BTSE, a Dubai-based cryptocurrency exchange, is looking to raise $50 million in one of the first token offerings on the Liquid Network, the parallel system to bitcoin created by startup Blockstream.
BTSE is looking to sell 50 million tokens at $1 each. The target launch date is March 2020 and there will be a total supply of 200 million tokens, of which the company plans to eventually buy back and burn 100 million of the tokens in circulation, according to a pitch deck for the offering.
“Funds raised will be allocated toward user acquisition to increase overall platform revenue, platform development and liquidity, as well as expansion into lending, OTC and mining markets. The minimum investment size is $150,000 USD,” the deck says.
If successful, the offering could help put bitcoin sidechains back on the map as an alternative platform to ethereum for launching new crypto assets. With sidechains like Liquid and RSK, an asset can be locked up on the main bitcoin chain and then traded on the parallel network, and vice versa. This allows complex operations like smart-contract creation and token issuance to occur on the sidechain without gumming up the works for bitcoin proper.
The idea was in vogue mid-decade until the emergence of ethereum, which was designed specifically for such use cases, and became the go-to launching pad for initial coin offerings, security tokens, non-fungible collectibles and the like. But Liquid, launched in September 2018, has started to make inroads; last week, BTSE announced it was integrating Blockstream’s Liquid versions of bitcoin and the dollar-pegged token USDT.
"The Liquid Network provides a reliable platform for token issuance that benefits from bitcoin’s stability and security characteristics," said Lina Seiche, global marketing director at BTSE. "Issuing tokens on Liquid is further much less complicated than on ethereum, which mitigates the risk of smart contract bugs and makes exchange integrations easier as well."
While BTSE's will be the first exchange token on Liquid, it is one of a handful of issuers and possibly the largest to pursue fundraising on the network. Others include gaming startup Pixelmatic (run by Samson Mow, Blockstream's CSO and Seiche's beau), which has been seeking to raise $16 million, and Puerto Rican financial institution Zenus Bank, which planned to do a private placement of securities.
BTSE will use revenue streams derived from platform fees and its OTC desk, as well as a foray into crypto mining planned for early next year, to buy back the tokens until the end of 2021, the company said.
“Starting three months from token launch, we will use 30% of all revenue to buy back and burn tokens. BTSE will eventually destroy one-hundred million BTSE tokens, leaving one-hundred million remaining in circulation,” said BTSE’s slide deck.
The idea is that the scarcity of the token will encourage users to hold it; other incentives for token holders include lower fees, and higher rebates, BTSE said.
BTSE also plans to deploy mining operations hosted by Blockstream in February, billing it as a consistent revenue stream with expected returns of 30% a year.
All told, BTSE (perhaps somewhat optimistically) expects to see revenues of $2.7 million in 2019 growing to $103.5 million in 2020, and reaching $323.4 million in 2021.
BTSE currently supports trading in bitcoin, ethereum, litecoin and monero, as well as stablecoins tether, TrueUSD and USD Coin.