Months after finally admitting he was a part of the group that snapped up Poloniex late last year, Tron founder Justin Sun appears to be using the once-dominant cryptocurrency exchange’s reputation to boost the credibility of his week-old stablecoin.
On Monday, Poloniex announced it is creating a new initial exchange offering (IEO) launch platform “to help quality blockchain projects grow and further develop their ecosystem”—a venture that’s going to be known as LaunchBase.
An IEO is like an initial coin offering, except that the cryptocurrency is sold through an exchange that acts as a broker.
The first IEO project that LaunchBase is going to support? The JST token, supporting the Tron-based stablecoin lending platform called JUST and its dollar-pegged USDJ stablecoin. The proprietor? A certain Justin Sun. (Wherever could the name JUST have come from?) The only cryptocurrency that can be used to purchase tokens on Launchbase? TRX… the coin that’s native to the Tron blockchain.
Sun was his usual hyper-enthusiastic self when he announced the news on Twitter on April 6. The entrepreneur said he believes LaunchBase has the potential to become a “world-leading token sale platform”—and he vowed that it would have the Tron Foundation’s full support. Cozy.
Ready for launch
“LaunchBase aims to be more than just a token issuance platform,” said Poloniex. “In addition to providing an avenue for community members to buy and sell tokens, Poloniex will also offer professional advice and guidance to help these blockchain businesses gain traction and adoption.”
LaunchBase also promised a “first-come, first-serve rule” to prevent the accusations of unfairness that have arisen in past IEOs which only offered a small percentage of the available tokens to the public.
The release said buyers “will be subject to eligibility and screening requirements.” In addition, residents of “certain jurisdictions” may not be eligible, it added.
How strong that know your customer (KYC) effort will be remains to be seen. In the past, however, Poloniex was known for strict requirements before regulatory pressure made that as big an issue as it is now.
If the phrase “decentralized stablecoin lending platform” and thought that sounded familiar, you’re not alone. JUST is very similar in its purpose to MakerDAO (which has had its fair share of troubles in the past couple of weeks). That makes sense, as Tron has been accused of plagiarizing the JUST code from MakerDAO.
Tron has faced similar allegations before, with long-running claims that its own white paper was largely copied from other projects such as the InterPlanetary File System.
Describing the platform’s objectives, Sun wrote: “JUST aims to build a fair DeFi system that provides stablecoin lending and governance mechanisms for all users. JUST is expected to become more than just a DeFi project for community members, but also serve as an example to attract more DeFi developers to Tron.”
Here’s how it works: Tron’s native TRX token can be pledged as collateral in order to generate USDJ, a stablecoin that is going to be pegged to the U.S. dollar. The JST token, which is being sold through LaunchBase, can be used for “paying interest, platform maintenance as well as other activities on the blockchain.”
Compare that with MakerDAO: Ether, Basic Attention Tokens or—recently—USDC can be pledged as collateral in order to generate DAI, a stablecoin that is pegged to the U.S. dollar. The MKR token can be used “to pay transaction fees on the Maker system, and provides holders with voting rights.”
Sun and shade
Poloniex at one point accounted for half of the crypto trade volume, although it’s now down to just 1%, according to Nomics.
Still, despite its somewhat tattered reputation, it’s fair to say that a launch through Poloniex would give any coin a certain credibility—a value in and of itself given this is quite a crowded market.
That’s despite the fact that the exchange has had its fair share of challenges: a few years ago, when tough KYC requirements were less in vogue, Poloniex only allowed verified users to have one account each. Some customers had also complained of lengthy backlogs when attempting to get their daily deposit and withdrawal limits increased.
More recently, the May 2019 CLAM token flash crash led to many defaults on Poloniex, upsetting customers to the point that the new owners apologized for previous owner Circle’s response.
A Twitter feud in December also raised eyebrows. The chief technology officer of DigiByte, Jared Tate, embarked on an eight-post rant in which he called Tron “a blatant con job” and Poloniex a “$TRX shill factory.” Four hours later, Poloniex announced that DigiByte’s DRB token was being delisted after a “careful review.”