth in traditional dark pools has slowed, resulting in a market share loss for dark pool servicers.

In the digital asset sector, there are a handful of centralized OTC trading platforms, which include ItBit, Genesis, Circle, Gemini and Binary Financial. Although exact volumes are not published, spokespersons for Genesis and Circle report recent average daily volumes between 50MM and 100MM USD or about 2B USD per month. There are even fewer dark pools, which most prominently include Kraken and Bitfinex. Although trading volumes are unpublished, Kraken is the most well known dark pool offering a hidden order book for Bitcoin orders over 450,000 USD.

Decentralized dark pools can mitigate several of the risks that accompany centralized dark pools. Firstly, decentralized dark pools are less susceptible to regulatory restrictions, which has adversely impacted market share in traditional equity dark pools. Additionally, extensive regulations often require expensive intermediaries that drive up trading fees. We assume the Republic fee structure will ultimately be lower than those accompanying centralized dark pools.

Secondly, decentralized dark pools are not reliant on a single operator who may act nefariously. In 2016, several US regulatory bodies fined Barclays and Credit Suisse more than 150MM USD for misrepresenting efforts to police their dark pools from predatory trading, overriding their own surveillance tools on various occasions, and misleading subscribers about their data feeds. In the digital asset sector, centralized dark pools face the same risks as those faced by centralized exchanges, which include token theft, hacking, corruption and government takeover. The effects of previously compromised centralized exchanges still impact the market to this day (e.g. MtGox, BTC-e, Bitfinex and Cryptsy).

REN Token Valuation

The value of REN is derived from trading fees and bonds. Fees are paid by traders to darknodes in exchange for processing orders. Bonds are submitted in REN by both darknodes and traders in order to utilize the network. Fees and bonds are interconnected such that each darknode is required to hold a bond of 100,000 REN to gain access to the network and receive fees for processing orders. With this information and some basic market assumptions, we can diagram base and bull case scenarios for the potential value of REN.

Assumption #1: The digital asset market will continue to mature with increasing annual trade volumes

Since 2015, the annual total trade volume of digital assets continues to increase, as shown in the graph below:

In the year 2017, a total of 2T USD in digital assets was traded on public exchanges. As we approach the close of Q2 2018, over 4.5T USD has already traded this year. Conservatively, we project that about 8T USD in digital assets will be traded on exchanges by the end of 2018. Of note, these numbers do not include the unreported off-exchange volumes traded in OTC deals. Based on our market analysis, we perceive the last three years as periods of exceptionally rapid expansion of the digital asset sector. It is not reasonable to assume that the annual trade volumes will continue to grow at the rate shown in the chart above. If it did, the annual trade volume of digital assets would approach the 100T total annual trade volume of equities in 2019 and far surpass it in 2020. We think that it is unlikely that digital asset trades will exceed the global equity trading volume that soon. Instead, we will assume that the digital asset trade volume will grow at a more sustainable rate of 75% in 2019, 50% in 2020, 35% in 2021 and 25% in 2022. Based on these projections, the annual trade volume of digital assets will be about 35T in 2022.

Assumption #2: Trading fees on the Republic Protocol exchange, RenEx, will start at 20 bps for buyer and 20 bps for seller (40 bps collected per trade) and trend down over time.

The Republic Protocol team has specified that the fee rate for their exchange, RenEx, will be set to 20 bps for each buyer and seller. We will further assume that fees will trend down to remain competitive with other newly launched 3rd party darkpool exchanges. To support this assumption, we examined a few current market metrics. One of the largest, most liquid digital asset exchanges, Binance, has trading fees of 10 bps for each buyer and seller (5 bps during the promotional period). Another well known exchange, Bittrex, charges fees of 25 bps each. With lower liquidity in dark pools and OTC platforms, it is reasonable to expect higher trading fees. As a representative example, Circle generally collects between 25 and 50 bps from the bid/ask spread (12.5 to 25 bps each for the buyer and seller) in every trade.

