Maidsafe’s safecoin crowd sale sells out in five hours

This article assumes you already know what Maidsafe, the SAFE network and safecoin are. If that’s not the case, read this.

Wow. Those MaidSafeCoins (safecoins) got snapped up like fresh cheese rolls.

now that's saying something

now that’s saying something

I have the feeling that was something substantial. It begs the question, did I just put my money into an incredibly under-priced crowd sale, or did I put my money into an incredibly over-hyped crowd sale?

Before you get my biased opinion on that question, let’s cover some stuff, unfortunately it’s not all laughter and lollipops.

The crowd sale

The crowd sale was estimated to begin at 8.00am on the 22nd of April 2014, but actually kicked off at 8.38am. At this time addresses were announced for both bitcoin and mastercoin investment and people wasted no time sending their coins of choice in.

Mainly mastercoins.

The crowdsale fundraiser had technically closed five hours after opening. I say ‘technically’ because MaidSafeCoins were still being offered for sale after this time for bitcoins, due to being bought and immediately resold by Maidsafe. This action closed the fundraiser on the mastercoin protocol, meaning no more purchases could be made with mastercoins.

This explains why mastercoin disappeared as a funding option from buysafecoins.com, only hours into the crowd sale, leaving bitcoin as the only method of purchase.

Why did Maidsafe remove mastercoin as a funding option?

Mainly because there were so many mastercoins flooding in. Mastercoins were able to be immediately exchanged for MaidSafeCoin, whereas bitcoin receipts had to be processed manually. It was quickly noted by the Maidsafe team that the coffers would be completely emptied before they had the chance to honour bitcoin investors with their promised MaidSafeCoin.

The decision was made to buy out the remaining MaidSafeCoins with the help of large mastercoin owners (BitAngels), and then resell these MaidSafeCoins back to bitcoiners. If Maidsafe hadn’t intervened, the sale would have been over in just over 5 hours, and all the MaidSafeCoins would have been allocated to mastercoiners, despite many bitcoiners having followed all instructions and investing early.

Maidsafe were in a tough position and made a snap decision in the interests in fairness.

Why did most people send mastercoin?

Maidsafe set a fixed exchange rate, days in advance of the crowd sale, which meant you got more MaidSafeCoin for your money if you used mastercoin instead of bitcoin.

Why was the exchange rate set in this manner?

Firstly understand that Maidsafe wanted to provide an option for investors to invest directly using bitcoin, even though the protocol only supported funds denominated in mastercoin. The Maidsafe team decided they could borrow mastercoin and process bitcoin manually, but they were concerned that the majority of investment would be denominated in bitcoin and thus they wouldn’t have enough mastercoin to support it. To combat this, they decided to make the mastercoin exchange rate favorable in order to provide incentive to purchase using mastercoin.

Boy oh boy did this provide incentive. Many potential investors went out and bought mastercoin especially for the purchase of MaidSafeCoin. There was economic incentive to do so, and it seems people reacted to this in a predictable, rational way.

Why did Maidsafe not see this coming?

I don’t know the answer to this question.

What is my opinion on the matter?

At the end of the day, Maidsafe may have had their heart in the right place, but they handled the situation poorly and were supremely unprepared. They should have been ready for any eventuality, and their lack of foresight concerns me as an investor.

Unfortunately, there will be a large number of angry mastercoiners that are now unable to purchase MaidSafeCoin, this will have no doubt destroyed some goodwill. Clearly this is not a good thing.

Anyway, moving on.

I’m pretty sure Maidsafe broke crowd sale records there

The sale was bowled over by a massive wave of insatiable demand, indicating significant amounts of faith and public support. What conclusion can we draw from this?

It seems the market viewed the stated crowd sale price as very attractive and invested accordingly. But does this view have merit, or were investors simply being irrationally exuberant?

Alan probably thinks so

Alan probably thinks so

What I’m trying to say is, was the pot stirred too much?

Maidsafe just emerged out of relative obscurity a matter of weeks ago, with a modest manner and promises that were backed by hard work and substance. Other than a bit of evangelism from yours truly and coverage on a couple of reputable websites, Maidsafe appeared to slip predominantly under the public radar. Before anyone knew it, the crowd sale was imminent.

This leads me to think, Maidsafe’s project SAFE was a long way from being over-hyped, especially when comparison is made to projects such as Ethereum. I’m thinking the crowd sale price was widely accepted as an absolute bargain.

