What Happened To Proof Tokens?
Back in 2017, our team received crowdfunding from hundreds of people from around the world. Our goal: bring real-world assets, like property and debt agreements, into a new era of decentralization via the blockchain!
Quickly after our crowdfunding campaign concluded, we quickly ramped up our development, product, administrative, content, management, and finance divisions. The result?
Quite a few things actually.
1. It became increasingly apparent that creating tokens on the Ethereum blockchain (which we had been providing solutions for since 2016) was considered by ever-more-aggressive regulators from around the world to be unlicensed securitization. This was not a light matter. We quickly shut down all products that allowed people to create the kind of digital assets in question, as well as create markets for them through our platform in late 2017. We refunded all customers who had disruptions of service. This was easy because, for the most part, everyone had full custody of their assets on the blockchain. We also shutdown our credit card-to-cryptocurrency gateways. It’s simple: once a lot of people join your team, they bring a lot of things to light that the original founding team might have overlooked: like regulation. At that point, those things can’t be overlooked anymore. I will call this the Legal Realities Phase.
2. How about our token itself? Would our PRFT tokens be considered securities? This was the next challenge. Our founding team, like most blockchain projects that crowdfunded at the time, considered our token to be a utility token (i.e. in-store credit for a future decentralized platforms). Regulators and lawmakers around the world are still working out what the difference is, and we have spent much of the last few years watching as this dialogue has evolved. The advice we mostly received from legal advisors was: wait and see, but in the meantime, do not list your tokens on a centralized exchange.
Meanwhile, many people who participated in our crowdsale were watching many other token projects launch on centralized crypto exchanges like Binance, Upbit (before it was hacked), Bitfinex, and others. We received ever-increasing pressure from tokenholders to list.
In our early engagement with many of these types of exchanges, it was extremely hard to ignore the "pump-and-dump" mechanisms at play behind many of these crypto exchange deals. Given this reality and the legal ambiguity of such listings, we explained to tokenholders that we would continue research and development while more legal clarity was obtained. We also felt that creating intrinsic value within our ecosystem was a better use of capital than those questionable exchange listing fees. That's how you get a lot of tokenholders to turn on you.
At the time, there was this unstated rule in most projects that others tried to impose on us: break the law, pump your coin, make us rich, exit without providing value to everyday users. That is not why we started our company, raised funding, or come to work today. We stayed focused on our vision of blockchain-enabled, tokenized markets. While this was happening in mid-2018, the bottom was falling out of cryptocurrency markets. Most of the crowdsourced funds we had raised was held in cryptocurrency (being true believers and so forth). At this point, many of the exit scams... exited. True believers capitulated. Crypto was dead, or at least much of the media reported it be... again. Over 90 percent of the market cap of Ether tokens vanished from early 2018 into Winter. People started associating us with these acts. We kept our heads down, continued building, and lamented the loss of much of our own capital to market forces. I will call this the Crypto Winter Phase. Many others called it this, too. It’s still chilly outside.
3. After our crowdfunding session and issuance of PRFT tokens, we began to face stark realities outside of just the legal challenges/securities definitions by regulators. Many of the projects that were working towards similar objectives began releasing products that obtained zero traction.
Why? People believe a variety of things. My personal opinion is that:
A) Decentralized platforms on Ethereum were extremely hard for non-crypto geeks to use (even today).
B) The people with the savvy (and patience) to use these platforms were not that interested in real-world asset markets.
For us, this meant re-establishing how we would find product-market fit. This, along with the legal realities, led us to focus on data. The assumption was: once the legal grey areas were addressed, most savvy investors would want and need to actually analyze these new markets. Understanding that these market participants were also very much interested in traditional cryptocurrencies as well, we built a crypto data platform called Avocado Terminal (original embarrassing slogan: “Funny Name, Serious Data”).
We aggregated data from the top crypto exchanges, created an automated market analysis system, built a financial charting tool (might have geeked out too hard on that particular area), integrated a custom messenger for OTC, developed a social network on top of all that (because traders told us they wanted that, too), and partnered with some of the largest cryptocurrency funds to gain traction. Meanwhile, we built out an open-source decentralized marketplace for Ethereum-based tokens and released an open-source token generator/manager.
Basically, a lot of development. A lot of market penetration tests. A lot of trial and error geared towards product-market fit.
With a team of about ten developers at the time (seven in-house and three or four remote colleagues), along with a ten-plus non-technical team of analysts, marketers, product managers, etc, we burnt through a lot of cash in payroll, taxes, rent, server costs, and general office/operational expenses.