The most popular decentralized exchange is currently IDEX with fees of 10 bps for market makers and 20 bps for market takers (30 bps per trade). As a decentralized dark pool, the Republic Protocol will initially have higher fees than its counterpart decentralized exchanges while simultaneously desiring to remain competitive with OTC platforms like Circle. At 20 bps for buyer and 20 bps for seller (40 bps per trade), the Republic Protocol will have initial trading fees higher than those on IDEX, but comparable to those of Circle.

Finally, we will also assume that on average 5,000 darknodes will be participating in order matching and earning fees. Although there are many factors that will dictate the precise number of darknodes that are active on the network at any given time, we feel comfortable modeling our assumption off other projects that have had similar node requirements.

Assumption #3: Dark pools will approach 15% of total digital asset trading volume.

As expounded upon in the previous section, dark pools constitute about 15% of the total volume in traditional equity markets. We believe that 15% is also a fair estimate for the eventual growth of digital asset dark pools. On the one hand, many digital asset traders gravitate toward options that allow greater privacy and anonymity, perhaps even more so than traders in traditional equity dark pools. This suggests that digital asset dark pools may capture more than 15% of the market. On the other hand, there are seemingly more retail investors in digital assets than in the equity markets, which could put a ceiling on the demand for OTC and dark pool trading options. For this reason, we will stick to the assumption that digital asset dark pools will mature to capture 15% of total trade volume.

Based on the above assumptions, we can now estimate a valuation of REN from the utility of the network in base and bull case scenarios. We are intentionally excluding a bear case scenario. As most decentralized projects including Republic Protocol are still in their infancy, we believe that the bear case valuation of these projects approaches zero over about 5 years, as historically demonstrated for a number of digital assets (historical snapshot from November 2013 of previously well known digital assets).

Bull Case Scenario

Table 1. Annual revenue per darknode in a bull case scenario

Before addressing the bull case, we would like to clarify our interpretation of this scenario. The bull case scenario is the upper limit of what REN could be worth assuming they achieve success to the very highest of expectations. We think this is an important metric to consider given the rampant euphoria in digital assets and blockchain projects. Many digital assets have reached markedly inflated market capitalizations predicated almost entirely on speculation. In some cases, the price of the tokens is so inflated that it approaches or even surpasses the token value as if the platform has already achieved successful adoption (while in reality the platform is still pre-launch or with minimal adoption). Knowing the upper limit of a token’s potential value is extremely helpful in screening tokens that may already be overvalued. For this reason, our bull case scenario is the upper limit of what each REN could be worth assuming the highest realistic success.

In our bull case scenario, we add one assumption to the above list, which is the market capture of the Republic Protocol. As shown in the table above, we assume negligible volume in 2018 as the platform will only first launch in Q3 2018. The market capture then trends up to 1.7% by 2022, estimating that the Republic Protocol will capture about 1/10th of the total volume of dark pools. In favor of this bull case scenario is the likelihood that the Republic Protocol will be the first mover in decentralized dark pools.

With this final assumption, we can calculate a price of REN based on the network fees paid to darknodes, the largest holders of REN tokens.

Given REN’s network incentivization, namely fee generation, we have decided that the best valuation method would be a discounted cash flow analysis (DCF). Fees, which are to be paid in ETH, BTC, or other ERC-20 tokens, can be substituted for a cash dollar amount in a typical DCF model. Similarly, one can envision a fee generating node as a dividend paying stock or an annuity paying bond that lasts into perpetuity (less the costs associated with the electricity and hardware used to run nodes).

Using the formula for DCF, PV = [CF1 / (1+r)1] + [CF2 / (1+r)2] + … + [CFn / (1+r)n] + TV, we can discount our cash flows back to present day to arrive at a Present Value (PV) for the REN network.

