Content: Retrospective Analysis of Swap Payments
Classification: For External Dissemination
In-line with our long-term commitment in developing STRAKS, it is only prudent to retrospectively consider the holistic impact of the phased swap process from Signatum to STRAKS. In what follows we consider our dual goal of preserving value for Signatum investors and ensuring that “new” STRAKS investors are minimally impacted by the weekly dilutive effect of swap payments.
It is clear from our internal analysis that we have to-date paid out more in US dollar terms via the swap payments than the total historical market value of the swapped Signatums across its trading history, adjusting for early market peaks and subsequent corrections. The calculations do not use proprietary methods or other data and can be easily replicated using CoinMarketCap (CMC) data feeds. Our calculations indicate that further swap payments will be a gross misappropriation of value away from current miners, masternode operators and STRAKS investors.
In succeeding in preserving and further accruing value for Signatum investors, the team consider it prudent to seek input off the entire STRAKS’ community as to whether the time is right to stop the swap payments and allow both new and old investors to accrue value on equal terms without the overhang weekly dilution and subsequent opportunistic liquidations.
To be clear, we are not enforcing an uni-lateral decision by the STRAKS team, instead we are providing a retrospective analysis to drive discussion and offer a vote that will forge the way forward for the whole community.
For the newly initiated; STRAKS was a new digital currency and shared no technical association to Signatum other than allowing their investors to receive STRAKS under a proof-of-burn styled 4-to-1 swap. The swap registration period ended on 04-Jan-18, and a total of 80,786,812 SIGT was burned resulting in a reserve of 20,196,703 STAK marked to be distributed to Swapizens (for the sake of brevity, a SIGT-to-STRAKS swapper will be referred to as a “Swapizen” in this memo). The resulting swap payments are currently being distributed on a weekly basis, in-line with the rate at which supply is being generated for STAK through mining, i.e at 1440 blocks per day (14,400 STAK per day). The total duration of the swap payments as scheduled was to be 4 years and 1 month from the 10th Jan 2018. The guiding principle behind the protracted swap period was to minimise the disruption of STRAKS circulation and subsequent market value impact.
For more detailed information please refer to our GitHub page: https://github.com/straks/straks#signatum-swap-and-developers-premine-information
A Retrospective Analysis
The analysis presented here is simply tracking the market value of Signatums’ swapped versus STRAKS paid out to date. We consider a smoothing of price volatility for 7,14 and 30 days for Signatum to demonstrate impact of market dislocations during Signatum’s tumultuous trading history. For STRAKS, the market value was simply based on the point-in-time price when making the swap payments; first, the approach recognises the fact that Swapizens had the option to liquidate their payments instantly and second, follows accepted general accounting principles.
We appreciate that the market price is not representative of liquidity nor market depth, however, in the absence such information the recorded market value in US$ associated with each swap payment can only be represented by the price at the time of making the payment. Similarly, the value of Signatums swapped at each point-in-time is certainly not representative of the actual value achievable as liquidity and market depth would have been equally constrained. Moreover, consider the catastrophic price impact of selling 80 million+ SIGTs at any point-in-time Signatum’s market history.
We consider the caveats as noted above to not distort the analysis to a appreciable degree, and certainly not enough to change the overriding conclusion.
Total Signatum Swapped: 80,786,812 SIGT
Total STAK Reserve For Swap: 20,196,703 STAK
Total STAK Paid-to-Date: 2,620,800 STAK
Total STAK Residual To Pay: 17,575,903 STAK
S1: “SIGT Point-in-Time Swap Value”: Total swapped SIGT multiplied by point-in-time price
S2: “SIGT 14-Day Avg. Swap Value”: As S1, but averaged over 14 days
S3: “SIGT 7-Day Avg. Swap Value”: As S1, but averaged over 7 days
S4: “SIGT 30-Day Avg. Swap Value”: As S1, but averaged over 30 days
S5: “STAK Cumulative Value Paid-to-Date”: Total STAK paid out multiplied by point-in-time price
From Signatum’s Inception to Current Date:
From 01-Oct-17 to Current Date:
Through the weekly swap, the STRAKS team has paid out just over US$4 million, as of the last payment on the 04 July 2018. When compared with the value of Signatum’s swapped, using the full spectrum of price variations in Signatum’s history, we can confidently conclude that we have returned value in excess of the majority of Signatum investors’ initial capital outlay.
Old Target: Value Preservation
The STRAKS community was built on the foundation provided by Signatum miners/investors and we accept that we should honour our agreement fully rather than suffer possible reputational damage. Equally, we have stated that “…the distribution of swap funds will be managed to the extent that significant disruption of STAK circulation and market value can/will be minimised…”, and it is to this end we are obliged to inform the community and highlight the emergent dichotomy.