What now?

There’s no disputing the fact that there is an unbelievable amount of support and confidence surrounding project SAFE. However, the speed of the crowd sale is a double edged sword.

Maidsafe didn’t raise as much monetary value as they thought they might. All the MaidSafeCoins got sold out well within the first week, securing every buyer the 40% bonus, despite Maidsafe expecting to give out closer to 25% in bonuses. This issue is compounded by the fact that Maidsafe got around 50% mastercoin funded and the current mastercoin exchange rate is less than half of what the Maidsafe team were expecting it to be.

What does this mean for investors? Basically, a lot less capital was able to buy a lot more MaidSafeCoin. Investors secured a large slice of SAFE pie with less cash than anyone expected. It’s amazing that massive demand actually managed to drive the effective price per MaidSafeCoin down!

Good: Investors got more bang for their buck, regardless of the fact that the community clearly values the project above the implied crowd sale price.

Bad: Maidsafe have less capital at their disposal to put towards the successful implementation of project SAFE.

I’m not sure what public sentiment on the offset of the above factors will be, we’ll have to wait for a MaidSafeCoin market price to be established through active trading on the mastercoin network. Would you like me to make a prediction? I think investors will be seeing profit right off the bat. If these investors hold fast, and Maidsafe delivers, this initial profit could start to look very trivial indeed.

Time will tell whether this statement holds any truth. Best of luck, Maidsafe.

7 Comments

  1. dacoinminster

    April 23, 2014 at

    Awesome post. Great analysis.

    As to why the situation was not foreseen, I think you alluded to the answer later in your post: modesty. If we had truly believed it was possible for the crowdsale would sell out more-or-less instantaneously, things would obviously have been structured (and priced) differently.

    Imagine instead a crowdsale creeping along over 30 days, with all of us wringing our hands and doing interviews and hoping that the fundraiser raises a significant fraction of what Maidsafe was hoping for. That was more or less my personal expectation. We also expected the Mastercoin price to approach 0.2 BTC and stay around there for most of the 30 days.

    Instead, we all got whiplash 🙂

    Next week, Mastercoin is doing a retrospective on everything that happened (http://www.reddit.com/r/mastercoin/comments/23plvp/maidsafe_issurance_retrospective/), and hopefully other projects will learn what needs to change when they do their own fundraisers.

    Thanks!!

  2. Neither of the above (under priced, over hyped)! Really can’t believe the worlds this stupid but it’s true 🙂 !!!

  3. Great Post!You have absolutely nailed it on the chin.

  4. Great comprehensive article. This innovation has the potential. Imagine that a portion of the dark web moved to this platform…

  5. Really good blog post and very insightful. Yes we were were unprepared for the speed of this for sure and we have to take that on the chin. One part that I hope I can help with is:

    “To combat this, they decided to make the mastercoin exchange rate favorable in order to provide incentive to purchase using mastercoin.”

    There were 2 reasons for this (both in hindsight wrong)
    1: The bitAngels loan was less than expected and the price would have to be this to allow us to cover the BTC funds.
    2: The 0.2 price was thought to be something that would quickly eclipse making MSC less favourable.

    We would have liked a 25% max MSC as it’s less liquid, but over time would become so. We also thought as people seen Mastercoin in operation and providing a service this value would increase. INstead many holders came straight in and many others converted BTC -> MSC (which we really did not want to see, but can understand of course).

    Yip we were wrong on both counts for sure. We did not want to incentivise people to convert from BTC to MSC at all and thought it may actually be the reverse very quickly as MSC gained value. We got totally wrong footed there for a wee while and afterwards felt a bit like we had been mugged. Of course at the end of the day it was a roaring success and many thousands of people got in (mostly numbers in BTC side of things) including all of us with our BTC in the office. It was a scary thing to watch though. Our meeting with all parties later tonight will be publicly made available as others will learn from this one for sure.

    The aftermath has proven to be great though, with thousands of supporters and interested people contacting us now. So we made a splash with a belly flop, but we are now motivating and organising all the other dev teams and hopefully others can learn.

    Would I do it again? In a flash, but I would do it with this knowledge for sure. I must say the Master Protocol guys have been amazing to work with and we will continue to do so. Very inspiring to watch them in action. They work for the community for sure.

    Thanks for the blog and very balanced and educated views, very good journalism for sure.

  6. Anonymous

    May 14, 2014 at

    Who will buy the safecoins from the investors and developers?

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