Is Hashgraph a Scam?
Hashgraph Seed Price, Saft Price and OTC Price
Hashgraph FUD: Fear, Uncertainty and Doubt
Discussion: Hashgraph is a revolutionary new distributed ledger technology (DLT) that has the throughput, speed, scale and security to become a dominant player in the cryptocurrency ecosystem. However, because the Hedera public DLT is new to the crypto space, a high level of attention has also brought a large amount of fear, uncertainty and doubt (FUD) about Hashgraph. The coin metrics, Hashgraph Seed investor status, Hashgraph SAFT fundraise and over-the-counter (OTC) sales have cast a dark shadow on the new cryptocurrency. In this article, we answer the question, “is Hashgraph OTC a scam?” and other similar inquiries.
At the earliest stage of an investment cycle, a startup company has the largest amount of risks of the unknown. Fear of not being able to produce a service or product, uncertain timing to enter the market, unknown future revenue and continual financial support all must be considered. At this stage in a crypto startup, an early believer that provides financial backing is considered the first to ‘seed’ the project. In the cryptocurrency space, this would occur before any public raise in order to begin the discovery of the market, assemble a team and create a roadmap. Since this is the earliest stage in an unproven project, investors are given the largest profit opportunity in order to balance the risk of the unknowns.
Hashgraph Seed Price: The Hashgraph seed sale was offered in the range of $0.001, meaning that seed investors were promised Hashgraph hbar tokens for less than a US penny. This was offered in an internal employee round of financing several years ago. This seems outrageous to a common investor, however, since this occurred nearly three years ago, a retrospective understanding is required. Having funds tied up for a prolonged period of time with no certainty of success is a major financial risk. That risk was balanced with a large potential reward. This practice is not new to cryptocurrency.
In the traditional financial world, early seed fundraising can be many orders of magnitude below an eventual IPO price. The most famous of these seed investments is Peter Thiel’s seed investment in the early days of Facebook, placing $500,000 USD in seed funds that eventually turned into $1,000,000,000 USD. That’s right, 1 billion USD yielding a 2000% return on investment.
Investments in the cryptocurrency space are even more wild. To date, bitcoin has yielded a whopping 66,000% for the earliest investors in 2011. Meaning that if one spent $100 and bought bitcoin at the previous price would have gained 333 bitcoins that would have been worth nearly 6.6 million USD at the peak bitcoin price of $20,000 in December 2017. However, if one did not sell at that point, the return would have still yielded as much as $1.3 million USD. Many other cryptocurrencies such as ethereum and litecoin have had enormous returns on investment (ROI) as well.
The Hashgraph Seed price was near $0.005 for the seed financing round amongst institutional investors was undisclosed publicly but a total raise of adding up to $100 million USD were purchased for future hbars. This is a combination of internal employee fundraising as well as institutional seed financing. This gave the Hedera Hashgraph a strong financial footing to begin the network build, with plenty of available funds to finance employment of developers, multiple hackathons with prizes, early development team of at least 60 starting members and much more. What should also be considered are the hbar tokens offered to developers and contractors in the process of network build and contests in the past few years. It is difficult to discern at what exact price the hbar token exchange for labor and services was at, but is reasonable to estimate somewhere between the earliest internal employee round and institutional seed raise.
Hashgraph ICO Price (hbar SAFT price): After the Hashgraph ICO or seed sale, as with all early public fundraising in the cryptocurrency market, an initial coin offering, or ICO could have been conducted. However, an alternative model of early fundraising called a simple agreement for future tokens, of SAFT, was chosen for the Hashgraph ICO fundraise. This is a much more regulatory-compliant method in light of the Security Exchange Commission’s currently unspoken stance on the entire cryptocurrency market.
Per the SEC guidelines of the Hashgraph ICO, or SAFT fundraise, only accredited investors could participate in the financial round. By definition, an accredited investor is a person that generates at least $200,000 USD/year in annual income, or $300,000 USD/year in a joint filing with a significant other. Alternatively, if a person has a $1 million USD total net worth they could also qualify without a high annual income. There are also a few other definitions per the SEC that can be referenced in the following link.
