TCAP - Price Exposure to Total Cryptocurrency Market Cap

Nick Sawinyh on 31 Aug 2021

Joe shared TCAP backstory and told us how the market of basketed derivatives looks like in 2021.

Hello! What’s your background, and what are you working on?

My name is Joe Sticco. Prior to building Cryptex, I was a lifelong trader and asset manager. What initially got me into crypto was realizing that the financial landscape was rapidly changing. The speed at which financial applications could be accessed and transacted was moving at a pace like I had never seen before. I bought my first Bitcoin in 2014, sold it shortly after that, thought I was a genius with my small profit and kind of just forgot about it for a while. I got involved again in the summer of 2016 and started seriously researching, accumulating and holding different tokens. We started building Cryptex in October of 2018, and launched it on April 8th, 2021.

TCAP is our first decentralized solution. It is a fully decentralized, trustless total crypto market cap asset that allows DeFi users, investors, institutions, hedge funds, basically anybody in the world, to have the ability to hold the entire crypto market cap in a single tokenized solution. So basically at a high level that’s what it is, and you’re essentially just offering the world the ability to take one of the most widely quoted metrics in the crypto sphere, which is total crypto market cap, and collateralize that data to where anybody in the world can hold it and have access to movement of the entire market without any intermediary or centralized owner, including ourselves.

What’s TCAP backstory?

So I came up with the initial idea one day coming home from my former life. I was trying to figure out a way where I could apply my background, which was traditional finance, and everything I knew in that space and combine that with this new technology everyone was talking about - the blockchain. My ‘aha’ moment was, what if you made the S&P 500 of crypto, where it’s one asset that represents the entire market, And that was kind of like this, ‘oh shit’ moment for me. You think about these different ideas in your life, and you always look at things other people do and you say, “That’s so simple, why couldn’t I think of that? Why didn’t I think of that idea?” And for TCAP, I felt like that was my, well, “I finally thought about it” idea.

What validated it for me was when I started telling other people, “Hey, this is what I want to do.” And a lot of people started telling me it was impossible. And me being me, nothing’s impossible. I’ll figure it out. So we started developing it, and at first, the way I thought about it was just taking the total crypto market cap, which at the time was $150 billion dollars, and dividing that by an index divisor of 10 billion and getting a value of 15 bucks and saying, “Okay, this is the token, the nominal asset now tracks the data to the penny.” And it wasn’t until we linked up with Preston Van Loon, who basically said to us like, “Okay, this is nice. You were able to do some basic math, but what’s it backed by?” And I’m like, “No, it just trades. It trades based off of as if it was the total crypto market cap.” And he’s like, “Yeah, but what’s it backed by? What’s the underlying holding it that’s giving it its inherent value of $15?” And I’m like, “Nothing?” And he’s like, “Yeah, you got to figure that out before you do this.”

So once Preston got on board and talked to us about this collateralized model that MakerDAO and a lot of other platforms were using, and how we could apply that platform to a variable asset like total crypto market cap or variable metrics, or should I say, total crypto market cap, that’s when everything really started to come together. About two years after that we launched it to the world.

Preston Van Loon is a career software engineer and has become one of my best friends. He was formerly employed at Google. That’s where Tom and I had initially met him. We met first through an ex-girlfriend’s father who does high level investigations, and Preston’s best friend happened to work with her father. So what happened was, they were doing an investigation, some major drug bust, and they were hiding out in the basement of a deli gathering intel. True story. Hiding out in the basement of a deli, sweating and killing time, and her father just happened to say, “Hey, do you know about Ethereum?” And they start talking crypto, and he’s like, “Hey, Joe’s building this thing, and he’s trying to make this token.” And James told Mike, “They need to link up with Preston. Preston builds Ethereum.”

A couple of weeks after this, Tom and I were at Google and we met Preston Van Loon, who is in addition to being a co-founder and blockchain lead at Cryptex, is also the co-founder of Prysmatic Labs. They have an Ethereum software client called Prysm, which is currently securing over $10 billion dollars in the new Ethereum 2.0 smart contract. So Preston handles all of Cryptex’s blockchain development, along with Cris Garner, who is an incredible, incredible developer, and they work together in creating all of the Cryptex solutions. Cris is from Honduras. He has been working with us for about two years now, and basically they build all the different solutions and apply my traditional finance ideas, and basically use their magic wands and turn them into blockchain. And then Tom Matzner, our other co-founder, has always been involved in building brands, building all types of different things for companies, but he’s always been very tenacious in his approach. In addition to being one of my lifelong friends, he’s always been an entrepreneur. So once I kind of had this idea to like, “Ok, this is kind of what I want to build.” we got Tom involved, and Tom was in right away. We started coming up with ideas and concepts. So Tom handles everything. Website development, the feel and the designs of the sites, and the functionality. Everything other than coming up with the tokens or building the tokens, Tom takes over and does everything else. And then we have the DAO that’s filled with hundreds of community members like Brendan, and all these other different people that kind of just gravitate towards us and work with us on building this every day. So shout out to the DAO, too, because without the DAO we really wouldn’t have anything. They’re awesome.