PV = Present cash flow value

CF1 = Cash flow at the end of year 1

CF2 = Cash flow at the end of year 2

CFn = Cash flow at n specified year

r = Discount or required rate of return

TV = Terminal Value

Before continuing further, we must assign a specific discount rate, r. Presently, there is no appropriate risk rate in the digital asset marketplace that can be used as a benchmark. As such, we will borrow from other financial markets to ascertain an acceptable discount rate. The risk free rate is typically deemed to be the return rate on US treasury bonds — a return which is considered to be devoid of risk of loss. Moving along the risk spectrum to a more appropriate discount rate, we arrive at funding costs for start-up companies. In Series A equity funding rounds for venture capital, the generally accepted rate is between 30–50% per annum. As a digital asset platform with certain technological components that remain unproven, Republic Protocol has a relatively high risk profile and we believe that it is reasonable to assign a discount rate that is similar to that of a Series A round for a startup. Given this information, we have decided to settle on a discount rate of 40%.

Using our estimates of fees paid to REN nodes from Table 1 above, we can plug these CF values into our formula.

PV = 0/(1.40)¹ + 84,000,000/(1.40)² + 321,300,000/(1.40)³ + 822,150,000/(1.40)⁴ + 1,506,093,750/(1.40)⁵ + TV

Lastly, we need to include those fees paid after the five year period. We model the REN platform to last into perpetuity, as is appropriate in the equity markets. To do this, we use the Gordon Growth Method to find a Terminal Value, TV. We conservatively model out a sustained growth rate of 2% (g = 0.02), in-line with mature company estimates.

TV = [year 5 cash flow * (1+g)/(r-g)]

TV = 1,506,093,750*(1.02)/(0.4–0.02) = 4,042,672,697

Adding up our yearly cash flows and terminal value, we arrive at the below summation:

0 + 42,857,142 + 117,091,836 + 214,012,390 + 280,034,686 + 4,042,672,697 = 4,696,668,753

Finally, by dividing our total network cash value (4,696,668,753) by the number of circulating tokens (519,094,022), we arrive at a dollar price per REN of 9.05 USD. That is, with our assumptions and best case scenario forecasts, REN could achieve a value of 9.05 USD per token. This represents an upside of ~94x (9,300% gain) from its current price of 0.096 USD.

Base Case Scenario

Table 2. Annual revenue per darknode in a base case scenario

In the table above, we forecast out our base case assumptions. As in our bull case scenario, the only assumption we adjust in this scenario is the REN market capture rate. Using more conservative projections for our base case, we model the platform to capture trading volumes that are more in line with numbers for decentralized exchanges such as IDEX, DDEX and the Waves DEX. IDEX, which presently has the greatest market share, captures about 0.06% of daily digital asset trading volume.

For the sake of brevity, we will not detail the DCF calculation as we did before. In this base scenario though, the resulting price per REN is 1.84 USD. This represents ~19x (1,800%) increase from its current price.

In summary, assuming a successful launch of the Republic Protocol platform and increasing interest in trading digital assets, the price of REN falls somewhere between 1.84 USD and 9.05 USD, respectively a 1,800% to 9,300% increase from its current price of 0.096 USD.

Competitors

• Circle
• Gemini
• Kraken
• Airswap
• Loopring
• Enigma
• 0x

Republic Protocol faces competition from digital asset exchanges and OTC platforms. Republic Protocol’s main competitors can be bifurcated into two groups: centralized platforms and decentralized platforms. Republic Protocol’s centralized competitors include Circle, Gemini, Kraken and soon Coinbase. One of the greatest centralized competitors to Republic Protocol is Circle, which makes markets for institutions and HNWI in many of the top 20 digital assets including Bitcoin, Bitcoin Cash, Ethereum, Litecoin and Zcash. Circle is also flexible as it will attempt to work a client order in almost any digital asset. While orders are not executed via a dark pool, private OTC trades such as those provided by Circle, often reveal little information to exchanges and other market participants. Circle relies on its relationships with other institutions such as hedge funds and HNWIs to execute agency trades on behalf of clients looking for liquidity in large block OTC trades. Additionally, when Circle cannot find the other side of a trade for a client, they can buy/sell OTC blocks using their own proprietary capital. Circle charges no fees on trades, but maintains a bid/ask spread. Circle’s bid/ask spread is typically less than 50 bps, depending on the liquidity of the digital asset. The higher the liquidity, the tighter the spread. Given that Republic Protocol is a decentralized platform, it relies less on a dedicated sales force which interacts with institutions to drive flows, and more on increased security and anonymity, while maintaining lower fees to drive new flows.

