Fluence direction: past, present, and future

I think it would be great to share how our understanding and direction has evolved over time and present what course is ahead of us now.

When we started working on the project as a tiny team, we had an idea of how a decentralized database would benefit blockchain projects that needed to store and process lots of data. The general idea was that, instead of forcing every node in the network to store the same data and perform the same database operations, we could split the network into independent regions (clusters). Different clusters can store different data and reduce operations cost: the blockchain will be used to verify these operations, and token economy will incentivize miners to store other’s data. You can find more details in our technical paper, published in July 2017.

We conducted a pre-sale in August 2017, rolled our sleeves up, and started working on the technology. We knew that every concept, which were described in only a few sentences in the technical paper, required lots of research and development. Nodes in the network have to find each other, the data has to be encrypted and searchable at the same time, the blockchain should enforce the data integrity and correctness of operations, and, finally, the economy should be structured in such a way that bad agents will eventually be evicted from the network.

We planned to launch a tokensale in Q4 2017, but it turned out to be pretty hard to meet this date. The rabbit hole was really deep, and it took us almost half a year to dig deep enough and publish an updated, much more thorough technical paper in February 2018. The codebase had to catch up too — and, now, we have a code that, if set up properly, can launch nodes for the private testnet.

Looking back, I can say that results were definitely worth the effort! We presented our technology at almost a dozen different conferences and meetups, and even had a chance to be a keynote speaker at the Oracle event. The team has grown to eight member, including 5 software and research engineers: we have also signed few great people from the crypto world to serve as advisors.

So, here we are, in May 2018, and the question is, “what’s next?”

The biggest challenge which we see now is that even more research is needed before we can do the final tokensale. We are digging more into various consistency models that might not require a full consensus; verification games that reduce costs while keeping computations correct; authenticated data structures proving that data was not forged by malicious hosts; and other research topics. We are also learning how to engage with the developers community by attending various developer’s meetups.

The timeline

First of all, let me remind you about what has already happened so far:

  • Jul 2017: the original whitepaper produced;
  • Aug 2017: conducted pre-sale, raised $800k;
  • Sep 2017: prototype development kick-off;
  • Oct 2017: Parity hack ($500k frozen);
  • Оct 2017: tokensale shift;
  • Jan 2018: team meeting and the new whitepaper kick-off;
  • Feb 2018: the new whitepaper published, promotion at conferences;
  • Mar 2018: private test-net, promotion at conferences, tokensale shift;
  • Apr 2018: team meeting and further research kick-off.

For what’s next, I should firstly say that research is hard, and sometimes, it can be hard to predict, but an estimated timeline is the following:

  • Q2 2018: complete the private seed round with a few selected VC funds to keep our efforts ongoing;
  • Q3 2018 — Q4 2018: keep working on the research and development, publish a world-class whitepaper, solidify the codebase, promote the technology among community developers, and get its alpha version tested;
  • Q4 2018: conduct the tokensale;
  • Q1 or Q2 2019: roll out the first version of a production ready mainnet.

Now, we must admit that there were certain promises which we were not able to fulfill. We did promise the tokensale would happen in Q4 2017, then moved this date to Q1 / Mar 2018, then moved this date again (tentatively) to Q4 2018.

We should have done better. We should have known that partnerships and technology promotion are really important for a successful tokensale. We should have known that the research was going to be much harder and more time consuming than we expected. We could have also known that, if you want a project to succeed as greatly as, for example, Ethereum, you need a really solid technology.

Probably the only force majeure incident was the Parity multi-signature wallets hack, where we had almost 60% of our funds frozen. After that happened, in Q4 2017, we had pretty much only two choices: run a really weak tokensale which wouldn’t benefit anyone at all, or keep making the technology and do the strong sale which would be way more beneficial to everyone than the weak one. So, we chose the latter.

In February and March 2018 we started to think about how we should reward our early contributors for this long wait and our constantly shifted dates. Back then, it didn’t look like a big deal to multiply their tokens twice or even three times — we had 94% of tokens left after the pre-sale. We also felt really grateful to them for the support and trust on the pre-sale, so we even promised that there will be a multiplication bonus. Well, now, we learned more and it doesn’t look like the best idea.

In an open society every party has their own interests and a freedom to pursue these interests. Fluence, as one might guess, has multiple parties involved; early contributors, VC funds interested in a private round, tokensale participants, miners, network users, unaffiliated software developers from the community, and, of course, the team.

Increasing the share of early contributors will come at the expense of other participants. It might hurt the project in the short term because new parties (for example, potential tokensale participants) might be reluctant to contribute if too many tokens were available at the highly reduced price. It might also hurt the project in the long term as well because less tokens will be available to encourage the ecosystem around — users, miners or community software devs.

So, instead of multiplying tokens, we increased the target token price by 40% and offered a refund policy. The refund is intended to let those who can’t or don’t want to wait any longer to leave the project. The target token price increases benefits not only the early contributors, but the entire community around Fluence. Comparing conducting the tokensale in Q4 2017 with a weak technology or the tokensale in, say, Q4 2018 with a really strong whitepaper, software that actually works and the right partnerships, I’m sure that 40% token price increase is justified quite well.

We know that some pre-sale participants are not happy about this decision, and we feel genuinely sorry about that. As much as we would love to reward them, we don’t see an easy way to distribute multiplier bonuses. We did make a promise that we shouldn’t have made, and that led to wrong expectations and a disappointment. We apologise for that.

