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The First Yearlong ICO for EOS Raised $4 Billion. The Second? Just $2.8 Million

  • Block.One’s yearlong initial coin offering (ICO) for the EOS blockchain raised a record-breaking $4.1 billion in 2018.
  • LiquidApps created a second-layer protocol for EOS to offload computing expenses for dapps, which became very expensive just a few months after EOS launched.
  • In a similarly yearlong ICO, LiquidApps is currently selling DAPP tokens to be used on its new protocol.
  • However, six months in, LiquidApps had sold only $2.8 million worth of DAPP. After the same amount of time for its sale, Block.One had sold $700 million worth of EOS.

New cryptocurrencies aren’t raising money like they once did, even during marathon sales.

In the first half of 2018, the average initial coin offering (ICO) raised $25.5 million, based on data reported by PwC. The biggest ICO of them all, the yearlong EOS offering, closed during that era and raised a whopping $4.1 billion.

But a second ICO that aimed to make EOS more usable and also opted for a yearlong approach hasn’t drawn as much investor interest.

LiquidApps is building a second-layer solution for EOS that runs on the company’s DAPP token, which has been sold in daily auctions since February 2019. At the end of its 233rd auction cycle on Aug. 19, the DAPP sale had raised just $2.8 million worth of cryptocurrency.

A source with knowledge of the LiquidApps fundraise told CoinDesk:

“They’ve done an interesting job and [have been] innovative in learning from the Block.One sale and mechanics in crafting how a fundraise for a project should be done. Where they’ve struggled is, not just different market conditions, but finding the right investors and participants for their sale that fully understand the value proposition for the project.”

LiquidApps declined to provide comment on the results of its token sale so far, despite multiple attempts by CoinDesk for comment.

For 333 days and 444 sale cycles, 500 million of the 1 billion pre-mined DAPP tokens will be gradually sold off – that’s 1.12 million tokens every 18 hours. CoinDesk’s analysis is based on the reported price of these tokens in each sale, as shown on the LiquidApps auction site.

The LiquidApps solution is meant to take pressure off the EOS blockchain’s RAM system, which has gotten bogged down as computing resources have proven to be the scarce asset on the fourth-largest blockchain by market cap.

Still, the effort seems to be garnering comparably little fanfare. For comparison, six months into the EOS sale, the startup behind it, Block.One, had raised $700 million, according to a December 2017 report by the Wall Street Journal.

This is a different era in crypto, however, and LiquidApps has put out a much more real product than vastly larger ICOs that ended long ago.

Fred Kreuger, creator of the Lynx Wallet, which is built to work well with EOS, told CoinDesk that he was not surprised by more modest returns on the LiquidApps ICO.

Said Kreuger:

“Most end users and token buyers understand one thing – native tokens for blockchains.”

New era

The company made a conscious decision at the outset not to set a goal for its fundraiser.

“Our goal with the Token Generation is to bring as many stakeholders into the ecosystem to best establish it for success,” LiquidApps CEO Beni Hakak told CoinDesk in a February email, shortly before the sale opened. “As true believers in the free market, we don’t involve ourselves with price speculations – there is no technical possibility to combine an auction, like we’re doing, with a capped amount.”

There may be less pressure on LiquidApps to raise a substantial amount due to its close relationship to another well funded ICO, Bancor.

Hakak was the director of operations at Bancor until January of this year, according to his LinkedIn page, which also lists him as the CEO of LiquidEOS, an EOS block producer that CoinDesk previously reported as a project of Bancor itself.

In February, the LiquidApps white paper listed eight people on its founding team, including all three co-authors of the original Bancor white paper: siblings Guy and Galia Benartzi and Eyal Hertzog. Still, according to a Bancor spokesperson, LiquidApps is a distinct and separate company, though one made up of Bancor alums.

That relationship yielded a great deal of skepticism from the broader crypto community. At the outset of the LiquidApps sale, Cornell professor Emin Gün Sirer saw the whole effort as ill-advised.

“This is an idea that, in the old days, would attract no more than $225K in seed funding from angels and a few VCs, and those VCs would be considered mavericks for taking this on,” he told CoinDesk in an email before the sale opened, adding:

“If $4 billion was not enough to yield an EOS network that is functioning smoothly, the thing to do is not to seek additional funds for more work in the same vein, but to question what went wrong with the original design of the RAM market in EOS.”

Why buy DAPP?

RAM is the ready, easy-to-access memory that applications need to work through a given function. Early on, speculators bought up the RAM supply in anticipation that increased popularity of EOS would make it valuable. In fact, it became so pricy that acquiring RAM resources on EOS became prohibitive.

The first product from LiquidApps was vRAM, a way for EOS dapps to offload most of their RAM needs to a second, less expensive layer. To its credit, vRAM was live at the start of the token sale and has been running ever since.