While Republic Protocol is slated to be the first decentralized dark pool operator, the platform will likely face competition from decentralized exchanges, such as trading platforms built on 0x, as well as other OTC decentralized platforms including Airswap, Enigma, and Loopring. Enigma potentially will offer anonymous smart contracts while Loopring acts as a pooled liquidity provider. If Loopring is overlaid on top of the enigma platform, one could envision a decentralized anonymous pool of liquidity which could challenge Republic Protocol. Airswap offers private OTC transactions on a decentralized network. Airswap aims to build out a peer-to-peer trading platform that allows for off-chain negotiations between buyers and sellers. Airswap has a very similar market profile to Republic Protocol. Airswap raised 32.5MM USD in their ICO which was backed by prominent investors including, Michael Novogratz, and currently trades at a market cap around 40MM USD. Airswap will likely be the leading challenger to Republic Protocol, and both platforms will need to market aggressively to capture new adopters. However, in its current capacity, the Airswap order book is not hidden and can be pieced together by attempting to place orders. Additionally, in its current state, the Airswap orderbook is entirely comprised of a small number of approved liquidity providers. Lastly, the 0x Project which powers many decentralized exchanges could eventually have a decentralized darkpool solution with the use of zkSNARKS. However, similar to some of the aforementioned platforms, this too is not currently functional and could be quite awhile before a detailed roadmap or product release is seen.

Risks

Inadequate Go-to-Market Strategy

The team currently maintains no dedicated marketing personnel which is often needed to grow user adoption rates on the platform. In the early stages, if resources are limited, it is essential to focus on development and less on marketing. However, after launch it is necessary that services have the ability to attract and retain users. Failure to successfully market the platform could lower estimated growth rates. Because the Republic Protocol is currently pre-product, the lack of a dedicated, strong marketing presence is not deleterious nor a large concern provided they increase marketing efforts in the near future.

Complicated or Slow Token Listing Process

One of the most attractive elements of decentralized exchanges is the ease and efficiency with which new tokens are added and subsequently traded on the platforms. This expedited listing process has the great benefit of attracting and retaining users looking to trade a diverse set of assets, both new and old. There is a risk that Republic Protocol will fail to add new tokens at an appropriate rate or be burdened by an excessively cumbersome process. This outcome could impact user adoption rates substantially as users often seek out those exchanges that add assets the fastest.

Burdened by Centralization

In their analysis of EOS, Multicoin Capital expounded on the difference between sovereign-grade and platform-grade censorship resistance. Although mostly decentralized, Republic Protocol does have a few centralized parts that make it susceptible to sovereign-grade censorship. Of note, early on, the Republic Protocol team will be responsible for listing new tokens to the dark pool. This is especially a concern as many government agencies, most notably the US SEC, are currently scrutinizing many exchange and privately traded tokens to determine classification status. For any tokens classified as securities, any platform trading these tokens could be required to undergo a lengthy and expensive process to obtain special licenses as well as maintain KYC/AML compliance requirements. If the Republic Protocol team controls the listings of tokens in its dark pool, then government agencies may hold the team accountable. Fearful of legal repercussions, the Republic Protocol team may be reluctant to add tokens with unclear statuses to their dark pool. Nevertheless, this may only be a temporary concern as the Republic Protocol allows for 3rd party darkpool exchanges that, we presume, will have control over the assets listed within their exchange. Additionally, 3rd party darkpool exchanges could also adopt a decentralized listing process that is controlled by token holders.

Low Liquidity

Low liquidity is an enormous hurdle for all new exchanges and dark pools. Without a certain threshold of liquidity, exchanges have a difficult time retaining traders. Although not yet disclosed, the Republic Protocol team has indicated that they do have a decentralized approach to bringing liquidity to their platform shortly after launch.