The Hashgraph ICO or SAFT price was variable depending on a variable lockout schedule. If an investor wished to buy hbar at a price of $0.096 USD, then the lockout schedule would be as follows:
Year 1: 20% hbar coin release at Open Access of the Hashgraph Network
Year 2: 20% hbar coin release
Year 3: 20% hbar coin release
Year 4: 20% hbar coin release
Year 5: 20% hbar coin release
If an investor in the Hashgraph ICO or Saft fundraise wished to have hbar coins earlier with less than 1 year lockout schedule, then they were able to buy hbar at $0.12 USD. The lockout schedule would be as follows:
Year 1- 1st Month: 20% hbar coin release at Open Access of the Hashgraph Network
Year 1- 2nd Month: 10% hbar coin release
Year 1- 3rd Month: 10% hbar coin release
Year 1- 4th Month: 10% hbar coin release
Year 1- 5th Month: 10% hbar coin release
Year 1- 6th Month: 10% hbar coin release
Year 1- 7th Month: 10% hbar coin release
Year 1- 8th Month: 10% hbar coin release
Year 1- 9th Month: 10% hbar coin release
The Hedera Hashgraph ICO or SAFT raise brought a near total of $20 million USD from approximately 1000 investors or less. This brought the total Hashgraph ‘ICO’ fundraise to nearly $120M USD. Many of the Hashgraph ICO/SAFT investors were early founders, employees, developers and accredited retail investors. However, the unfortunate downside of the Hashgraph hbar fundraise through ICO/SAFT was that many enthusiastic fans were unable to meet the strict SEC requirements of an accredited investor and were unable to purchase hbar at such a low price.
Many attribute the decision of Hashgraph management to only allow accredited investors to buy hbar thru an ICO/SAFT based on the increasing regulatory climate of cryptocurrencies by the SEC. However, being a US entity, Hashgraph, LLC was forced to comply with regulatory laws that precluded the presale or ICO to any non-accredited investors. In any case, the fact that only a few initial investors were able to buy hbars at the ICO/SAFT discount most likely means that first release of hbars on exchanges by summer 2019 should be met with good buying pressure.
Interest into the Hedera Hashgraph network is also easy to see based on the debut of the platform in March of 2018. At the live event, over 1000 attendees were present with nearly 80,000 live streams of the event. This indicates an overwhelming amount of serious interest in the platform and should bode well when hbar exchange listing occurs.
At one point the Telegram channel for Hedera Hashgraph had over 30,000 members with daily inquiries about when hbar will be released, when will hbar be on exchanges and hbar price predictions after hbar is on exchanges. If this number is an accurate representation of buying interest in hbars, then Open Access could have a much higher proportion of buyers relative to sellers.
Why No Hashgraph ERC-20 Token?: In the cryptocurrency community, a mad rush of whitepapers emerged in the fall of 2017 claiming to be the next greatest digital currency in the market. Unfortunately, the grand majority of these projects did not even have a working mainnet or project to even demonstrate objective their claims. In the midst of this cryptocurrency exuberance, was the Hashgraph whitepaper that claimed to have the greatest speed, scale, security and stability well beyond any blockchain.
However, unlike the entire majority of blockchain and other DAG projects, the Hashgraph team resisted the economic incentive of pursuing an ERC-20 fundraise in favor of a much more sophisticated and regulatory-compliant method at a later date. In fact, the final public fundraise in August 2018, through the SEC-restrictive process of a SAFT raise was chosen in order to minimize any kind of regulatory risk for investors and the platform. This ended dissuading many from the Hashgraph platform, not because of Hashgraph’s superior technology, but because of the SEC’s antiquated and wealthy-favoring legislative powers to only allow accredited investors.
In the end, Hashgraph, LLC was forced to comply with US securities legislation, pursue a SAFT fund raise and literally turn away tens of thousands of potential investors. If Hashgraph administration decided to take the riskier, but easier funding route of the typical ERC-20 token raise, investors may have been happy for a while. However, that investor confidence in Hashgraph would have easily been eroded by the current SEC actions of prosecution of many ICO’ for their illegal fundraising methods. It seems that the Hashgraph admin had made the better decision to avoid all regulatory risk and pursue the SAFT fundraise, however, their hands were tied in the process by the SEC, which limited some of their greatest enthusiasts from investing in the breakthrough platform.
Hashgraph OTC Sale: According to all official Hashgraph management statements, no prior or current over-the-counter hbar sale has been endorsed. Any Hashgraph OTC sale is considered a violation of the original Hashgraph ICO or SAFT investor agreement and would jeopardize the seller of hbar tokens per Seed or SAFT contract stipulations. For clarification, an OTC agreement is a contract arbitrated between a person trying to sell hbar to a person trying to buy hbar with the use of a third party.