Investing With a Difference (IWAD) runs a node on the LiquidApps network, and one of the companies it worked with to use its services found dramatic savings. Moonlighting, a freelance job site that runs on EOS, would pay $2,000 per day to run all of its transactions on EOS, according to Raman Bindlish of IWAD. Their costs after moving most transactions onto IWAD’s deployment of LiquidApps dropped to about $10 per day.

“We are doing 10,000–20,000 transactions per day, and CPU/NET cost on EOS blockchain is almost minimal,” Bindlish told CoinDesk. “So, using LiquidApps framework for RAM, we brought down the cost of each transaction to less than $0.0005 on average.”

Since releasing vRAM, LiquidApps has put out many more useful tools for developers, such as a way to make accounts for free (an EOS account costs a bit of EOS), an oracle system and a time tool, among other things. LiquidApps published a detailed account of progress so far early this year. To access its different services, users pay in DAPP tokens.

Despite doubts about the necessity of its product, launching the solution has led to a network of service providers running its vRAM system and other products. This has created a new income stream for technically proficient teams no longer able to earn enough contributing to consensus on EOS, either as a block producer or standby block producer.

LiquidApps began in an era of expensive RAM. In September of 2018, it was running at roughly $0.80 per kilobyte. For context, at that time, it would cost a developer a few dollars in RAM to add one new user.

Since then, the price of RAM has dropped considerably. As of this writing, a kilobyte of RAM cost about $0.34 in EOS, according to EOS New York.

And EOS, for its part, had a strong first quarter in terms of transaction volume, largely driven by gambling dapps.

Hakak told CoinDesk in February:

“We believe The DAPP Network should be a separate, complementary ecosystem (economy) to EOS. While EOS Mainnet is where the consensus is established, the DAPP Network is a secondary trustless layer; and having a unique token, the DAPP token, will allow this ecosystem to flourish.”

source.coindesk.

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Privacy Laws Are Only as Effective as the Companies Implementing Them

Privacy is a hot topic for legislators all over the world.

Democractic presidential candidates have privacy laws and regulations in their campaign platforms. Amy Klobuchar discussed a tax on companies who share user data. Elizabeth Warren has introduced legislation that considers the idea of jail time for CEOs over privacy failures. Before he dropped out of the race, John Delaney proposed the U.S. adopt a law similar to the California Consumer Privacy Act, which gives greater agency to consumers when it comes to limiting companies collecting of their data. 

Voters are demanding action. A recent poll from Morning Consult found that 79 percent of registered voters said Congress should pursue a bill to better protect the online data of consumers, while 65 percent called data privacy one of the biggest issues facing society.  

The European Union, 27 member states with the loss of the UK, enacted the General Data Protection Regulation (GDPR), enshrining the idea that people have control over personal data. California recently enacted its own privacy law, the California Consumer Privacy Act (CCPA), which goes into effect January 1. The law empowers California consumers to know when private companies collect, share or sell their data and to stop that sale if necessary. It applies to companies with annual gross revenue of more than $25 million or that possess information on 50,000 or more consumers. 

But laws can have unintended consequences. Sometimes the very laws meant to enforce privacy can result in companies nevertheless sharing it. GDPR opens up a way of crooks to impersonate people and get their data from companies.

A year after GDPR went into effect, researchers in the EU showed how it’s easy to access personal data from companies. 

“This isn’t a problem with the law itself, but instead with the companies and organizations implementing it,” Mariano Di Martino, one of the researchers, who is a PhD student as Hasselt University in Belgium, told CoinDesk in an interview. “This may be because of budgetary constraints or maybe it’s because they don’t understand the risks of this data.” 

One group used publicly available information, such as names, emails, and phone numbers, in addition to more complicated methods to request information on their research partners from 55 companies under GDPR. One of these complex methods for obtaining the data included replacing the name, birth date and photo on the image of an ID to reflect the person whose information the researchers wanted. Of those 55 companies, 15 companies gave up sensitive personal information to the researchers. Four companies never responded to their data requests, in clear violation of GDPR.

THIS ISN’T A PROBLEM WITH THE LAW ITSELF, BUT INSTEAD WITH THE COMPANIES AND ORGANIZATIONS IMPLEMENTING IT. 

The information they gathered included financial companies giving up details such as ID card numbers, a list of timestamped financial transactions, customer IDs, telephone numbers and place of birth, and transportation and logistic companies releasing locations people visited in the past as well as routes they’d saved.

Another team of researchers in the EU found similar issues when one requested information on his research partner and the research partner’s wife using a spoofed email account that was a variation on the name of the wife. About a quarter of the 150 companies and organizations they contacted gave up sensitive personal information without verifying the identity of the requester. The information given to him included everything from her social security number to her high school grades and various account passwords.