Poor Protocol Incentives

Proper platform incentives are among the most important aspects of protocol design. These incentives are necessary to allow decentralized systems to effectively operate and capture the value of the underlying service while remaining resilient to bad actors who wish to harm, manipulate or control the system. All teams building truly decentralized systems face this particular challenge. While the Republic Protocol has laid out some solutions to many of these potential pitfalls (e.g. darknode fees, traderbonds), building these platforms to operate in a decentralized environment as anticipated is not an easy task. It is a risk that can be mitigated by properly designed protocols that have both sound value capture for the native asset as well as strong incentives for participants within the system. The Republic Protocol team has done a good job of addressing these issues thus far.

Decreased Funding

It is common practice for blockchain companies to maintain some degree of secrecy in the management of the ICO proceeds. Because funding is often received in the form of another digital asset, most commonly ETH, there are important fund management decisions that need to be made. While cautious teams liquidate much of the raise into USD for stability, it is not uncommon for teams to keep a large allocation in Ethereum. This has important implications as the recorded amount raised (e.g. 35MM USD) if kept in the primary form received, Ethereum, could have a drastically different value depending on market conditions. The Republic Protocol team has refrained from commenting on the exact percentage of their ICO raise that was converted from ETH to USD.

Team

Republic Protocol was founded by Taiyang Zhang (CEO) and Loong Wang (CTO), and has 13 team members and 5 advisors. This is Taiyang and Loong’s first blockchain and/or digital asset project. Prior to founding Republic Protocol, Taiyang was a founding member of Virgil Capital, a cryptoasset quantitative hedge fund, and prior to that was a director at Neucode for 3 years. As of Feb 4, 2018, Virgil Capital managed ~24MM USD and focused primarily on arbitrage opportunities within digital assets. Prior to co-founding Republic Protocol, Loong was the lead software developer at Neucode for nearly 2 years. Neucode is a small software company based out of Australia with little digital footprint.

Republic Protocol ICO Details

An important, yet often overlooked metric in token valuation is the token distribution. This is especially critical in the setting of a recent ICO as token concentration and market manipulation may be a concern. Many token sales have poor token distribution with enormous discounts given to entice high profile advisors or partners in order to boost marketing of the ICO. This does not appear to be the case with Republic Protocol, as outlined below.

• Date of ICO: February 3, 2018
• Token distribution: February 17, 2018
• Total REN (capped): 1B
• Total REN sold in ICO: 602MM (60.2%)
• Presale allocation: 516MM REN (51.6%)
• Main sale allocation: 86MM REN (8.6%)
• Tokens held by founders, team and advisors: 298MM (29.8%)
• Token allocation for community development and partners: 100MM (10%)
• A total of 4075 people participated in main sale without discounts
• Vesting schedule for advisors and team is 6 months and 2 years, respectively
• Presale discounts: 0–15%
• Main sale: no discounts
• Average price of REN ~0.05 USD

Although CoinMarketCap reports that the total REN in circulation is 519,094,022, the actual number that will be in circulation in the very near future is probably closer to the total REN distributed in the ICO, which is 602MM.

Regarding vesting schedules, 100MM REN (10%) are locked up until either August 2018 or February 2020 as this is when the 6 months and 2 year vesting schedules conclude. Until August 2018, there should not be any unexpected large influx of REN entering the market assuming the remaining 29.9 million REN set aside for “Reserve,” “Early Adopter Partnerships,” and “Community Development and Partners” are mostly vested.

Of note, at 0.096 USD, REN is currently trading at just under 2x (92% above) its average ICO price of 0.05 USD.

Disclaimer

The managing partners do not endorse, or recommend any investment action in Republic Protocol (REN). This document should not be regarded as investment advice, offering document, or as a recommendation regarding a course of action. The managing partners of Blocktown Capital own Republic Protocol (REN) tokens. These views are those solely of the managing partners of Blocktown Capital and do not represent the views of the Republic Protocol team.