The third party in this agreement would escrow the funds in USD fiat or cryptocurrency such as ether or bitcoin until hbar coins were available for exchange. However, the sellers of hbars in these OTC agreements should also have a lockout schedule and would have low liquidity overall in the sale. What’s more is that the Hashgraph OTC sale would also be limited per the seed agreement that other founders and employees will be subject to.
OTC market agreements occur on a daily basis throughout many international exchanges and include purchases of stocks, bonds and various other financial instruments. However, in the cryptocurrency space the OTC market is much less regulated and therefore a riskier venture than traditional OTC exchanges. The largest risk is determining a reliable third party for a cryptocurrency purchase since all actions on a distributed ledger are immutable and are not currently regulated by United States courts in a predictable manner.
Any disagreement on hbar OTC purchase would have to be mitigated by an additional third party and would incur legal action to remediate. Because of this regulatory uncertainty, trying to buy hbar OTC is not recommended by Hedera Hashgraph administration. However, the savvy hbar investor should know that several OTC markets do exist and have transacted millions of USD in cryptocurrency in such arrangements. The problem may be that the OTC offering agents fall under a contractual agreement that does not allow them to release the hbars they expect because of contractual stipulations with Hashgraph management, adding an additional layer of risk to the OTC buyer.
Hashgraph OTC Price: In the time period between the Hashgraph Seed and Saft fundraises, many developments have transpired in the course of network development. Multiple hackathons, developer assistance workshops, multinational meetups and many more exciting events have been hosted by and funded by the Hedera public DLT. Other than the delay in Open Access which was anticipated by some by February of 2019, Hashgraph management have been clear that Open Access was not guaranteed but at earliest would occur by February 2019. This has caused some confusion for investors and enthusiasts as many wait eagerly for hbar exchange listing and early network testing.
The greatest confusion of all the Hashgraph fundraising issues has been with the hbar OTC offering at an hbar price well below the Saft investor offers. Per social media outlets such as the Hashgraph Telegram channel, hbar OTC price was rumored as low as $0.06 USD. Although the main offering agent appeared to be a reputable third party offering agent, many additional Hashgraph scam OTC offers were made in parallel. This created much confusion and frustration for Hashgraph administration and even ended up deceiving several individuals by social media reports. An apology even occurred from one of the Hashgraph OTC offering syndicates.
It is strongly advised to consider the risk-benefit ratio if one is considering to buy hbar OTC through a third party. This will require know-your-customer (KYC) personal identity disclosures as well as an advanced payment most likely in cryptocurrency. A seemingly endless series of conversations can easily be accessed through the search function on the Hashgraph Telegram channel for more detailed discussions on this controversial topic.
Hashgraph Governing Council Treasury: As members of the Hashgraph Governing Council are added, a growing distributed body of multinational, multisectoral mega-cap corporations will be commissioned with stabilizing the Hedera network by actions that can easily use the power of the Treasury. By design, the hbar coin is a utility coin that secures the network by making API calls on the network expensive if used in excess. The value of the hbar price is also very important in order to make large accumulations of the Hashgraph coin impractical in order to prevent Sybil attacks. As the Governing Council monitors the hbar price on exchanges, any action that is feasible for the security of the network will be possible and likely a high priority.
For instance, if the Hashgraph OTC sale happened to lower the hbar price from the beginning to levels as low as SAFT or Seed hbar prices, then the Hashgraph Council could act by exercising stored funds on exchanges by doing hbar coin buybacks. This is a common practice in mega-cap corporations such as Google and Apple, Inc. as a measure to maintain the overall stock price as well as preserve the power of employee stock options. Similarly, the Hashgraph Governing Council could conceivably perform a large hbar buyback action in order to stabilize hbar price on exchanges as a security measure. These kinds of action will be transparent from the Council since all meeting minutes and Governing decisions will also be open-review to all participants.
Hashgraph FUD: Apart from the uncertainties surrounding the Hashgraph fundraising and OTC issues, another category of fear, uncertainty and doubt (FUD) has affected the hbar community. The Hedera Hashgraph DLT has claimed to have the highest transaction speeds and scaling abilities than any current blockchain. Additionally, the fact that the Hashgraph algorithm has achieved a first-in-class security for any DLT or blockchain with a formally proven aBFT property, allowing bank-grade certainty of transactions seems preposterous to many. These wild claims of Hashgraph, although justified by formal proof and mainnet testing, will cause quite a riot amongst deeply entrenched blockchain enthusiasts and investors. Uprooting many of the cryptocurrency leading platforms with superior performance and governance will not be easy.
