June 2019: Capdax’s Future and a recap of Events
Dear supporters and friends of Capdax,
In our previous update in March, we announced that we were investigating a promising new direction for the future of Capdax in response to the various challenges faced. We saw it as our responsibility as founders to pursue the project further only if we could guarantee a high probability of success. Since the last update, we have been working extremely hard on trying to secure the necessary agreements and partnerships, whilst running on minimum costs.
Unfortunately, despite our best efforts, we are unable to guarantee the success of Capdax to our satisfaction. We have therefore taken the difficult decision that in the best interests of the community, we will not pursue the project further. Instead, we will work out the best possible way to buy back all tokens in circulation using the total funds remaining once any outstanding business matters are resolved.
Given that this is a major decision that heavily impacts the Capdax team as well as the community, I want to use this update to offer a detailed break-down of the events that have led to this step. While 2019 was an extremely challenging year for Capdax, we are confident that we have explored all possible solutions to these challenges to the best of our ability. We’ve had various achievements along the way, including some recent opportunities that made us hopeful that we might be able to secure the future of Capdax. Unfortunately, these have not worked out, and it’s important to accept this reality and proceed accordingly.
In the second quarter of 2018, the Capdax Matching Engine, a crucial component of our exchange platform, was found to be lacking in both stability and scalability. Subsequently, our former CTO and Project Lead stepped down, making way for two new experienced leaders. In order to avoid delays in launching, we engaged a third party provider (with over 20 years of experience working on major projects in the trading space) to deliver the matching engine. However, this external partner did not submit the work to deadline, resulting in delays in the final quarter of 2018. In February 2019 the matching engine was submitted, and the test results were extremely disappointing. After filing many bug reports, our team concluded that in its current form the backend was not, and never would be, fit for public release.
It was necessary at this point to reassess the future of Capdax. Pursuing the regular token exchange would have led to further delays of at least six months, in a market that was quickly becoming less and less promising for newcomers. Furthermore, we were experiencing funding difficulties due mainly to the depreciation of ETH, and starting over to rebuild the matching engine would have left us with very little runway. It was therefore necessary to explore pivot solutions that would allow us to generate revenue much more quickly, or require significantly lower expenditure. We were determined to find a solution that would meet the following conditions: leverage the outstanding knowledge, partners, and resources built up over the course of the project, guarantee revenue generation before the end of 2019, and have the potential to become a major international success.
Over eight weeks, several potential business models were identified and explored thoroughly, involving in depth talks with major industry players and potential business partners. In May, we announced that we had narrowed this down to one exciting opportunity: a crypto derivatives exchange. Although this is more challenging to realise than a token exchange, it made sense given it’s potential for quick revenue generation. The market is much more innovative than for the spot exchange business, meaning the potential for fast growth was higher. Furthermore, we had indications from a business partner that we would be able to secure agreements guaranteeing adequate revenue for the next 3 years.
In the interests of the Capdax community, we were determined to go forward with this direction only if we could build a strong foundation for success. We set ourselves very ambitious conditions, as we wanted to offer the community a high degree of certainty in the future of the project. The key conditions for the success of the project included: 1) a clear regulatory framework provided by our partner banks; 2) revenue guarantees by future clients and certain trading volumes, 3) a team to execute and build such a challenging product in-house, 4) engaged advisors with a strong reputation; 5) further backup funding options.
We have been working passionately with minimum costs during May and June, utilising all our expertise and industry contacts in an attempt to meet these conditions, and leaving no avenue unexplored. We dove deep into negotiations with our potential business partner about deal terms, as well as approaching several other players actively searching for an institutional derivatives solution. We explored the feasibility of raising additional funding through non-equity in order to maintain full control. After countless meetings, we also identified an extremely strong tech team including technical as well as legal and regulatory experts, and selected several high level advisors, including a former board member of one of the biggest security exchanges in Europe.
Unfortunately, this promising opportunity did not work out. While we were able to meet conditions 1, 3, 4, and partly 5, we were unable to build sustainable commercial partnerships that would contractually secure Capdax’ future. While we were able to identify partners with a very strong interest in cooperation, we believed a solid foundation for the commercial future of Capdax could be adequately secured only if these partners agreed to long term commitments. As our demands here were not fully met, we have decided that the responsible decision in the interests of all parties is to discontinue the project.
Over the coming weeks and months we will be focusing on resolving final business, including negotiating closure agreements with partners. We will aim to reach a resolution as quickly and efficiently as possible. Once this has been achieved, we will buy back all tokens in circulation with the remaining funds. Details will be published as soon as possible, and we recommend that community members hold on to their tokens until this time. If your tokens are still stored with us, you may request a withdrawal now or during the upcoming weeks. We will announce a final deadline as we approach the ultimate buy back date.
We are very disappointed to bring this bad news. As founders, we believed strongly in the potential of the project and were therefore happy to personally contribute a great deal of money and unpaid time. The interests of the community have always been our priority, and we regret the impact this will have on those who have supported us throughout the process. Having done our best to explore every possible solution, we believe it is our personal responsibility not to put the project and community at further risk where we cannot guarantee success. We thank everyone in the community for their continued support for the project, and will publish a further update on the resolution process in due course.
As always, we genuinely appreciate your input and welcome your ideas, concerns, and opinions. For further information, questions or to speak with a member of the Capdax team, please join us on the Capdax Telegram channel.
