Overview

As of the current time and date of publishing this blog post, the BTC/ETH ratio has increased in comparison to the crowdsale start date. A few crowdsale participants have reached out to us expressing frustration regarding making contributions of ETH prior to the rise. These early ETH contributors raised concerns about the pegging of ETH to BTC at the time of contribution, saying it can result in an unfair distribution of TRST tokens. We treat feedback from the community with the highest regard. We listened carefully to the points raised, and after consulting among ourselves, our advisors, escrow partners, and legal team, arrived at the following decision.

While this may not make everyone happy, we hope the discussion in this post will help everyone understand how we arrived at this decision.

TL;DR what we have decided

The crowdsale will end as and when we reach the original cap of 6000BTC (calculated in the same way we did until now), OR when we reach the equivalent of $7.3M (details below). Of course, the original end date of April 12, 2017 11:59 PM UTC remains as well. The crowdsale website will be updated accordingly in the next day or two.

Background: crowdsale calculation method

When designing a multi-currency crowdsale (in WeTrust’s case, BTC and ETH), one needs to decide on how to use a single yardstick to measure the contributions received in the different currencies.

In our case we decided on the following guidelines:

Participants should be allowed to contribute in ETH, BTC, or both. We shouldn’t incentivize contributing in one currency over the other (i.e. no per-currency bonus). We should reduce the currency uncertainty for participants, so when they contribute they can use the current value of their cryptocurrency. They should know immediately where they stand at with respect to the 1K/6K BTC min/max caps and not have to wait for weeks and be subject to market fluctuations. There should be a single metric describing how the crowdsale is doing relative to the predefined minimum and maximum caps, so that the relevant actions can be taken (refund, regular termination of crowdsale, or early termination of crowdsale in case the max cap is reached)

To accommodate number 4 we needed to peg all contributions to a single standard. As BTC and ETH were the currency of choice, it only made sense to peg to one of them, and as BTC has a larger trade volume and thus less susceptibility to volatility, we decided to peg all contributions to it, as well as setting the min & max caps (1K BTC, 6K BTC respectively).

After WeTrust receives and processes a contribution, the ETH and BTC go to escrow accounts over which we don’t have any control. As a result, we consciously made the decision, perhaps non-optimal in retrospect (see below), to leave the funds in the currency they were received until the end of the crowdsale.

Things we could have done differently

Though the terms of the crowdsale were specified and set in the beginning, the exact calculation could have been articulated in more detail in the FAQ and in the Terms & Conditions (we’re doing better this time, see Appendix A). That being said, anyone who inquired received a detailed answer, e.g. this one on bitcointalk (notice this is still before the significant ETH/BTC changes), and as soon as we learned this is missing from the FAQ we added that. Since the vast majority of expenses of WeTrust are expected to be in USD, it would have made most sense to define our min & max caps to be in terms of USD, and peg all contributions (at time of contribution) to that currency. However, in practice it would have been much harder from technical, legal, operational and escrow aspects to convert all contributions to USD on a periodic basis. Having decided to peg contributions and caps to BTC, it would have been better to work out a way, in advance, with our escrows to periodically convert the ETH received to BTC. While right now it may seem that we were “lucky” in retrospect with not doing that, things could have gone (and could still go) the other way.

Analysis and decision

Basic principles

When making a decision, we need to take into account all of the relevant actors’ needs and interests. This includes the group of crowdsale participants, our escrows, and WeTrust itself.

The most important principle we follow, is that we should avoid — or failing that minimize — any rule changes to the sale once it has begun.

Even if we make such a change, it should not hurt any group of participants to benefit another, not even if it’s benefitting the majority. Why? Under a simplified model, suppose we’re making a change that awards 90% of participants 1 extra TRST each. That means that the remaining 10% lose 9 TRST(!) each. While this will make the majority of our users slightly happier, it would significantly hurt the minority. We don’t perceive this as being fair and will thus avoid any such proposal.

In order to reach a decision, it was important for us to involve our escrows, advisors, and legal team, in order to get as many points of view as possible and make sure we did not miss any important facts or considerations. The following thoughts and conclusions were reached by way of consensus.

