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Bain, Lightspeed Back First ICO With $133 Million Basis Funding

It turns out investors are interested in central banking alternatives.

Announced Wednesday, Basis (formerly known as Basecoin) has raised $133 million (most of which was reported last week in an SEC filing) in an initial coin offering (ICO), a round that featured an all-star cast of investors originally first revealed by CoinDesk back in October.

But if that funding round sounds big, so too are the project’s ambitions with Basis seeking to offer a so-called “stablecoin,” or cryptocurrency that would maintain a stable price in what has proven to be one of the world’s most volatile markets. As such, Basis’s investors include some of the biggest names in crypto – Andreessen Horowitz, Bain Capital, Lightspeed Ventures, Google Ventures and others.

“I think we were able to convert a lot of institutions into understanding the full scope of crypto more broadly,” Nader Al-Naji, the founder of Basis told CoinDesk.

Some of those institutions haven’t even ever invested in a crypto token before. For example, Lightspeed Ventures made its first token investment ever with the Basis round.

“I think the size of the opportunity is unique and the team is a very good fit for the problem,” partner Adam Goldberg told CoinDesk.

Basis also convinced Bain Capital Ventures, the venture arm of Bain Capital, to make its first investment in tokens. Although, the $95 billion private investment firm has been interested in crypto since it invested in CoinDesk’s parent company, Digital Currency Group. Bain Capital Ventures led the round.

Al-Naji said:

“I think Bain is uniquely positioned in this institutional finance world.”

Bain has supported al-Naji’s idea from the very beginning – alongside AngelList’s Naval Ravikant, the firm helped Al-Naji put together the project’s initial venture round last year.

Stepping back, Basis is built on the idea that, fundamentally, central banks basically know how to keep a currency stable, but they tend to screw it up through human error. So Basis sets out to use the same operations that central banks use, but control them with software, not brains.

Bain’s Salil Deshpande makes the argument for Basis in a forthcoming blog post, saying, “There have been various approaches to solving the price-stability problem … none of which solve for both counterparty risk and volatility at the same time. Because it is hard to do.”

Many other cryptocurrencies assure stability by backing their tokens with actual fiat currency, but this requires users to trust the entities that manage those currencies. Trusting someone else is risk, and crypto promises to create trustless payment systems where that risk isn’t inherent.

Basis uses simple supply and demand to manage the price of its currency. When too many people want basis, the protocol increases the supply of the currency. It does the opposite when demand is weak.

All of this is managed by software, not people — who might have ulterior motives or simply bad judgement.

Well-rounded investors

In fact, the pool of investors reflects an intimate familiarity with the behavior of national banks.

In addition to the firms cited above, the round also includes some notable individual investors, such as Stanley Druckenmiller, who is known for watching the behavior of central banks and understanding their decisions alongside economic fundamentals. He worked alongside George Soros when he bet against the Bank of England and won.

Kevin Warsh also joined the round. He served as an economic adviser to President George W. Bush before he was appointed to the Federal Reserve Board, where he served from 2006 to 2011. Warsh served on the Federal Open Market Committee during the 2008 financial crisis that many credit for inspiring the creation of bitcoin. The committee makes, as a group of humans, the same decisions around issuing bonds and retiring them that Basis is designed to make algorithmically.

Valor Capital is an investment group focused on bridging the U.S. and Brazil. This connects Basis to Latin America, where it believes some of the strongest use cases for crypto might be found.

An Alphabet’s venture arm, GV, connects Basis to some of the world’s best computer programmers. “That technical pool of talent and experience that GV has is going to be helpful,” Al-Naji said. GV declined to indicate whether this was its first purchase of a token pre-sale.

Basis will need that technical talent as it builds a set of products that it hopes will build interest and buzz that will lead to regular people using its new currency. Al-Naji said they will accomplish this by building new, compelling products that work with its token, but he declined to describe what these products will be, for competitive reasons.

Still, if the aim is to reach the non-crypto economy, the products will need to fast, light and super easy to use, and all that takes a unique combination of tech skills.

Why Basis?

The idea of breaking into the consumer market was a big part of what enticed Lightspeed to take part.

“A unit of account that could be leveraged for all crypto projects lets you remove one mental barrier for consumers,” Goldberg agreed.

