The $4B VC Pump and Dump

Less than 72 hours ago, we were on the brink of a global depression and nuclear war. Now, we're allegedly back in a tech bull market. Don't tell housing, she may get jealous. We're diving into the current state of the markets and Silicon Valley's latest crypto flop.

Bottom Line Up Front

Contribute something new to the news you’ll coffee chat over

• Twitter co-founder Jack Dorsey has launched a private beta for his new social app Bluesky Social and unveiled AT Protocol, which will allow users to choose from different algorithms and to port their data to other social media networks.

• JPMorgan has appointed a former executive from the bankrupt Celsius Network as its head of crypto regulatory policy. Reminder: this is the asset class CEO Jamie Dimon blasted as a ponzi scheme to Congress. A week ago.

• The 10-year treasury yield hit 4.09% (14-year high) and UK inflation is over 10% (40-year high).

• European natural gas prices are collapsing, despite Russian supply threats.

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Deep Dive: The $4B Flop Launch Funded by Silicon Valley

Silicon Valley funded its own pump and dump. And its launch dumped big time.

Aptos is a Layer 1 blockchain that aims to become the most secure and scalable blockchain in history. That’s not enough reassurance for skeptics calling it a standard pump-and-dump due to all-to-familiar trends:

• Founders from big tech

• Team of PhDs

• Funding from all known VCs

• "Low latency, high throughput, safe, and reliable L1 solution"

• Love of developers

Let’s dive into each of these claims.

Aptos raised one of the largest funding rounds in crypto history with over $350 million in Series A funding, led by FTX Ventures, Andreessen Horowitz, Circle Ventures and Multicoin Capital.

Cool, but what is it?

As a Layer 1 (“L1”) blockchain, Aptos aims to solve the “trilemma” of reliability, scalability and usability issues that have plagued existing Layer 1s. On top of that, it hopes to possess security features that are lacking in current EVM-based blockchains. Blockchains struggle to balance decentralization, scalability and security. For most, the initial goal is scalability in order to facilitate adoption. Aptos ultimately plans to increase scalability while offering some unique security and usability options.

At the center of its technological innovation is “Move,” based on Rust, which is widely considered in the industry as the fastest programming language for network applications. Move is a programming language originally created for Diem, a now abandoned blockchain project by Meta (formerly Facebook). Coincidentally, Aptos was developed by former Meta employees focused on Diem.

It comes as little surprise that Aptos will still focus on Diem's original goals of creating a scalable, fast blockchain. In addition, it hopes to offer additional features that will make the crypto more accessible to average users.

“Reliable L1 Solution”

Aptos and Solana both aim to maximize throughput all on one computing layer, rather than scaling through additional networks like Ethereum’s Layer 2s (L2s) and Avalanche’s Subnets.

2021 was largely the year of the alt-Layer 1 trade — Solana’s SOL posted eye-watering gains of 9,848% and Avalanche’s AVAX paled in comparison with a 3,165% gain.

As the bear market has settled into 2022, Ethereum Layer 2s (L2s) are gaining steam and Cosmos’ “appchain” model is drawing major players. So, one would think that the wind left the sails of L1s and shifted towards verticals like DeFi and gaming built on top of L1s.

With a system that’s been designed to scale to one billion users, while safeguarding against common issues blockchains such as DDoS attacks, network downtime, and wallet-draining hacks, Aptos could successfully attract the next generation of DApps, DAOs and NFTs to its blockchain.

Bulls & Bears

The $150M poured into Aptos shows that many investors still have an appetite for L1s. However, it has its skeptics. Anthony Sassano, Ethereum bull and educator, warned Aptos “Gives Multicoin another chance to dump on retail.” More, crypto influencer Autism Capital thinks there will be money to be made from the “scam pump”.

Aptos primarily differentiates from Solana with the Move virtual machine and language. These capabilities are what Aptos is hoping will not just differentiate itself, but also set the standard in safety and efficiency.

High Valuation

This underscores a key fact about Aptos, which could justify its high valuation — the project has emerged from the ashes of Meta’s Libra, which pivoted to a project called Diem, which shut down in January citing regulatory concerns.

Aptos’ two co-founders, Mo Shaikh and Avery Ching, both worked on Diem at Meta before leaving the company and starting Aptos Labs. The rest of the Aptos Labs team consists of PhDs, researchers, engineers, designers and strategists. It’s unclear if Aptos will emerge as technology that pushes blockchain adoption to the next level or merely another VC-propelled L1 that struggles to find meaningful adoption.