What went into building the TCAP?

We started building TCAP seriously in October of 2018. That was when the initial idea had come into formation, and we met Preston shortly thereafter. So some of the things we saw when we were building it, was the surprise that nobody else had really figured out the solution on how to do it. That was one thing that really threw me through a loop. Nobody else out there, other than one protocol who has a rebased elastic token that’s based off the Ampleforth system, was really trying to collateralize aggregated market data and create new synthetic tokens based off of data metrics. Everybody was having all these other different things, which are also doing incredibly well and shout out to all those guys, but nobody was doing what we were doing and that really kind of surprised me.

I don’t think that there were any real blockers in building it. We had the idea of what we wanted to do, but the beautiful thing was the landscape change from the time that we started building. DeFi value locked was probably $150 million at the time. And once we launched it, DeFi locked value was $60 billion or $70 billion dollars. So we came in at a time where there was an abundance of liquidity in the space that hadn’t necessarily been there before, and gave us the opportunity to launch TCAP, and within a couple of days of launching you had $100 million dollars locked inside of TCAP.

And that number, while it’s come down a bit, as everybody wanted to get the governance tokens for CTX that we released in conjunction with TCAP at a price of zero, you saw that huge inflow. So when you think about it, from the time that we started building, the total value backed in DeFi, which wasn’t even at that point within 18 months, you had DeFi go from $150 million to $70 billion. And in three days you saw a hundred million come into TCAP just 18 months later. So almost the entire value of what was in DeFi when we started building was locked in our protocol a couple of days after launching. So that was insane to me. To think about and look at it, it was just like, wow. I am so happy to see the space growing, and I think that it’ll continue to grow, and 10x, 20x from here easily in the next two to three years.

Also there’s many baskets of assets. DPI is a cool DeFi basket, BED by Bankless also. Those guys are doing a great job with the Bitcoin, Ethereum and the DeFi space. You have these baskets of tokens that hold the physical assets, which you can buy on your own anyway. You have the rebased elastic token project that we had mentioned a little earlier, you have all these different people are starting to go at it a different way, but we believe that the model that we’re using is the best. It really is total exposure to the entire sector with zero underlying holdings. A true index. And not only can you start with the system, but you could upgrade it and continue to build on it. Whereas with some of these other indexes, it’s a centralized committee that is deciding what the assets are holding or what’s inside of them. With TCAP it’s just through exposure to the entire market, and it’s aggregated data that’s brought on chain from Chainlink, and then collateralized by a corresponding amount of Ethereum or DAI.

What’s your business model?

So in order to bring TCAP into the world, you have to mint them. There was no presale, there was no ICO, there was no pre-mine. We raised no money to build this system, have no outside investors, every TCAP that’s in existence today has been minted into existence. So you have to post 150% collateral to the system, and once you post collateral you can then mint your TCAPS, and that from a technology standpoint is something that we think gives a lot of opportunity. Because as more liquidity pools come online, as more vaults come online where people can post different types of collateral to mint TCAPS, it just creates more opportunity for the user that’s limited in other projects. And you could also upgrade the vaults, you could upgrade the staking, you could do so many different things that are coming online soon. We really feel that there is a significant advantage. And in terms of security, we’re fortunate enough to have some of the best developers on the planet building TCAP. Preston, what he’s done in the Ethereum community is virtually unparalleled.

He’s making great, great strides in Ethereum and continuing its development. So we’re lucky enough we have Preston leading the ship when it comes to building these things. We have Chris Garner who is phenomenal at coding and what he does in building, and we have Quantstamp to audit everything that we build. And Quantstamp is one of the most recognized and prestigious blockchain auditing services. Don Ho from Quantstamp is a co-founder there, he’s an advisor to Cryptex, we’re lucky that we have that relationship. Basically we build these things, and Quantstamp audits them, and we put them out into the world, and we’ve had a lot of success with the strategy.