But Basis is not even close to the first project targeting that issue. We’ve recently covered MakerDAO, Tether, Saga, Carbon, Fragments, Stably and more.

Emulating central banks on the blockchain is a problem Al-Naji tinkered with for years. The trouble he found with blockchains is that they don’t generally “know” what the price of their token is. Mostly, they just log trades.

Then the idea of oracles started to emerge. Oracles are ways to get data about the real world, and the concept is critical to other projects as well, such as Augur. Al-Naji had been working on ways to help bring stability to bitcoin for years, alongside the fellow Princeton students who would become his founding teammates at Basis. Nothing quite did it until he discovered oracles.

“That was a big breakthrough,” he said.”Basically I realized you could get the price of the cryptocurrency onto the blockchain, and once you get the price onto the blockchain, the adjustment can be algorithmic.”

As we previously reported, Basis’s coin will initially be pegged to the U.S. dollar. When the price goes below the target, the supply will be contracted by selling bonds and burning tokens. When the price goes over the target, basis will redeem bonds with newly generated tokens.

Just in case the protocol needs to expand supply at some point when there are no bonds available to redeem, it will also sell what it calls “shares.” If there aren’t any bonds to redeem when supply needs to expand, holders of shares will get them.

And not to be U.S.-centric,the protocol allows for its users to change its peg. Speaking to Al-Naji, he seems to very much hope it will one day switch to something like a basket of goods and services rather than a fiat currency. Again, government already does this. In the U.S., officials maintain the Consumer Price Index (CPI) to assess what’s happening with prices. The CPI is a basket of goods that gives officials a sense of how much a dollar can buy.

It’s a simple concept, but as this episode of Planet Money illustrates, determining the CPI is one of the more time consuming, complicated and secretive things the government does.

Basis seems to be determined to find a way to get there, and that’s reflected in its name change. As Al-Naji explained:

“The other big reason why we like ‘basis’ is we want Basis to be the fundamental unit of account, the basis of all value.”

Slacklining photo via Shutterstock.

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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$125 Million Raised in Basecoin SAFT Sale, SEC Filing Shows

Intangible Labs, the company behind the Basecoin “stablecoin” project, has raised $125 million by way of a Simple Agreement for Future Tokens (SAFT) sale, a new SEC filing shows.

According to a Form D document submitted the U.S. Securities and Exchange Commission (SEC), Intangible Labs raised the funds from 225 investors between March 22 and April 3. Intangible Labs did not immediately respond to a request for comment.

Intangible’s basecoin token aims to avoid price volatility by pegging its value to a group of other digital assets. Founder Nader Al-Naji, who left Google last year to pursue the basecoin project, previously told CoinDesk that the token was created to serve as a medium of exchange.

A combination of oracles would monitor the prices of these assets, and the network’s protocol would add or remove tokens to ensure that basecoin’s price remains stable, as CoinDesk previously detailed.

The startup is also developing “base bonds” and “base shares,” or cryptocurrencies that will serve to underpin basecoin. Together, the two will help the protocol manage the supply of basecoins. Base bonds can be converted for basecoin tokens as needed, while base shares simply ensure new tokens are distributed to the shareholders when they are created.

The project has already attracted a group of notable backers, including Andreessen Horowitz, Bain Capital Ventures, Digital Currency Group, Pantera Capital, Polychain Capital and MetaStable Capital.

Coins image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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Perhaps Ripple’s (XRP) Destiny Is ‘To Be A Stable Coin’

The partnerships Ripple (XRP) has acquired and the constant momentum of banks using the revolutionary payment settlement software by the company, has been monumental and impressive in a a sense that it has all happened in a Tsunami of developments. The wise Ripple (XRP) HODLers have been noted as being calm like Buddhist monks during meditation for they know the potential of the project in providing real life blockchain solutions and the potential of the coin in the crypto markets.

But what if Ripple (XRP) was never meant to moon drastically? What if Ripple’s destiny is being the most stable coin in the crypto-verse? Far more stable than Bitcoin (BTC)?

The way I see it, XRP could end up being the ‘base’ of the cryptocurrency market the same way the United States Dollar and the Euro are the base currencies for global trade. The USD in particular is considered as the unofficial world currency. Everything in global trade is measured with respect to the United States Dollar. This is due to the fact that after the Second World War, the American economy has grown tremendously domestically and internationally. The country has also remained politically stable (domestically) for 153 years since the end of the Great American Civil War in 1865. The US has gone ahead and proven its might as a Super Power on numerous global occasions.

