In Defense of Aptos, Crypto's Punchline This Week

The much anticipated blockchain by ex-Facebook employees was off to a rocky start.

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Updated Oct 21, 2022 at 2:19 p.m. UTC
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Aptos, the much-anticipated blockchain built by Silicon Valley wunderkinds, has become this week’s punchline in crypto. The project ain’t apt, people said following its rocky (and much criticized) debut Monday.

Its token, APT, dropped about 50% in its first 24 hours of trading and the crypto network that boasts a potential transaction count of 100,000 had only four per second at first. The project, which was valued at $2 billion in prelaunch private investment rounds, has a $959 million market cap as of this writing. Do you laugh or do you cringe at those data points? I guess it depends on the size of your bag.

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In speaking to a few industry participants this week at CoinDesk’s first-ever I.D.E.A.S conference, I got the sense that people were rooting for the project’s failure. While Aptos may offer a few technological innovations worth putting to market, it also represents the insider-first approach to crypto development that’s anathema to crypto’s ideals.

Facebook roots

Aptos’ core team are primarily transplants from Facebook parent Meta Platforms’ failed Libra/Diem project, which itself was a controversy when first announced in late 2019. Libra, too, had a novel approach to crypto adoption: a stablecoin backed by cryptos, fiats and other assets that could have become a global reserve currency by leveraging Facebook, WhatsApp and Instagram vast user bases. Meta owns those three social-media platforms.

Libra acquiesced to regulators’ demands immediately, and eventually, the original vision was so mangled that it become unrecognizable. In retrospect, Zuckbucks was dead on arrival because of people’s learned distrust of Meta after years of privacy abuses and other crimes against humanity.

But Facebook invested heavily in the project, and it developed interesting blockchain scaling products and a new programming language called Move. So when Aptos was announced, people got excited that something could be built without all of Diem’s baggage. After a launch that even co-founder Mo Shaikh admitted “could have gone better,” Aptos seems to have picked up some of crypto’s worst traits.

Cobie, a semi-pseudonymous market commentator who is something of crypto’s moral conscience, had serious apprehensions that basic facts about Aptos tokenization scheme – like the token supply and initial distribution – weren’t revealed before the APT token was listed on exchanges such as Binance, FTX and Coinbase.

Releasing those figures – less than a day before the token was available to trade – didn’t quell controversy. According to its blog post, 49% of Aptos’ 1 billion initial token supply will be going straight to “core contributors, investors and the foundation.”

Slightly more tokens are reserved for the “community,” and will presumably be granted to people willing to build apps and protocols on the blockchain. “Community” here, however, may be poorly defined: “a majority” (~41%) of APT will be disbursed to the Aptos Foundation and a “smaller portion” (10%) going to Aptos Labs, the blog states.

Insiders agreed to a one-year token lockup, meant to prevent venture capitalists and major holders from dumping on retail. About half of the total supply of those tokens, however, can also be staked to earn up to 7% in token rewards per day, and those emissions aren’t subject to the lockup (meaning they can be dumped).

It also appears that insiders were able to start staking on Oct. 12, five days before the mainnet launch. AkadoSang, a pseudonymous crypto analyst, called the scheme "a sneaky way to get liquidity since backers usually hold [a] great deal of supply." (FTX Ventures and Jump Crypto co-led a $150 million investment in July, and Coinbase and Binance both had “strategic investment rounds” in March and September, respectively.)

A quick defense

Despite all of the red flags here, I want to mount a quick defense of Aptos if only for the sake of balance. First, judging a just-launched blockchain for having dismal transactions-per-second counts seems like a low blow – nothing yet is built that anyone could transact with.

Second, Aptos’ tokenization scheme, far from being a fair launch, is in line with competitors like Solana, Near and Flow – all of which have since put their “community”-directed tokens to good work funding grants.

Lastly, while Coinbase and Binance’s “strategic” investments look shady, they seem to have just been buying tokens early so that people have something to exchange at or near launch. Aptos was highly anticipated, and they wanted to get into the market because traders wanted to get into the market.

None of this addresses a separate, important question of whether the world needs another layer 1 blockchain. Right now, every blockchain basically has spare capacity and block space – even Ethereum is cheap to use again. And in the last bull market, we saw most “scalable” blockchain, like Solana, run into processing issues because of scale – who knows if Aptos found the right solution there.

I’ll leave you with some words by gigabrain Haseeb Qureshi, who invested in Aptos through his venture fund Dragonfly Capital:

“Investing into a new Layer 1 is really about… building a more scalable operating system for blockchains. We're still at the beginning of this journey, right? Smart contract blockchains have existed since Ethereum, about seven years ago and we're clearly not done. These systems are so primitive, and we're learning so much in real time about how to make them faster and perform better.

“I remember back when I first became a VC, people used to argue whether proof-of-stake was even possible,” Qureshi continues. “Now we’re in a world where the second largest blockchain has completed a transition to proof-of-stake. We've learned so many things about what's possible with respect to pipelining transactions, parallel execution of generalized computation – with what Solana has done, what NEAR has done, what Polygon and Avalanche have done right.

“A big part of the reason why we were excited to back Aptos is pretty clear: It's another step in blockchain evolution. Now, that doesn't mean that I know for certain that Aptos is [going to] win. But I can tell that what these guys are doing is important.”

UPDATE (OCT. 21, 2022 – 14:20 UTC): Corrects Jump Crypto's name.


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Daniel Kuhn

Daniel Kuhn is a deputy managing editor for Consensus Magazine. He owns minor amounts of BTC and ETH.

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