All this, as crypto markets tanked. All this, while many PRFT token-holders became angrier that we weren't planning on a pump-and-dump, as they navigated Crypto Winter themselves. We had always shared most of our internal group chat discussions with... anyone (open Telegram and Discord channels). The problem with this is that many of our team members became evermore distracted, and even harassed, by strangers in our group chats. This reached a point where we felt it would be best to close our discussion channels to the public for the time being. The decision wasn't taken lightly; however, it also became apparent that outside the company, the majority of people in our group chats were not interested in our experiments for product-market fit.
Our idea was to reopen these group chats once we and the greater ecosystem as a whole found that. Otherwise, it's just the Pump-And-Dumpers pitted against the speculators, who are at odds with the builders/researchers. I will call this the Heads-Down Phase. We paused most speculator engagement while we focused on fit.
So, where does all of this leave us today? When moon?
The original founders/developers of Proof: Tai, David and myself are still building. We have shuffled on through Crypto Winter, the legal rollercoasters of regulatory ambiguity, speculator harassment, and so forth. And honestly, I am extremely proud of our team’s experiments. And we’re not promising the moon. We never did. There was one guy who tried to launch an ad when we were doing our crowdsale back in 2017 that read "PRFT: Make money". That ad never launched and we stopped working with him.
The very platform that we have been building on all along is undergoing a massive make-over. As Vitalik will tell you: the current version of Ethereum was not meant for user adoption... it was meant to live experimentation. A lot of people don’t want to hear that. There have been some very interesting developments over the last few years since our crowdfunding that are transforming everything, and highly influencing our work to overcome hurdles we previously encountered. I will list a few:
- Uniswap
This is revolutionary because it is turning the orderbook-based market concept on its head, allowing for truly decentralization of markets. There is no token you need to own to interact with it, fees are very low, anyone can be a "maker", and it does not require any off-chain trust like with other DEXes such as IDEX or ForkDelta. When we started, nothing like this existed. The Uniswap innovation has changed the nature of custodianship. Uniswap will likely live on forever, because no operators are required. This is the kind of system we are looking to integrate with, and it has been highly influential in our work towards market-infrastructure that works.
2. UMA Protocol and Synthetix
Defi platforms have interesting tokenomics behind them, but what makes Uma and Synthetix particularly interesting is how they collateralize cryptocurrency in a (mostly) trustless fashion and produce (mostly) decentralized derivatives. What's even more interesting is how they are navigating the legal landscapes. UMA was founded by two Goldman Sachs alumni, (who I have had the honor of meeting), and brings a lot of interesting, practical solutions to leverage, oracles, settlement, and counterparty risk on-chain. These two platforms have been highly influential in our current work. While the traction side of their platforms is yet to be proven, the technology is extremely workable... and open.
3. DeFi more broadly (Maker, Compound, Fulcrum)
These platforms and the idea of decentralized "Money Legos" have added shorting, fixed income, riskless loans, mostly trustless stablecoins, and more to the blockchain space. And, more importantly, they are doing pretty well regarding the highly coveted attribute of traction. In fact, we built an experiment called Structured that leveraged all of these platforms for a recent global hackathon (2nd place out of 77 projects isn't so bad). Money legos and the era of DeFi composability are creating entirely new opportunities in the landscape. New developments continue to influence our strategy.
4. Optimistic Rollups
Interacting with the Ethereum blockchain has always been quite costly. The introduction of rollups at Devcon 5 was a massive move for the space, and is changing the nature of what Ethereum accessibility looks like. Before rollups, trying to build something that non-crypto geek consumers would use was really hard, just from an infra/cost perspective. That is changing. Further, developments in Eth2 scalability/sharding are transforming what can be done.
With all of these moving pieces and industry changers, most days aren't boring...
But I know why you're here.
So, what's this mean for PRFT holders and how will PRFT gain in value?
Here's a deal and something that works on the regulatory front as well:
As we continue developments on Avocado, AMP, Togen, Structured, OrFeed and a few other skunkworks projects, integrating areas of significance from the above listed projects and working towards traction, PRFT will continue to gain more convertibility into credits that can be utilized along the chain of DeFi Legos. This is already the case with OrFeed, where you can subsidize the cost of Chainlink website data oracles with PRFT, and with Togen where you can save $75 (.5 ETH) in platform fees. If you want something more specific, this industry is changing too fast to pretend to have a crystal ball.
