Encryption Startup NuCypher Raises $10.7 Million in Round Led By Bitmain, Polychain Capital
Encryption startup NuCypher raised $10.7 million in an agreement for future tokens (SAFT). The firm’s investment round was led by San Francisco-based Polychain Capital.
NuCypher also announced that it has launched its public testnet.
The company’s main product is based on proxy re-encryption, which encrypts files being sent to individual and administrator accounts. It controls how access to files is granted and revoked based on certain conditions. Established in 2015, NuCypher began experimenting with tokens as a way to decentralize its platform in 2017.
NuCypher’s management had considered launching an initial coin offerings (ICOs) in 2017, however, it decided not to conduct a public token sale. Instead of an ICO, the company conducted one SAFT for $4.4 million.
Co-founder and CEO at NuCyhper MacLane Wilkison told Coindesk that the new SAFT comes as the company prepares to launch its mainnet.
“The launch of our public testnet is the culmination of over two years of hard work to bring data privacy to dApps built on Ethereum and other public blockchains. The network is now fully implemented and ready to enter its final stress testing phase.”
Other participants in NuCypher’s funding round include mining giant Bitmain, full-service blockchain firm Bitfury, Y Combinator Continuity Fund, Compound VC, Notation Capital, DHVC, Hashed Arrington XRP Capital and CoinFund.
This investors in NuCypher’s latest round will lock their tokens in order stake their funds on via nodes running the NuCypher software. The protocol decentralizes a platform by allowing nodes to earn tokens by performing encryption computations. The investors risk losing their stake if they act maliciously.
Participants in NuCypher’s latest SAFT acquired 8% of the company’s initial token supply of 1 billion ERC-20 compliant tokens, with 31% having been already sold in the previous $4.4 million round.
According to the announcement, NuCyphers’ node operators will be rewarded with new token emissions and network transaction fees. In a manner that’s similar to other decentralized protocols, inflation will decrease over time as fees are increased with long-term usage.
In an effort to further decentralize the platform, NuCyhper will be using a distribution method called a WorkLock. The terms have not yet been announced, however, the mechanics have been shared in a Medium blog post.
New platform users can deposit ETH into a smart contract and, in turn, they get NuCypher tokens. Their Ether will be destroyed, however, unless they stake their NuCypher tokens for a set amount of time.
This should discourage users from acquiring NuCypher tokens unless they’re planning to actually use the platform. Approximately 250–400 million tokens will be distributed via the WorkLock.
Although participation requires that users are tech-savvy, NuCypher has tried to make the process simpler for everyone. The company has released a comprehensive staking document.
Several established staking operators including Bison Trails, Grassfed Networks and Staked are currently running NuCypher’s software.
To encourage app development, NuCyhper conducted a hackathon with CoinList and various minimum viable products have been launched, including Stridon, a service paid blogging; Snowden, a solution for sharing information on social media that your friends can see but the platform cannot access; and a solution called NuBox for encrypted file storage.