ICO Analysis: BitTorrent Token

Blockchain company TRON made waves back in June 2018, when it was announced that TRON was acquiring BitTorrent, the company responsible for the development of the immensely popular file-sharing protocol BitTorrent, for $140m.

The BitTorrent protocol is a pioneer in the decentralized networks space and allows for the downloading and uploading of files from/to various hosts rather than a single server.

Perhaps the most popular or well-known use of the protocol is torrenting, which is often used to share copyrighted content like movies and music illegally.

Regardless of how the protocol is used, one can’t deny the popularity of the protocol.

According to BitTorrent (the company), the protocol is used by more than 170 million people every month and is responsible for as much as 40% of the world’s daily Internet traffic.

However, while BitTorrent is immensely popular, the company behind the protocol has struggled to generate revenue.

Thus, the acquisition comes as a break for the struggling company and might prove to be very strategic for TRON, as they gain access to a very large user base and more importantly (in the author’s view), a team of developers that is top of its class when it comes to developing decentralized networks.

Under the new leadership, BitTorrent is launching a token (BTT) to tokenize what is perhaps the world’s biggest, decentralized file sharing protocol.

Token

According to the BTT whitepaper, BTT will incentivize users to offer infrastructure services, such as seeding or hosting files, in return for BTT.

To validate this concept, BitTorrent is launching something called BitTorrent Speed (release date set for Q2 2019), which will enable faster downloads for users who choose to pay file seeders in BTT.

Thus, downloaders (“leechers”) will benefit from faster downloads via prioritized resource allocation, while seeders or hosters will benefit from payment in exchange for providing bandwidth services to the network.

It’s hoped that this will incentivize downloaders (who become seeders when they start to download a file) to keep seeding, even after their download is finished, a problem that has been present since the inception of the BitTorrent protocol.

While BitTorrent Speed is the first initial experiment when it comes to tokenizing the BitTorrent protocol, the team behind BTT envisions more generalized applications of this tokenization model (with potentially more to come):

  1. General decentralized mass distribution of content that might be subject to attack like censorships. With the decentralized and large network effects of the BitTorrent Protocol, not only do content creators not have to worry about hosting their content on one provider, but performance issues will also be of less worry, as the BitTorrent protocol has been proven to be able to handle large amounts of download requests, with organizations like Facebook and Twitter even using the technology to distribute updates to their servers.
  2. Decentralized storage services, where users pay for storage over time
  3. Decentralized proxying services, where users pay to retrieve content by URL (use cases may include content that might be subject to IP-based controls, highly mobile applications, and users with intermittent Internet connectivity, such as mobile users on WiFi, requesting content in chunks vs. in a complete form)

BTT-based transactions will be confirmed via blockchain technology to prevent fraud.

The total supply of BTT will be 990,000,000,000 (990 billion) BTT.

The tokens will be allocated as follows.

  • TRON Foundation (20%)
  • BitTorrent Ecosystem (19.9%)
  • Team (19%)
  • TRON Airdrop, or allocation for holders of Tron’s cryptocurrency (TRX) (10.1%)
  • BitTorrent Airdrop, or allocation for BitTorrent client users for client install and onboarding (10%)
  • Seed investors (9%)
  • Public sale (6%)
  • Partnerships (4%)
  • Private sale (2%)

The public token sale, which starts at 15:00 UTC, January 28th, 2019 is structured as follows.

  • $7.2m USD hard cap (sale finishes when hard cap is reached or at 15:00 UTC, February 3rd, 2019)
  • Individual cap of $20k USD
  • 59.4 billion BTT for sale (6% of total token supply)
  • No vesting or lockup
  • 40% of tokens for sale in BNB, 60% for sale in TRX
  • Tokens distributed within 15 days of token sale conclusion

Team

The team behind BTT is the team behind BitTorrent, which as explained, is a massively popular decentralized file sharing protocol, and the team behind Tron, a highly popular blockchain-based project, whose cryptocurrency TRX, is ranked #9 by market capitalization as of writing (Coinmarketcap).

Verdict

Below is a breakdown of the risks and growth potential of BitTorrent Token (BTT).

