Marqet Status Update
TL;DR - Marqet launch date is postponed for regulatory uncertainty
One month ago Marqet was selected for support from Fair Launch Capital and we have been lucky enough to work with top-tier advisors such as Joe Gerber, Reuben Bramanathan, and Gavin McDermott who made a decisive contribution to Marqet’s growth path.
During the first month all together we focused on:
- Fair Launch Principles
- Token Distribution Design
- The Fair Launch Credit Vault
- Liquidity Provider Discussions
- Regulatory and risk landscape
Through these efforts, we made a lot of progress on defining a more fair launch, but also how Marqet would work, what its legal framework could be and with the latest regulatory actions against exchanges and more in general on crypto derivatives, we don’t feel comfortable enough with the legal risks associated within the actual scenario to proceed and have decided to postpone the launch to a date to be defined. We remain committed to DeFi, community ownership and will continue to contribute in a variety of ways.
In fact, we’ll support Fair Launch Capital, translating some of what we learned into tools and structures that will help future projects.
In that spirit, we’ve outlined some of what we’ve learned over the last month in hopes that it will be valuable to others who are considering a fair launch.
1. Fair Launch Principles
What is a fair launch? How is it structured? Is there a standard? These and other questions have still no specific answers therefore it was the first thing to face.
In fact the goal of Fair Launch Capital is to demonstrate a new, fair path to market and set an important precedent in the process. Because there is little precedent for this path, we had to define and rely on core principles to guide our decisions towards the most fair outcomes possible.
Principles
- No pre-allocations before launch
- All decisions should be made transparently
- Ownership distribution design creates balanced and active community participation
- Community has agency on all decisions via either signaling or on-chain voting
- Team and advisors will steward project during initial stability phase
- Governance and ownership will be transferred to community as soon as possible
- Community — Team alignment leads to a more successful project
- Credit line provided by Fair Launch Capital just needs to be repaid — no upside at all
- Budget allocations by Fair Launch Capital dynamically grow with project
- These principles are starting points and subject to change via governance action
These principles could be used by all the projects interested in a fair launch and we would be very happy to receive feedback from the community on it or new points we can add to the list.
2. Token Distribution and Governance
Once the cardinal principles were clearly defined, we moved to the distribution of the token but above all to design a token economy such as to align the interests and participation of all those involved as much as possible.
We first analyzed the token models of the most relevant DeFi projects that involve a major distribution of governance tokens to the participants of the protocol and a subsequent transfer of governance such as Compound, Synthetix, Uniswap, Yearn Finance, Pickle Finance, Balancer, Curve and ArcX.
Secondly we identified all the potential stakeholders of Marqet and therefore all the categories of actors who will interact with Marqet and will be crucial for its growth. A healthy community has a balance of stakeholders working in concert to operate the network so it’s extremely important to design a fair token distribution for the key participants. And for Marqet they will be:
- Liquidity providers
- Traders
- Buidlers
- Growth Marqeters
And finally we designed several token allocation scenarios with different hypotheses on the distribution and on the incentives available to these four categories, always keeping in mind the key principles.
The distribution that will come out will be unique and will have several innovative features.
We can anticipate one :) Quadratic funding formula for the liquidity mining program.
3. Vault Testing
According to the principles we defined, Marqet didn’t sell any token allocation and its launch is backed by Fair Launch Capital through a line of credit which has to be paid back (to back future initiatives) once the platform will be able to produce revenues.
The credit line is progressively disbursed through a “Credit Vault” and this money could be used for early expenses (e.g. audits, setup, operations) so there is no need to sell tokens to raise money.
Being the first project to be supported by Fair Launch Capital, we cooperated with our advisors to improve and set up the “Credit Vault” so as to have an instrument with which Fair Launch Capital can provide access to working capital for new projects that are committed to doing a fair launch.
The “Credit Vault” has been designed and coded with specific features, such as:
- It’s based on Aave Delegated Credit Vault
- Backers can contribute with aTokens
- Team can draw down on the line of credit in stablecoins e.g. aDai
- Credit limit agreed by team & Fair Launch Capital (in the future this will be controlled by the Backers who have contributed capital)
- Credit limit increased in line with agreed milestones
- Project is requested to repay the credit line in the future, enabling backers to withdraw their aTokens, or pay it forward to new projects
4. Liquidity Providers Discussions
Marqet protocol will belong to the community and almost all of the tokens will be distributed to the protocol stakeholders who will constitute the pillars of governance.
We then started engaging in conversations with traders, investors and liquidity providers explaining to them how the protocol will work and what benefits they can derive from using Marqet instead of centralized platforms.
The interest in participating in Marqet has been and continues to be very high and we can only thank you very much for this. It seems there are all the prerequisites to have a governance composed of smart investors with deep experience of the crypto industry and in particular DeFi.
5. Regulatory and Incorporation Research
As you can imagine this was one of the points on which we focused most.
Launching the Marqet platform thanks to the support of Fair Launch Capital requires having a legal company structure in order to receive the loan and use it for our initial expenses, for instance to expand the team and to pay salaries. This implies choosing a jurisdiction in which to incorporate the company with which to be compliant and at the same time comply with the regulations of the countries in which we decide to operate or decide not to operate with some of them.
During the last weeks the lack of regulatory clarity has been a recurring theme for the crypto industry in particular for the margin trading platforms.
Centralized margin trading platforms such as BitMEX and OkEx are in the spotlight of regulators and their related founders have been arrested for several reasons and it is likely that more will follow.
Both the CFTC and the SEC expressed their opinion on the decentralized platforms, giving their generic interpretation and making it clear that DeFi tokens could be classified as securities even in case of a fair launch and that DeFi platforms need to respect BSA as well.
FCA has published final rules banning the sale of derivatives and ETNs that reference certain types of crypto assets to retail consumers. It affects any firms acting in, or from, the UK.
After a series of meetings with several lawyers from different countries of the world we understood that there are no clear and definite answers and that the industry which we are approaching is impervious and not clear from a regulatory point of view.
We like to have fun while we build things and not be concerned about how any regulator’s decision could impact our business or personal sphere therefore at this moment we don’t see a safe framework and we are not confident enough to proceed further.
It does not mean that Marqet is permanently stopped but that its launch is simply postponed to a date to be defined and all the current and upcoming activities are in stand-by.
As soon as there are updates on the status of the project they will be communicated on the official channels of the Fair Launch Capital. In the meantime feel free to write to us, our DMs are always open!