Many in the Hashgraph community anticipate a backlash of FUD in the early access period of the Hedera public network. However, understanding the degree of commitment and financial investment at stake of many of the top cryptocurrencies should humble the Hashgraph enthusiast and compel the committed hbar investor to also hold-on-for-dear-life (Hodl). Weathering the FUD storm that is most likely to bombard the Hashgraph community should
be expected, considering that hbar is the new coin on market and must prove its claims of speed, scale and security. In order to be the top network boasting that they are the fast, fair and secure network above any blockchain will certainly incur much acrid criticism.
Some of the antics that will be used through social media to disparage the Hashgraph DLT will be irrational and of uninformed opinions. The whitepaper claims will be challenged until the public network stands up to the assault of various kinds of attacks. In the earliest days of hbar exchange listing, it would be wise as an hbar investor to know the differentiating factors of Hashgraph versus blockchain and to hold fast to one’s convictions. Following hbar coinmarketcap or Hashgraph social media sentiment will be at first inaccurate gauges of the final success of the public network.
Hashgraph is not Open-Source: By design of bitcoin, an open-source community collaborated anonymously to create the greatest cryptographic currency network in the world in a short period of time. In the open-source philosophy was the belief that when people work collectively, network software can be much more rapidly created and with more robust features than if made by a single party. In the process of using this open-access software, all participants were free to manipulate the source code and introduce new ideas without fear of penalty or intellectual property infringement. This is distinctly different than the great majority of software designs in the business world, where patents are enforced daily in court for even the most minor infractions. Also, the source code is never revealed except in compiled form, which is very impractical to reverse engineer or decipher. Open-review of code is also strictly prohibited in patented projects that companies like Apple, Inc., Microsoft and Oracle fund.
At first glance the open-source community of bitcoin appears well intentioned and superior to IP protective public SAAS companies, who vehemently avoid the method. However, a review of the past decade of the consequences is very telling how open-source development in financial technology (fintech) may be one exceptionally poor place to use such a community method of software development. In the bitcoin whitepaper, it is quite clear that the formation of a new peer-to-peer electronic cash was meant to completely bypass the state-issued currency of the US government dollar. Blockchain was a de facto revolution of finance and in essence was meant to replace a multi-trillion dollar industrial product of the US treasury. This should not be taken lightly.
In the process of trying to upend the US dollar, bitcoin drew a considerable amount of financial attention to its open-source project by its sky high marketcap. What occurred subsequently was a mad rush of competitive copycat blockchain projects that made wild claims of superiority in performance and security. Some of these projects were also wildly successful from a coinmarketcap perspective, drawing in billions of dollars by speculative investors. Yet, with the more than 1000 alternative blockchain coins, none had offered much more than a different branding a minimal technical improvements on the original bitcoin source code.
A few standout projects, such as ethereum and cardano brought novel ideas about smart contracts and peer-reviewed development not present in bitcoin. Nevertheless, bitcoin’s open-source approach to financial reinvention was a major backfire, with 100’s of bitcoin forks taking market share, diluting brand awareness and leading to mass confusion in the marketplace. The bitcoin cash fork and many others, although possibly well-intended, did nothing more than stymy the blockchain movement, leaving institutional investors disillusioned by the marketplace chaos.
Conclusion: The cryptocurrency ecosystem is chock full of spirited and inexperienced investors, amateurs of technical expertise in cryptography and network data architecture as well as risk-benefit assessment in emerging markets. However, many smart minds are also present, but may come with entrenched loyalties to other cryptocurrencies, regardless of the true merits of Hashgraph. If one is convinced that the Hedera Hashgraph public DLT is the future ‘trust layer of the internet’ it would be wise to buy hbar on lows and hodl as the network matures.
It may take a few years for the Hashgraph distributed ledger to prove itself and become a top 10 cryptocurrency by hbar marketcap. Time will tell if the performance specifications are true from the Hashgraph whitepaper and mainnet testing phases. In the meantime, hbar investors should remain diligent to the developments of Hedera to confirm that mass adoption of DLT is finally occurring within the cryptocurrency ecosystem.