Risks

  • Would people actually pay for faster torrent downloads (initial use case for BTT, which will serve as a way to validate or invalidate the notion of tokenizing the BitTorrent protocol)? Torrents are known for enabling free downloading of content like movies and music. If users really wanted to pay for torrents, it’s possible that they would have already migrated to services like streaming via Netflix and Spotify. Moreover, BitTorrent users are not mandated to participate in BitTorrent Speed. (-0.5)
  • There is a lot of legal controversy surrounding the use of BitTorrent – the protocol itself is legal; however, as mentioned, there are many illicit uses of it, such as the sharing of copyrighted content. While it’s unlikely that the team behind BTT would get into any sort of trouble, it’s possible that users might be turned off by negative press or attention about illicit use and resulting legal disputes. (-0.5)
  • The team is highly experienced at building and maintaining decentralized network infrastructure (BitTorrent) and building popular blockchain-based solutions (TRON). However, competitors like Upfiring have already launched beta products, with decent feedback on places like Reddit. (-0.5)
  • Although the BitTorrent and TRON teams have built large-scale decentralized network infrastructure, it will be difficult to build a blockchain that can handle the massive throughput of the BitTorrent network. (-0.5)
  • Initial circulating supply is only 9% but will near 80% within 3.5 years, which means that the BTT token will face incredible inflationary pressure (-2)
  • Seed and private investors got BTT at a ~68% bonus (relative to public sale price) and don’t have a lockup (though tokens are vested over a year). (-0.5)
  • No details on lockups and/or vesting for team tokens. (-0.5)

Growth Potential

  • BitTorrent is about as legitimate as they come for proven examples of successful decentralized networks. (+2)
  • The tokenization of BitTorrent’s protocol could prove to be very interesting, and it’s possible that content creators and other individuals and groups that wish to distribute files could migrate to the protocol in order to circumvent the various problems associated with going through more centralized alternatives, such as app stores, music distribution platforms, and more. (+2)
  • If tokenization via BTT takes off due to the combination of the already large network effects of BitTorrent and the validation of the BTT tokenization model, it’s very possible that BTT might be covered in mainstream media outlets, as an example of a cryptocurrency project that has “mainstream adoption”. (+1)
  • The sale will be taking place on Binance’s Launchpad platform for ICOs, which provides BTT with a ready base of potential investors who can invest easily from Binance’s platform. (+1)
  • Although competitors like Upfiring are up and running, the team, as mentioned, has a great track record in building decentralized networks (BitTorrent and TRON). (+2)
  • Say what you want about Justin Sun and TRON, but no one can deny that Justin Sun and TRON are marketing wizards, who are highly capable of building investor interest in blockchain projects. During the bull run of late 2017~early 2018, TRX multiplied in price by over 100 times (as measured in USD), and the TRON community continues to be vibrant. (+2)

Disposition

BitTorrent Token will prove to be an interesting experiment for the future of decentralized technology. The team is combining an already large decentralized network (the BitTorrent protocol) with the idea of tokenization and crypto-economics. However, in terms of investing in the token sale, competitors, current blockchain technology limitations, inflationary pressure, more favorable terms for early investors, opacity regarding team tokens, and general lack of interest in ICOs amidst a bear market make BTT ICO participation a questionable proposition. Nevertheless, the sheer potential of leveraging BitTorrent’s network in a cryptocurrency project as well as the team’s experience in building decentralized networks and marketing make BTT a token to keep an eye on. BitTorrent Token receives a 5/10.

Investment Details

  • Type: TRC10 – Utility
  • Symbol: BTT
  • Platform: TRON
  • Crowdsale: January 28th, 2019 at 15:00 UTC
  • Minimum Investment: Unspecified
  • Price: 1 BTT = .00012 USD (prices in BNB and TRX set on day of token sale)
  • Hard Cap: $7.2m
  • Payments Accepted: TRX, BNB
  • Restricted from Participating: China, USA, Afghanistan, Albania, Belarus, Bosnia & Herzegovina, Burundi, Central African Republic, Cote d’Ivoire, Cuba, Democratic Republic of the Congo, Ethiopia, Guinea, Guinea-Bissau, Iran, Iraq, Lebanon, Liberia, Libya, Myanmar, North Korea, Republic of Macedonia (FYROM), Serbia, Somalia, South Sudan, Sri Lanka, Sudan, Syria, Thailand, Trinidad & Tobago, Tunisia, Uganda, Ukraine, Venezuela, Yemen, and Zimbabwe

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Featured image courtesy of Shutterstock.

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