Looking at Ripple, the coin had remained relatively stable from August 2013 when it appeared in the markets, till around March 2017. This is a period of almost 4 years where XRP was valued at around $0.06 on average. Of noteworthy mention, is that XRP withstood the Mt. Gox hack of December 2013 that rocked Bitcoin and caused it to plummet 70% from levels of $1,152 (30th November, 2013) to $380 a year later. Bitcoin would then range between $200 and $300 till late 2015. Bitcoin did not recover to its $1,000 levels for 3 years.

XRP was not affected by the Bitcoin turmoil then and has shown some level of resilience whenever Bitcoin becomes volatile in the markets. It has maintained levels around $0.50 for the last few weeks as Bitcoin has gone sub $7,000.

Perhaps the reason XRP is constantly stable is because it has a top notch management team led by Brad Garlinghouse; has actual working products backing the coin (xRapid, xCurrent and xVia); and the coin is in constant circulation and not prone to hoarding like BTC.

What then can become an outcome, is that XRP will keep rising steadily in the markets to the predicted levels of $4 by mid 2018 and $10 by December. Once traders notice this, they will opt to increase their portfolio in XRP due to less volatility and support of the coin. Also, exchanges will then start using XRP for its trading pairs. If this were to happen, XRP would dethrone BTC and become the new King of Crypto.

[Photo source, hacked.com]

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Basecoin Revealed: A16z, MetaStable Seek Crypto Holy Grail With Stable Token

An all-star cast of investors has backed a little-known startup behind a token called basecoin.

Scheduled to debut with a white paper release on Tuesday, the project, the first from Intangible Labs, boasts investors including 1confirmation, Andreessen Horowitz, Bain Capital Ventures, Digital Currency Group, MetaStable Capital, Pantera Capital and PolyChain Capital.

Hailed as an evolution of the “stablecoin” concept, basecoin is lauded by investors for its unique approach to what’s been called the “holy grail” of cryptocurrency – a digital asset able to keep its value free from volatility. A draft white paper obtained by CoinDesk details the concept, which outlines a blockchain with the built-in “brains” to manage monetary policy.

At a high level, the idea is that the basecoin protocol, when complete, could be pegged to the value of any asset or basket of assets, dynamically adjusting its market price through the creative use of a combination of tokens.

As explained in the white paper, the idea is that the protocol would be set up to mirror an asset or an index, say the U.S. dollar or the Consumer Price Index, at which point it would use oracles (links to trusted, external data sources) to monitor exchange rates. The protocol would then automatically expand or contract its supply of tokens to maintain its value.

Polychain’s Ryan Zurrer hailed it as an “elegant system,” with other investors heralding that the idea could have both short and long-term implications – in the near-term, providing an alternative to fiat currencies for crypto traders, and in the long run, serving as a tool for maintaining the stability offered by today’s centralized monetary systems.

The former problem was one addressed by Joey Krug, the founder of Augur and a Pantera partner, who spoke to how basecoin could ease issues he’s faced as a developer.

“One of the problems this space faces is volatility; no one is going to want to use Augur if you’re right about a prediction, and the price of the reward goes down overnight,” he told CoinDesk.

Indeed, Intangible Labs founder Nader Al-Naji, who quit his job at Google in July to pursue the project, described stability as the main benefit the protocol would bring to the market.

He told CoinDesk:

“Bitcoin and the other cryptocurrencies are a bit of a playground for speculation, and that speculation is undermining cryptocurrency use as money. The fact that it’s volatile and that there’s speculative value is a blocker to mainstream adoption. We tell people we’re trying to be used as medium of exchange.”

In this way, the cryptocurrency project is notable given the extent to which the basecoin team – comprised of Al-Naji, as well as fellow Princeton graduates Lawrence Diao and Josh Chen – draw inspiration from traditional finance.

“Basecoin would present the world with both the technology and the opportunity to develop an independent, transparent and potentially more stable monetary policy than anything that’s ever been possible via central bank,” the white paper reads.

According to Al-Naji, the company has still to determine how it would launch the protocol – namely, if individual protocols would be needed for each stablecoin, or if a single version of the blockchain could manage many different types of fixed-cost assets.

