As published on our website: www.basis.io

December 13, 2018

Dear Basis Community,

Eighteen months ago, we set out with the ambitious goal of creating a better monetary system: one that would be resistant to hyperinflation, free from centralized control, and more stable and robust than the monetary systems that came before it. This was a goal we felt could create tremendous value for society if achieved, and one we also felt well-positioned to take on.

We started with a white paper that proposed a stable, decentralized cryptocurrency called Basis that had the potential to fulfill this vision.

Basis remains stable by incentivizing traders to buy and sell Basis in response to changes in demand. These incentives are set up through regular, on-chain auctions of “bond” and “share” tokens, which serve to adjust Basis supply. Because the Basis ecosystem would take some time to develop, we knew we’d need to initially play the role of trader ourselves, which would be capital-intensive. As such, after publishing our white paper, we raised a $133M round of financing. This allowed us to involve a diverse set of investors who we felt could add a lot of value to the project and enabled us to build a large stabilization fund to bootstrap the system. We then assembled an outstanding team and set our sights on launching the system.

Unfortunately, having to apply US securities regulation to the system had a serious negative impact on our ability to launch Basis.

• As regulatory guidance started to trickle out over time, our lawyers came to a consensus that there would be no way to avoid securities status for bond and share tokens (though Basis would likely be free of this characterization).
• Due to their status as unregistered securities, bond and share tokens would be subject to transfer restrictions, with Intangible Labs responsible for limiting token ownership to accredited investors in the US for the first year after issuance and for performing eligibility checks on international users.
• Enforcing transfer restrictions would require a centralized whitelist, meaning our system would not only lose its censorship resistance, but also that on-chain auctions would have significantly less liquidity.
• Having fewer participants in the on-chain auctions adversely affects the stability of Basis, making Basis intrinsically less attractive to users. Additionally, imposing transfer restrictions on bond and share token auctions materially hurts our ability to build the Basis ecosystem.
• While transfer restrictions can generally lapse 12 months after a security is issued, because the auctions of bond and share tokens governed by our monetary policy would be continuously issued, transfer restrictions and a centralized whitelist would be required indefinitely.

We considered many alternative paths to launch to try and comply with the regulatory constraints while keeping our product compelling and competitive. These paths included launching offshore with added utility to make bond and share tokens less financial in nature, and starting off with a centralized stability mechanism. Ultimately, however, we don’t think any of the paths we considered are compelling enough for our users or our investors, or consistent enough with our vision to justify moving forward.

As such, we are sad to share the news that we have decided to return capital to our investors. This also means, unfortunately, that the Basis project will be shutting down.

Although this isn’t the outcome any of us wanted, we knew going into this that we were fundamentally making a binary bet on a favorable regulatory landscape. The binary nature of our bet is precisely why we included a return of capital clause in our token sale to begin with, even though it was something we hoped we’d never have to rely on. So, while we’re disappointed we couldn’t launch the system we were all hoping to build, we’re thankful that we can at least do right by our investors given these circumstances.

Finally, we owe our sincere thanks to everyone who supported us and our project — from the extraordinary backers and partners who believed in us, to the outstanding team that joined us in our mission. You gave us the opportunity to change the world, and we’re looking forward to trying again.

Until next time,

Nader Al-Naji, Lawrence Diao, Josh Chen, and the Basis Team

Basis Update was originally published in Basis Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.

It is for this reason that we are excited to announce that John Taylor will be joining Basis as an economic advisor. As a pioneer of rules-based monetary policy, inventor of the Taylor Rule, and runner-up for Fed Chairman in 2018, it is hard to imagine someone more fitting to advise us as we work to build an algorithmic central bank*. Prof. Taylor also served on the Council of Economic Advisers and as the Under Secretary of Treasury, working in four presidential administrations.

We expect Prof. Taylor’s expertise will be invaluable to our efforts to marry concepts from traditional monetary systems with the new primitives offered by cryptocurrency. If we are able to innovate on monetary systems, it is by standing on the shoulders of giants. And Prof. Taylor is truly one of those giants.

Prof. Taylor is joining Naval Ravikant on our advisory board. Naval is a co-founder of AngelList and MetaStable and an early cryptocurrency thought-leader.

*Basis is not a bank or engaged in banking business.

Basis Welcomes John Taylor, Pioneer of Rules-Based Monetary Policy, as Advisor was originally published in Basis Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.

I am excited to announce today that Basis (formerly Basecoin) has raised $133M in a private placement from Bain Capital Ventures, GV, Stanley Druckenmiller, Kevin Warsh, Lightspeed, Foundation Capital, Andreessen Horowitz, Wing VC, NFX, Valor Capital, Zhenfund, INBlockchain, Ceyuan Ventures, Sky9 Capital, and many more. Together, we are building a cryptocurrency with an algorithmic central bank that we believe will make cryptocurrency stable and usable around the world.

Cryptocurrencies Aren’t Currencies

At Basis, we believe the price volatility of cryptocurrencies is one of their biggest barriers to widespread adoption. Unlike the currencies we use today, most cryptocurrencies do not have a mechanism to keep purchasing power stable. This means that sporadic swings in demand can cause huge changes in price.

This is bad. Imagine you’re paid a salary of 1 Bitcoin per month. If the price of Bitcoin drops, you might not be able to make rent. If it rises, your employer won’t be able to afford your salary. It’s simply not a reliable means of payment.

A currency needs to be stable in order for people to use it. Central banks apply monetary policy to mitigate currency volatility. Until now, there’s been no way to create a cryptocurrency with comparable benefits. And no way for cryptocurrencies to become true currencies.

A Central Bank on the Blockchain

At a high level, central banks maintain stability by expanding and contracting the availability of money. But Bitcoin and other cryptocurrencies have a fixed supply that never expands or contracts. This is a key contributor to cryptocurrencies’ volatility, making them virtually unusable, other than for speculation.

We wondered: Why can’t a cryptocurrency have an expanding and contracting supply, just like a real currency? We invented Basis to do just this. So it has all the benefits of cryptocurrency but without the volatility that’s prevented mainstream adoption to date.

Decentralizing Monetary Expansion

Put simply, when a central bank needs to expand the money supply, it runs the proverbial printing press to put new money into circulation. When the supply of Basis needs to expand, newly-created Basis is distributed to people who participate in the system. In that way, the system decentralizes monetary expansion. See our white paper to learn more.

Why the World Needs Basis

Most people in the developed world take for granted their access to a stable currency. In the developing world, however, the most stable currencies that people have access to are often inflating at annual rates of 10% or more.

Bitcoin was intended to be the solution to these problems. But its volatility makes it as deficient and ineffective as a hyperinflating local currency. As a result, it has brought us a tool for speculation and not much more.

We believe Basis can help solve this problem of currency instability for people in the developing world. By providing anyone with an internet connection access to a stable and secure medium of exchange for the first time, we believe Basis can significantly increase the efficiency of the economies of developing nations. This would help us achieve a dream that has eluded cryptocurrencies until now.

Our Backers

We realized early on that building a new monetary system requires buy-in from major institutions all over the world.

Now, through our private placement, we don’t just have the support of financial institutions like venture capitalists and crypto hedge funds. Major crypto exchanges, blockchain wallets, application developers, and economists have also come in to support our effort. We are proud to say that our backers now form an international network of supporters who have come together to help us make Basis the next great monetary system.

Rock and roll.

Nader Al-Naji, CEO

If building the next great monetary system excites you, we’re hiring. See descriptions of the team on our website.

* Basis is not a bank or engaged in banking business.

Introducing Basis, a Stable Cryptocurrency with an Algorithmic Central Bank* was originally published in Basis Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.