Crowdsale Maximum Cap

WeTrust’s code is counting the contributions in BTC-equivalent-at-time-of-contribution, and as ETH has risen significantly against BTC (and USD) since the beginning of the crowdale (as of 3/18), there is an argument to be made that WeTrust may end up with more funds than it intended to raise. Thus WeTrust should be able to end the crowdsale sooner without losing any funds compared to the initial goal.

Although the rules were defined in the beginning of the crowdsale, and raising “too much” might actually be a good thing for the entire WeTrust community (as there will be more products and features developed), we sympathize with the dissatisfaction expressed by some of the participants.

When we started the crowdsale we expected to raise up to 6000BTC at a price of about $1,223/BTC, totalling ~$7.34M. Therefore, we are adding an additional crowdsale termination condition: if we hit $7.3M (a bit less than our original goal), we will end the crowdsale.

Small print: how would we compute that sum? In order to avoid ending the crowdsale prematurely because of a momentary spike in BTC or ETH, our plan is to use a 3-day moving minimum of ETH and BTC prices, as described in Appendix A.

Distribution of TRST among contributors

We understand and sympathize with participants who would want to see a change in distribution implemented, but we think this is not the right thing to do when taking into account all of the participants’ interests. Note that whatever decision we made on this issue, WeTrust’s proceeds from the sale remain unaffected — it is only the distribution of the 80M TRST between the participants.

The terms of the crowdsale were set in the beginning and, although the exact calculation could have been articulated in more detail, potential participants who asked about it received an answer. Moreover, since the beginning of the crowdsale, our dashboard presented the current amount of TRST that each user would receive if the crowdsale ended now, and next to the Ethereum address for contributions, the current ETH/BTC rate was shown. We are happy that some of the participants who were curious about this issue were able to find information by looking at the dashboard and asking questions.

Market conditions have indeed changed since the crowdsale began. When dealing with volatile markets like this, sticking to the rules of the game is the most important thing to do, because people were making decisions based on this set of rules. Moreover, if we decide to change the internal distribution now, we’ll be essentially transferring a certain amount of TRST from one group of users to another group of users. As no game-changing event happened in the crowdsale itself (e.g. bug in the calculation, bug in the multisig holding the funds, etc.), it seems to us that no decision to benefit some users at the expense of others will be deemed fair by an objective observer.

It’s worth perhaps considering a couple of thought experiments: if a company was starting a “simple, ideal” smart-contract-based, ETH only, 10-tokens-per-ether, kind of crowdsale, and the ETH dropped by 50% during the crowdsale, early contributors might feel very similar to how some feel today. We therefore see it not necessarily as an “issue” of this crowdsale design, but as an artifact of dealing in a volatile market. This is also one reason why early contributors get an early-bird bonus, to compensate them for such uncertainty.

A second thought experiment: if ETH were to drop significantly compared to BTC during the rest of the WeTrust crowdsale, say to 0.001BTC, it is not unimaginable that participants involved would have opposing views to those they currently hold.

Consider the case WeTrust decided to pay early ETH contributors the extra appreciation ETH enjoyed throughout the crowdsale but does not receive compensation from these same contributors for any potential depreciation of ETH. This kind of service is usually called a “call option on ETH”, is charged a substantial price on the free market, and WeTrust did not and does not offer this kind of service.

Another angle on this is that as of the time of writing these lines [3/18], over the last 24 hours, bitcoin has gone down 9% and ether 13% compared to USD. As these trends change and certain users feel benefited or hurt, WeTrust cannot keep changing the rules of the game accordingly.

Appendix A — how we compute the end of sale condition based on USD

Let medianClosingRate(day, currency) be the rate of currency against USD at closing of day (UTC), calculated as the median of the data we get from cryptocompare, coinmarketcap and gdax (if some don’t answer, we use the median of the rest).

Let

minClosingRate(day, currrency) = min(medianClosingRate(yesterday, currency), medianClosingRate(day before yesterday, currency), medianClosingRate(3 days ago, currency))

Our additional end condition is then to stop if:

$7.3M > minClosingRate(today, ETH) * <amount of ETH collected> + minClosingRate(today, BTC) * <amount of BTC collected>

We are aware this is not the “theoretically ideal” way to compute this (where one would take into account trade volumes & average of the entire period) but given the circumstances, stakes and resources at hand, we believe this is a good enough approximation.

Update (3/21/2017): replaced poloniex with coinmarketcap in Appendix A