We believe that a healthy project should bring way more benefits in the long run than just additional bonuses. In general, we really want to avoid a situation which is called the tragedy of the commons. In this scenario different parties might act so much in their self-interest that it will damage the shared resource and it will not be any good for them at all.

Additional bonus

Having said all that, we have decided to add an additional conditionally vested bonus to the early backers who choose to stay with the project. It’s not a multiplier unfortunately, and has a specific condition, but this is what we believe is possible to do without hurting the ecosystem — but still, at least, a bit more rewarding and fair to our early contributors.

The bonus is offered exclusively to FPT token holders — 6,000,000 FPT tokens were sold in August 2017 during the early presale and represent 6% of the initial FLU allocation.

FPT token holders can receive of up to +25% of an additional conditionally vested bonus. The details are the following:

  • Each FPT holder (FPT Token Owner) can exchange 1 FPT to 1 FLU at any moment after the tokensale, as planned.
  • To receive the additional bonus, some or all FPT tokens held (let’s denote this number as X) will need to be sent to the Vesting Smart Contract before the tokensale to be locked. No tokens can be sent to the Vesting Smart Contract after the tokensale commences.
  • Immediately after the tokensale, 5% * X FLU will be sent back to the FPT Token Owner.
  • Throughout the 120 days that occur after the tokensale at the end of every 30-day period, the Vesting Smart Contract will send 5% * X FLU to the FPT Token Owner. This might change insignificantly from a 30-day period to the calendar month (and 120 days to 4 calendar months) because of smart contract implementation difficulties, but the main principle will stay the same.
  • At any moment in time, the FPT Token Owner can withdraw any amount of FPT back from the Vesting Smart Contract. From that moment, airdrops will continue only for the remaining FPT on the contract.
  • In the case of a funds withdrawal in the middle of the 30 days (calendar month) period, the bonus will not be prorated. In other words a 5% bonus will be accrued only for the tokens that are still being held on the Vesting Smart Contract at the end of the period. See example B below for more details.
  • Note: To receive the entire +25% bonus, the FPT Token Owner has to keep all FPT on the Vesting Smart Contract until the 120-day period ends, otherwise the effective bonus will be lower.

The schedule looks the following way:

Examples:

A) Alice holds 100 FPT. She sends all her FPT to the Vesting Smart Contract before the tokensale and keeps this for the entire 120 days after the tokensale. Immediately after the tokensale, she receives 5 FLU and, at the end of every 30-day period, 5 FLU. Eventually, she receives 5 + 5 * 4 = 25 FLU as a bonus, then withdraws FPT back from the contract and converts 100 FPT back into 100 FLU.

Total FLU: 100 locked + 25 bonus = 125 FLU.

B) Bob holds 100 FPT. He sends 100 FPT to the Vesting Smart Contract before the tokensale and keeps it for 70 days (two 30 days periods) after the tokensale. Immediately after the tokensale, he receives 5 FLU and, at the end of every 30 days period, 5 FLU. Eventually, he receives 5 + 5 * 2 = 15 FLU as a bonus and converts 100 locked FPT back into 100 FLU.

Total FLU: 100 locked + 15 bonus = 115 FLU.

Buyback

The buyback option is still here. You can receive back all the ETH that contributed to the Fluence Pre-ICO in August 2017.

To get a buyback in ETH:

  1. Fill this application form.
  2. We will reach out to you and provide further instructions.
  3. These instructions will need to be completed within a week, so we could send Ether to your address.

Please read these terms carefully:

  1. We only can do a buyback if you have an access to the address that participated in the sale.
  2. We can only do full buybacks: partial buybacks will be considered on a case-by-case basis, but will most likely not be accepted.
  3. You can apply for the buyback until the 26th May 2018. Please be careful, we can’t guarantee the buyback if your application is submitted after that date.
  4. If you have already applied for the buyback, you can change your mind at any time until the actual transaction happens. We will be individually reaching out to every person who applied for the buyback before commencing it.

The tokensale date and terms

The tokensale date is estimated to happen in (late) Q4 2018. We would like to remind you that this date is not set in stone and might possibly change. Again, the tokensale will happen once we make sure that the product is ready, when marketing is ready, when the technology is mature enough, and, last but not least, when there is a right time.

That’s the nature of software R&D — we have to deal with lots of uncertainties, especially when doing the hardcore research. Our previous update should give some more insight on what difficulties we have to deal with.

There are certain potential events that should not be overlooked.

For example, there is some chance that Ethereum price will go up 10 times before the Fluence tokensale commences. There is no way to know for sure, but those early contributors who think this event has a significant probability should probably use the buyback option. Same goes for those who are not able to put up with a chance that the expected tokensale date might move to a later time. We also have to remind that US and Chinese residents/citizens were not able to participate and most probably won’t be able.

Final thoughts

When we completed the early presale of tokens, the collected funds allowed us to do many things; bootstrap project development, spread the word about Fluence, kick off scientific research, and code first prototypes. We highly appreciate all 293 participants who took part in that. Despite being not so lucky and having lost a significant amount of collected Ether with the Parity multisig bug last November, we did an incredible job in a product development.

We appreciate the support and belief that our team is going to do what’s best for the project and what’s best for the entire ecosystem around it. We plan to work on Fluence for years to come, and believe and hope that, one day, it will be something that is used on every computer around the globe.

We are looking forward to the success of the product that we are building together. We dedicate our lives to building Fluence, because we really want the technology to be alive. It’s a tough road, but exciting nevertheless!