CasperLabs Pivots Away From Ethereum to Fundraise With Its Own Blockchain

Some crypto startups, including Solana and Dapper Labs, are eager to execute fundraising plans regardless of any coronavirus-induced downturn.

Likewise, CasperLabs, the startup formerly advised by Ethereum Foundation researcher Vlad Zamfir, is now partnering with the Singapore-registered exchange BitMax to conduct its token sale in the form of an Exchange Validator Offering (EVO).

“It’s a really attractive opportunity to participate with the same terms that are usually only available to institutional investors,” said CasperLabs COO Clifford Sarkin.

This fundraising effort comes after the startup raised $14.5 million in 2019 from investors like Arrington XRP Capital and Terren Scott Peizer, who the New York Times dubbed Wall Street’s jack-of-all-trades. It originally focused on Casper protocol experiments.

Since then, CEO Mrinal Manohar said the startup switched to developing a new blockchain inspired by Ethereum’s proof-of-stake plans for participants to deposit their tokens as a way to fuel the network. Manohar’s team of 26 developers and researchers, out of a total staff of 34, plan to launch the new blockchain’s mainnet before 2021. Investor Michael Arrington said he’s not sure whether his firm will participate in the upcoming token sale before CasperLabs’ mainnet launch.

“We will very likely run a node,” Arrington said. “We haven’t made a decision yet on further investment.”

In the meantime, starting on March 30, a new CasperLabs token (CLX) will be sold to retail investors through BitMax, which predominantly serves traders in China, Vietnam, South Korea, Russia and India.

The exchange will automatically stake CLX for buyers when the mainnet launches later this year, after which there will be an enforced 90-day lock up to prevent prompt sell-offs.

“The target audience is for a more sophisticated demographic, since this token won’t be liquid at launch,” said Shane Molidor, head of business development at BitMax.

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BitMax is especially popular with crypto traders in Japan and China, where token sales to non-accredited investors may not attract enforcement from securities regulators, as they do in the U.S. But BitMax and CasperLabs are officially registered in Singapore and Switzerland, respectively. And American retail investors will be barred from the sale, Manohar said.

Molidor added that, across the board, his exchange saw more than a 272 percent surge in trading volume this month, compared to February. The coronavirus crisis may turn out to be a boon for exchanges.

As such, BitMax is committed to operating a full node at CasperLabs’ mainnet launch to facilitate staking services for CLX and selling up to $3 million worth of tokens, as evaluated by both participating companies.

“On a relative valuation basis, we’re allowing people to come in at the ground floor,” Manohar said. “It performs exactly like ether will perform when Ethereum becomes a primarily proof-of-stake chain.”

Risky sales

CasperLabs, one of many prospective smart-contract-based Ethereum competitors, is betting its security setup on the hope that the network will quickly decentralize.

Manohar said the team is in talks with several other exchanges and companies that offer staking services. But, as it stands, so far just a few people are committed to staking or running nodes, which could invalidate the security model if it isn’t eventually resolved. Series A investor Omer Ozden of Rocktree Capital said his firm plans to participate in a private token sale and rely on staking services to utilize the tokens.

“We also have a wide ecosystem of partners, clients and projects we have invested in,” Ozden said. “In China particularly, blockchain is being rapidly adopted by large and medium-sized enterprises because of the government's top-down directive.”

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From Ozden’s perspective, he said he wants to see this project as part of the emergence of “Wall Street 2.0.”

Meanwhile, CasperLabs employees will retain roughly 8 percent of the token supply, restricted with a three-year vesting period. Manohar said the total token supply, yet to be launched, will be worth an estimated $100 million.

When asked how to sell such assets to retail investors in coronavirus-stricken jurisdictions, he replied “terms reflect several things to protect risk,” such as the prospect of “built-in yields” once the network launches.