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A Tale of Two ICOs: How Maidsafe and Tezos Endangered Their Own Projects with Critical Errors

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ICOs are currently experiencing a huge popularity boom, and many participants might think that the concept is new. does not do it. Long before Ethereum-based ERC20 chips were put on sale, Ethereum itself was launched using an ICO. Many do not realize that the history of the ICO goes even further than that, however.

Mastercoin

Imagine that someone tells you that a new cryptocurrency is about to be created that will allow the use of Smart contracts and will allow people to create their own digital currencies. Sound familiar? No, we are not talking about Ethereum, but about something called Mastercoin.

Mastercoin was launched via ICO on July 31, 2013. Investors could send Bitcoins to a certain address and would be rewarded with a proportional number. Mastercoins. The new protocol would do much of what Ethereum does now, but it would actually use the Bitcoin Blockchain instead of creating its own.

Like Ethereum, Mastercoin would create an easy way for individuals or businesses to create their own cryptocurrencies and offer them for sale via an ICO. One of the first projects to take advantage of this feature was Maidsafe, a distributed file storage platform. The crowdsale of Maidsafe chips was to last 30 days, but all chips were sold in just five hours.

Maidsafecoin

Such a request seems incredibly promising, is not it? Maidsafe raised $ 7 million from the sale, which may be small potatoes at that time of $ 100 million, but was a huge amount of money for an untested fundraising method in 2014 Maidsafe has determined that they would accept Bitcoins and Mastercoins a source of funding. Unfortunately, this has created a serious problem.

Maidsafe announced that a number of tokens would be awarded by Mastercoin and that a number would be awarded by Bitcoin. However, what Maidsafe did not realize was that at fixed ratios, people could buy many more Maidsafecoin tokens if they paid with Mastercoin than they were paying. with Bitcoin.

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For this reason, the price of Mastercoin climbed in the days leading up to the OIC of Maidsafe. By the end of the ICO, much of Mastercoin's application has suddenly disappeared and the price of Mastercoin has collapsed. Thus, Maidsafe raised about $ 3 million in Bitcoins and $ 4 million in Mastercoins, but the value of Mastercoins they received dropped rapidly. Maidsafe was unable to liquidate $ 4 million in Mastercoins quickly without turning the price, forcing them to hold a currency (Mastercoin) that continued to lose value over time.

about half of the money that they had intended to raise, and the market was on fire with speculation about bargains and market manipulations. Part of the problem was that Maidsafe had developed a terribly complicated deal with BitAngels, a Bitcoin-based venture capital firm. The arrangement was so complex that it was almost incomprehensible, involving Mastercoins changing hands several times between entities.

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Maidsafe is still there and is still working on their project, but the critical lack of funding has allowed them to be overshadowed by

From Maidsafe to Tezos

Tezos is a project initiated by husband Arthur and Kathleen Breitman to combine smart contract functionality with a formal governance structure on the channel. The ICO was based in Switzerland and, according to Swiss law, is supervised by the Tezos Foundation. A total of $ 232 million was raised during Tezos uncapped fundraising in July. The OIC has agreed to both Bitcoin and Ether for the contributions, and the products are owned by the Tezos Foundation. At today's prices, the foundation controls nearly half a billion dollars

According to Reuters, the Breitmans control the source code of Tezos, but the Foundation controls all the ICO funds. Now the Breitmans seek to oust Tezos Foundation leader Johann Gevers. The Breitmans accuse Gevers, in a blog post:

"In early September, we realized that the president of the Tezos Foundation, Johann Gevers, an attempt at self-negotiation, distorting to the board the value of a bonus he tried to allocate.We worked with the Tezos foundation to solve the problem and we pleaded for his removal from the board of foundation.We are confident in the ability the board to handle this delicate issue with care and diligence.In the meantime, Johann's operational role in the foundation was suspended, pending an investigation by the auditor of the board. "

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Gevers replied that the Breitmans are essentially trying to circumvent Swiss law and exercise direct control over Foundation "as if it was their own private entity." Gevers points out that the dispute between the Breitmans and himself is causing significant delays in the project. The Breitmans acknowledge this by saying:

"The momentum we had before the fundraising slowed despite the resources now available to support the project." Some developments have continued and we are working personally to create strong relationships with successful entrepreneurs who seek to build with Tezos Unfortunately, other aspects have fallen behind, such as:

  • Resource Creation online for contributors and developers to learn more about Tezos.