And How’s it Different?

While it's understandable to approach Aptos with some caution, startups with the same amount of VC firepower behind them should, at the very least, pack some hype. A very active community, plenty of investors, and access to unique engines and programming languages all help the Aptos blockchain stand out. Whether or not it delivers on its promises, it’s already different. But for both positive and negative reasons.

The Current State Of Aptos

Aptos is running its testnet in four separate stages. The first stage ran between May and June of 2022. Thirty thousand people applied, and 100 were selected to participate. The next stage of the testnet is just starting now, with between 100 to 500 validators. Once it completes, there will be one more limited testnet with 1,000 participants. Before launching, Aptos Labs also plans to run a final testnet stage to be open to all participants.

Joining the testnet comes with some unique rewards. Each participant gets 500 Aptos coins once the Aptos crypto is released. Top-ranking participants get extra bonuses of up to 5,000 Aptos coins.

The Aptos incentivized testnet is the reason people already know so much about Aptos Labs' capabilities. An incentivized testnet is essentially a way to gamify crypto development. Participants can complete various challenges, and receive rewards in return.

The highlight of their rollout, though, is the seemingly intentional tokenonimcs secrecy. And by secrecy, we mean void. Once users realized this wouldn’t be uncovered before launch, they did their own digging. It turned out Upbit accidentally leaked Aptos’ tokenomics in their PDF report on Aptos.

The Launch & Current Controversy

Less than 24 hours before official launch yesterday, Aptos had yet to release any tokenomics transparency. In other words, it would be listed on FTX and Binance, for example, expecting hype to drive users regardless of what they were buying.

Ten hours prior to the launch, some transparency was finally introduced. The initial total supply of Aptos was slated to be 1 billion. There would be no public sale, no incentive and only 13.48% of supply sold to private parties. Aptos’ latest funding round is at a $4B valuation, which meant $4 per APT at least. As assessment, the price acquired by VCs would be expected to be $2.5-3.

In the end, it didn’t make a difference. The price of Aptos has crashed more than 50% a day after launch. Investors remain wary of the network's widely-panned mainnet rollout.

The supply at launch was 130 million APT. If you count the valuation on listing, the initial market cap would be around $520M. In the launch, “community allocation” was jointly controlled by the Aptos Foundation (41%) and Aptos Labs (10%).

The outside crypto community weren’t fans, to say the least. One user noted: “This means that a bit over 80% of the token supply is controlled by the team and investors, as there was no airdrop nor other method as to earn mainnet Aptos tokens. There was never a public sale or another method where users could have earned tokens.”

There were problems pre-, during and post-launch. Hours after its launch, complaints had already mounted enough to the extent that Aptos was forced to disable its Discord by 4:30 PM EDT. Users couldn't chat or ask any questions. They've only recently opened a few channels, but important channels like “dev-resources” are still closed.

One of the touted features of Aptos was its transaction speeds. Although Aptos promised 100k TPS in its finalized version, the current TPS is somewhere around 4 transactions per second.

So Is Aptos A Good Deal?

Aptos is one of the highest-funded launches in the year 2022 with backing from top VC firms. It’s going to get a good deal of hype regardless. There is a lot riding on the success of Aptos. With speed, security and scalability baked into its architecture, it could be the biggest launch of the year. Compared to Solana, there are a lot of similarities. The funding amount so far sits at $350 million for Aptos vs. $335 million for Solana – and Aptos was built in a bear market. Some analysts claim Aptos’ tier of backing and funding could easily see it appreciate to a multi-billion dollar market cap as easily as Solana did years ago.

One potential risk, however, is the ongoing billion dollar suit against its founder, Mo Shaikh, for alleged fraud over the ownership of the company. According to TheBlock, the case is being pushed through the Supreme Court of the State of New York.

For many, Aptos might be seen as ICP. For other analysts, they’re totally different. For example, ICP has a large number of retailers from public sale. The ICP valuation blew up when it was first listed, but that was during a bull market. As a result, its price decreased gradually once ICP was unlocked for investors.

Meanwhile, Aptos is held mostly by its team, exchange and investors. A bear market also calms down its valuation, allowing more room for price appreciation. Analysts expect “smart” money to pump its token price to create liquidity and exit.

In short, Aptos is more like SOL than ICP, at least at its launch.

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