The target market is going to be DeFi users, it’s going to be institutions, it’s going to be anybody in between. From the person who just wants to hold total crypto market cap, and just leave it alone and have exposure to the whole sector, or to more sophisticated institutions who want to actually trade this mechanism every day. We’re going for your people who are just getting into the space, to the most sophisticated in the space. How we make money is the software. There’s no fee to mint TCAP, but there is a 1% fee to when you burn it, and that’s how we made money initially, and in the future, the plan is going to be to have upgraded vaults, where the vaults collateral will be staked, and we’ll be able to earn interest off what we stake, and once we do that, that will fund the continued development of the DAO.

What’s your position on the regulatory landscape today?

I think that there definitely needs to be regulation of some sort. However, when you look at any new frontier throughout history, the gold rush, the railroads, be it steel, textiles, any great revolution of industry - the beautiful thing is that you can be a little guy with good intentions and build something that can change the landscape based off of your knowledge, or your skills, or your ideas, or your tenacity to go and attack the world. And I feel like there definitely needs to be regulation that monitors to make sure that bad actors aren’t out here defrauding people, or just creating scam tokens like we saw in 2017 with all these bullshit ICO’s. But at the same time, I don’t think that there should be over-regulation. Because the deal about decentralized finance is exactly that. It’s decentralized. Right?

You have the ability to be a smaller player and create something that changes the game, and if you over-regulate, all you’re going to continue to do is to price out these smaller participants into the large participants, who are just going to “innovate” however they want. So now you take a decentralized platform or decentralized model, and you just make it centralized amongst a few small players with big pockets, and that really stifles innovation. It stifles the ability for these smaller players to really have their day in the sun. So I think that there’s a thin line between not enough regulation and over-regulation, and I’m hopeful that the powers-that-be find a way to keep this safe enough where people aren’t getting defrauded or getting scammed, but open enough where the little guys still have the opportunity to capture market share.

What are your goals for the future?

Well, the mission of Cryptex is to get TCAP, CTX, and any subsequent launches that we have, in the hands of as many people around the world as we can. We want to do that safely, we want to do that securely, we want to do that on a trustless basis. So my personal goals are kind of aligned with the DAO, in how do we grow this to where the entire world can have exposure to TCAP if they so should please. That’s something that we work for every minute of every day accomplishing, and it’s a decentralized community. It’s the goal of the DAO to achieve that, and it’s a goal that I think we will absolutely achieve.

What are your future thoughts for the DeFi market?

So I think the future of DeFi is the ability for the user to continue to have ways to transact where they’re completely autonomous trustless networks. Whether that be lending, whether they need money for a home purchase, whether they need money for a car loan, whatever that may be. Lending, staking assets, earning yield on a basis where there’s no middleman, no intermediaries. I think that that’s going to continue to take off. I think that indexing, I think that synthetic assets on the blockchain, I think all of these things are going to continue, and if you look at the early days of the prior boom and bust cycle, the biggest thing was trying to convince people to pay for stuff with crypto. That was kind of a use case. Like, “Oh, well.” Litecoin is going to get these 700 locations that you can buy and transact with Litecoin.

What’s interesting is that, while it gained a little bit of traction, people really didn’t want to do that. People really didn’t spend their crypto on that, because it’s like I could pay you $15 today that could be worth $30 in a month. Why would I want to do that? And you as the merchant, I could pay you $15 today that could be worth $8 tomorrow. So you saw stablecoins as the next level that built on top of that, where you can transact in stablecoin, but I feel like the space has evolved from looking at just like, “Okay, we can get this here and we could pay with it.” To like, “Okay, we can get this here to where we could earn with it. We can get loans with it.” They could earn interest on it. We could do all of these different things, and then you go spend that. So I think the next level for crypto as a whole is going to be the continued expansion of decentralized solutions, combined with this new aspect of things you’re seeing blowing up right now, like NFT’s, digital art, music on the blockchain, video games on the blockchain, Netherverse is on the blockchain, where you have these whole systems. If we’re playing a future Grand Theft Auto and I have a car on the blockchain, I can now buy a car that I’m using in Grand Theft Auto with tokens, and sell that car to somebody 3,000 miles around the world who then buys it off of me and now they own it. And now they could use that in game, and they could do their thing with that, and I think that those are going to be the opportunities in the future. NFT’s, trustless banking, gaming, all these different sectors from the traditional world that mitigate that, would find their way over to the blockchain, and now they are just thriving and doing their thing. So I think the next three to five years are going to be incredibly, incredibly significant.

Where can we go to learn more?

You can learn more about Cryptex on our Website, Twitter, Discord, or Subreddit!

DeFi is coming. Don't get left behind

About the author
Nick Sawinyh
Nick Sawinyh is a crypto entrepreneur based in LA. He founded DeFiprime in 2019 to offer information on emerging DeFi ecosystem. He owns small amounts of different cryptocurrencies.

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