As the CCPA goes into effect, it’s possible we may see similar issues. The GDPR research illustrates that privacy laws may only be as good as the companies affected by them. Which is scary. These leaks have real world implications. 

“Say I was trying to stalk someone, and I want to learn more about them,” says Di Martino. “I might send a data request to a company that provides taxi or bus services and try to get all the routes or GPS locations where this person has been. And it could work.”

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DROPBIT WALLET CEO CHARGED WITH MONEY-LAUNDERING

The Rundown

  • Dropbit CEO Larry Harmon Faces 30 Years in Prison
  • Harmon Facilitated Coin Mixing for Darknet Sites

Privacy of crypto transactions has been challenged again, as the CEO of the Dropbit app Larry Harmon has been arrested and charged with conspiracy to launder money.

DROPBIT CEO LARRY HARMON FACES 30 YEARS IN PRISON

Dropbit, the Bitcoin wallet and service, continues to operate for now. But Coin Ninja, Harmon’s cryptocurrency media, had its assets seized. The most contentious issue was the Helix service, which could help Dropbit clients mix their coins.

Peter McCormack, prominent Bitcoin supporter, has noted in a lengthy Twitter thread that Harmon faces serious consequences from attempting to offer private BTC transfers. Reportedly, the usage of Dropbit and Helix have also been related to dark markets.

Dropbit aimed to be an app for mainstream adoption, becoming “the Venmo for Bitcoin”. The app also had a referral program to send and receive Satoshis to drive adoption.14 BTC & 30,000 Free Spins for every player, only in mBitcasino’s Crypto Love Affair! Play Now!

However, coin mixing is facing high levels of intolerance, as law enforcement goes after mixer providers. This time, it was US authorities that took notice, making the case directly against Harmon for attempting money-laundering through BTC.

HARMON FACILITATED COIN MIXING FOR DARKNET SITES

The other serious accusation against Harmon is the creation of the Gram search engine, which aggregated results from darknet websites. The Helix coin-mixing service was also affiliated with the Gram search engine, attempting to anonymize BTC usage.

In the indictment papers, there is evidence of actively advertising Helix as a tool to mix BTC and exchange them for new coins that were not tainted by darknet usage. The messages and advertisements helped law enforcement make the case against Harmon. Helix has also reportedly offered mixing services to the Alpha Bay darknet site back in 2016.

Mixers have been used for years in the crypto space, with crackdowns only happening in the past couple of years. With stricter money-laundering rules, even blockchain records are not exempt from scrutiny. Most anonymous uses have been discouraged, and exchanges or merchants already require de-anonymization through KYC.

As a result of the Helix activity, Harmon reportedly helped launder 354,468 BTC, equivalent to above 354 million at current prices. But what is even more curious, the BTC that went through Helix were treated as “money”, in a case where Harmon transferred value without owning a money transmitting business license in the District of Columbia.

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Jill Carlson, Meltem Demirors Back $3.3M Round for Non-Custodial Settlement Protocol Arwen

Arwen, a non-custodial settlement protocol developer, has raised $3.3 million in a funding round including Meltem Demirors at CoinShares and Jill Carlson at Slow Ventures.

According to Arwen CEO and co-founder Sharon Goldberg, Slow Ventures led the round, which also included Collaborative Fund, Underscore VC and DG Lab Fund.

The funding will help the Boston-based startup expand its non-custodial settlement system, a layer-2 protocol that secures “assets in motion” via atomic swaps, Goldberg said. In simpler terms, Arwen allows users to settle trades via an exchange’s hot wallet without actually handing over custody of the underlying asset. 

The protocol currently supports bitcoin, litecoin and ethereum trades on the KuCoin exchange, though Goldberg said her company is in talks with “institutional partners” interested in using the service. Demirors said an announcement is expected in Q2 2020. 

Arwen’s non-custodial solution plays to high-dollar investors, according to Demirors – the type of trader that wants quick access to liquidity, but wants to avoid the risks associated with hot (online) wallets. She pointed out that hackers have proven time and again through 2019 that centralized honeypots are vulnerable, valuable targets to strike. 

However, “this settlement technology can be used more broadly than just with centralized exchanges,” Goldberg said. In the long-term, she sees Arwen providing settlement services to a wider market.

Jill Carlson, who led the funding round with her firm Slow Ventures, is also bullish on the technology’s long-tail potential to impact markets beyond crypto. 

“This problem of efficient clearing and settlement without more risk, it’s not crypto specific,” she said, adding that traditional capital markets rely on a sluggish settlement process that could also stand to benefit.

Carlson also identified another aspect of Arwen funding round, one she said came more by circumstance than design: the deal’s major players are all women.

“I think it’s really cool to see more and more female entrepreneurs in crypto,” she said.

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