Consider the fact that many Swapizens have already received and liquidated STRAKS in value that is currently (or was) worth significantly more than their Signatum holdings. Our objective, as a team, to preserve value for Swapizens has been accomplished. In continuing to make swap payments we are actively detrimentally impacting our entire investor base, both Swapizens and STRAKS investors alike (we acknowledge that there is an overlap between the two sets of investors).
We appreciate that many investors and recipients of swap STRAKS did not realise the market value at the various payment dates, but instead invested in masternodes. Rationally we consider that these investors would welcome an end to the swap payments, and are fully aligned with new potential investors in their desire to not have their masternode be diluted on a weekly basis.
The statement, we quote, when referencing the protracted swap process, “…we the STRAKS team, presented this as an equitable approach for all parties concerned…”, no longer holds true. STRAKS pricing in the market from day 0 has allowed the team to successfully pay swap payments that in total value has exceeded parity relative to the value of the Signatum holdings prior to the swap, and in a short space of time. Swapizens did not have to wait 4 years to recover their initial capital investment. In continuing to pay Swapizens one can argue that it is a gross misappropriation of value away from miners and new STRAKS investors, which is detrimental to the overall project and equally, Signatum investors (from a realisable value perspective).
New Target: Attracting New Investors
Unfortunately, new investors will unlikely appreciate being diluted on a weekly basis - noting that some dilution may be more palatable at certain price levels. Indeed, they are fully aware of the swap process prior to investing in the project, as we are (and have been) clear and upfront about it. Nonetheless, it may be hard to attract additional investments unless the price adjusts, assuming that the swap process is affecting price extensively, resulting in an equilibrium that equates the dilutive swap impact with a certain price level. The impact of the latter swap driven uncertainty and subsequent search for an equilibrium is inherently detrimental to early STRAKS investors who invested in the project at higher valuations when compared with STRAKS current market value.
It would seem - and we fully appreciate that this is conjecture as we have zero empirical evidence either way - that the wider crypto-community fail to see the value in our approach and mass adoption may be detrimentally impacted until after the swap process is over. Something that we fully expected whilst we worked towards preserving value for Swapizens, and had strategic value regardless for various reasons.
We are compelled to ask the community to rationally consider the option of cancelling the swap as the alternative is the continued active deterioration in value for both, existing payments to-date and future payment value through the explicit support of value misappropriation, and thus perpetuating barriers to adoption for new investors.
The Way Forward: You Decide
In our desire to ensure full disclosure we note that the total residual STRAKS yet to be paid to swapizens is 17,575,903 STAK (as noted above). The net premine of 13,392,284 STAK is currently being held as part of treasury funds, and has been marked for airdrops, bounties, operating expenditures (e.g. 3rd party services, additional exchanges etc), marketing costs, general working capital, and future strategic acquisitions and/or partnerships. Treasury proceeds are currently ring fenced to fund the creation of a sustainable legal entity to drive the STRAKS vision in the future.
A few options on how to proceed with respect to the swap payments are presented for your consideration:
Stop the STRAKS swap payments completely and burn 100% of the remaining STRAKS.
Stop the STRAKS swap payments completely and the team should use 100% of the remaining STRAKS as working capital and strategic partnerships.
Instant 20:1 payout of remaining STRAKS, i.e. for every 20 STAK owed to a Swapizen over the 4 years, he/she can claim and receive 1 STAK instantly. The residual will be burned
Instant 20:1 payout of remaining STRAKS, i.e. for every 20 STAK owed to a Swapizen over the 4 years, he/she can claim and receive 1 STAK instantly. The residual will be used by the team as working capital and strategic partnerships.
Defer the swap until such time that STRAKS’ market depth can absorb impact. Intermittent random swap payments based on market conditions at the discretion of the STRAKS team, without notice and guarantees.
Do nothing and continue swap payments as scheduled.
Maintaining strategic agility is of high value to the STRAKS project and thus we are open to a solution that seeks to maximise value for the community and the project. We ask that you think about what is best for the project overall, as we can appreciate that many of you have a vested interest in continuing with the swap as is. Recipients should be aware that value/price may continue to deteriorate - note that we are not suggesting that the relationship is linear or directly causal as various factors impact value/price - as a result of the negative perception of the existing swap, value misappropriation and continued dilution.
This vote has now been cancelled.
Please refer to the updated memo: https://straks.co/t/straks-swap-stream-buy-back-offer/430