  • Scaling up of the development team

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    Clear articulation of our vision of the project through a series of explanatory blog posts, as we usually do

  • Sincerely with the community contributors and decision-makers in Tezos, and assist them in their efforts. "

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Structure and Remedies of the OIC

The OIC was designed in such a way that the Breitmans Society, which has the right to Tezos code, would be bought by the Tezos Foundation.In the light of the current dispute, this has not happened yet.If this never happens, then investors may end up owning a fractional interest in a foundation. In the meantime, without the funds from the foundation, Breitmans may end up owning the source code for something whose development may never be completed due to lack of funding. the world loses.

At least one law firm is considering filing a class action against Breitmans or the Tezos Foundation, or both, to ensure a full refund of all funds to Such an action, called an Full ulation, could be ordered if the SEC determines that the Tezos ICO was in fact an unregistered securities sale.

The Draper connection

London correspondent Cointelegraph Nick Ayton recently published a detailed account of the Tezos debacle, and pointed to another source of controversy. The billionaire capitalist Tim Draper has publicly invested in Tezos under a special pre-ICO agreement, and the Breitmans have unquestionably used his support to promote the ICO. After all, if billionaire Draper thinks Tezos is promising, the project could certainly be a good deal, is not it?

However, Ayton noted that Draper did receive a special agreement; in return for his early support, Draper would apparently have the option of withdrawing double his initial investment, regardless of how the project unfolded. Shortly after the publication of Ayton's article, Cointelegraph received a request from Draper for the story to be retracted.

Draper wrote:

"Please, do your accounts." My fund is a long-term investor and a token holder I support entrepreneurs Promising with the prospect of transforming society for the good of the customer There was nothing secret about our purchase of Tezos Most of the founders of ICO earn tokens over time. we hope to receive that we have not bought in pre-sale (alongside all the other investors who participated) will be acquired over time with the tokens of the founders .I do not have the # I intend to sell these chips because I sincerely believe in Tezos' mission Arthur and Cathleen [sic] are dedicated, honest and brilliant founders, and they have made it clear to me and to other buyers that the token would need time to develop.So they succeed, they could just transform society, and we'll all be better off, and then, maybe in five or ten years, my investors and I may become wealthy. I am waiting for a full retraction. And I think you should send flowers and apologies to Arthur and Cathleen [sic].

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How Not to Lead an ICO

According to the lessons of Maidsafe and Tezos, there are some obvious things that should be avoided by future IFAs:

  • Do not accept illiquid currencies. Accepting funds in illiquid currencies, and especially fixing the symbolic price in such currencies, should be avoided at all costs. He paralyzed the development of Maidsafe

  • Avoid complicated bargains. Maidsafe's deal with BitAngels and Tezos' agreement with Tim Draper caused a lot of complexity and controversy. At best, such transactions seem bad. At worst, they could represent real corruption.

  • Avoid complicated structures. A foundation promising to buy the intellectual property of a company at the end of an ICO is simply too complex a structure to actually work. By creating two centers of power – the owner of the intellectual property and the holder of the ICO funds – too much complexity (and room for litigation) was injected into the post-ICO period

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  • Dispute Management. The Tezos ICO structure created two essentially equal entities: the Breitmans who controlled the actual source code, and the Foundation that controlled all the funds that would be needed to develop the software. However, there was no protocol for conflict management and the purchase promised by the foundation of the company that holds the Tezos source code has never been realized. Will all this end? There is a lot to see. At the very least, the Tezos project has been significantly delayed, with its planned release in the fourth quarter of 2017 now postponed until early 2018. At worst, the project could never be completed and investors could end up with nothing. It is likely that the legal battle will become more complex (and more expensive) and that regulators may even be involved in the conflict. Investors could see a complete return of all their funds, or they could lose everything.

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    There is also a third option: a delayed but ultimately successful Tezos could be launched, potentially generating significant profits for ICO participants. At this point, it does not seem likely, but stranger things have happened.

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