Either way, investors are keen on a share of the coins, in whichever version they appear. Intangible Labs is said to have completed a small and highly competitive capital raise, and will soon be opening a pre-sale of its coin.

An original version of its draft white paper indicated the startup is also considering an initial coin offering (ICO) as part of its release, though those involved declined further details.

Three tokens in one

But, that’s not to say any sale would even be limited to a single cryptocurrency.

As outlined in the white paper, basecoin aims to differentiate from past iterations of the stablecoin concept by using a combination of tokens to replace the centralized management that has been needed to maintain their stability.

The basecoin team, for example, took aim at Tether in its paper, itself recently the subject of criticism for fluctuations in its U.S. dollar peg. “Tether’s $400 million market cap proves the need, but it is also completely incapable of serving it long term,” the paper asserts.

Most interesting about the critiques, though, is that the basecoin team offers what appears to be a novel take on how a better system could be achieved.

Namely, to regulate the supply of its tokens, the basecoin protocol itself is made aware of the market capitalization of its cryptocurrency, the demand for the coin and the number of coins in circulation. Further – as the different tokens are used to offer different incentives – they seek to naturally create an equilibrium that keeps the price stable.

The first – basecoin – is the cryptocurrency that powers the system. Pegged 1-to-1 with the value of the U.S. dollar, it serves as the most user-facing of the three tokens, in that it’s the one exchange traders and other users would interact most directly with.

The second and third cryptocurrencies, “base bonds” and “base shares,” are those that underpin basecoin. Base bonds are tokens to be auctioned off programmatically by the blockchain when supply needs to be reduced, and these will expire within a time frame to encourage redemption.

“When you buy a bond, you now have a bond, a different kind of coin, and the reason why you like that bond is that it converts back into that coin at some point in the future. You’ll hoping in the future you’ll get it back, you want one coin plus interest,” Al-Naji explained.

Base shares, on the other hand, provide a fixed-supply cryptocurrency that does not have a peg.

Rather, they gain value through a dividend policy, whereby holders receive new basecoins that are created if and when the token supply needs to be increased.

Work to go

As for how these coins will be managed, however, that remains less clear.

Al-Naji said that the team is now working on a “yellow paper” that he estimates is about “80 percent” complete and that will detail the technical specifications of the basecoin blockchain, including aspects such as how mining will function and how consensus will be reached.

In contrast, Al-Naji framed the three different tokens that will underpin the protocol are more mature in ideation. Going forward, he said that the team is also working on a “robustness analysis” that will showcase the conditions under which the tokens can be expected to maintain their desired stability.

“You can think of this as economic research. It aims to prove this actually works and that the pegs stays put no matter what under the assumptions,” he said. “That’s really mature.”

Still, taken together, Al-Naji was keen to portray the project as not simply another token built amidst the recent ICO craze. Al-Naji said that he has been studying bitcoin since 2012, when he began considering how to apply monetary theory to the technology.

The end result, he said, is a sophisticated take on how public distributed ledgers and tokens could come to replace some of the more advanced aspects of the current monetary system, which he framed as corrupt due to human error.

“The key thing that we’re doing is that there’s no central authority. This is totally decentralized, even the exchange rate is decentralized via oracles, there’s no way you can corrupt the supply of this coin without convincing people, it’s a much more robust way to do the policy,” he said.

Forward thinking

Given these weaknesses, the authors go so far as to predict basecoin could “displace U.S. dollars in transaction volume” due to the fact that it would (in a sense) leverage the Federal Reserve’s work on maintaining a stable asset to bootstrap its value.

It also projects that, should its peg prove reliable, the protocol could be used for “salaries, loans, futures contracts, options contracts and more.”

Far from far-fetched, the authors believe they are likely to find a large market of cryptocurrency traders eager to act as early adopters, which will provide an onramp into other markets.

In line with criticisms about the sector from thought leaders, the authors think basecoin could one day even be adaptable to serve a similar function as central banks.

The paper concludes:

“In this future world, governments would do well to support cryptocurrencies that are stable in the face of macroeconomic upheaval. In fact, citizens may even demand it.”

Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in Basecoin.

Image via Basecoin website

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Interested in offering your expertise or insights to our reporting? Contact us at news@coindesk.com.

Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Please conduct your own thorough research before investing in any cryptocurrency.