NuCypher, an encryption startup, has raised $10.7 million in a simple agreement for future tokens (SAFT) led by Polychain Capital. Marking the occasion, the company launched its public testnet.
NuCypher’s particular product is based on proxy re-encryption, which allows files to be encrypted to lots of people and for administrators to grant and revoke access based on certain conditions. The company dates back to 2015, but it began looking at tokens as a way to decentralize its infrastructure in 2017.
CoinDesk covered NuCypher as one of the buzzy initial coin offerings (ICOs) of 2017, but the company ultimately opted not to pursue a public token sale. Instead, it ran one SAFT for $4.4 million in 2017.
In an email to CoinDesk, NuCyhper co-founder and CEO MacLane Wilkison said the new SAFT comes as the company nears mainnet launch:
“The launch of our public testnet is the culmination of over two years of hard work to bring data privacy to dApps built on Ethereum and other public blockchains. The network is now fully implemented and ready to enter its final stress testing phase.”
Other participants in the round include Bitmain, Bitfury, Y Combinator Continuity Fund, Compound VC, Notation Capital, DHVC, Hashed, Arrington XRP Capital and CoinFund.
This round of investors has agreed to lock their tokens for the purpose of staking nodes that will run the NuCypher software. The protocol decentralizes by allowing nodes to earn tokens by making encryption computations. The investors will lose their stakes, however, if they are found to be acting maliciously.
Participants in the newest SAFT purchased 8 percent of the initial token supply of 1 billion ERC-20 tokens, with 31 percent having been sold in the prior $4.4 million round. Node operators will be paid in a combination of new token emissions and network fees. Like many other networks, inflation will diminish over time as fees increase with usage.
In order to further decentralize the network, NuCyhper announced a distribution method called a WorkLock. The precise terms have not yet been released but the mechanics have been described in a Medium post.
In short, new users can put ETH into a smart contract and they will receive NuCypher tokens. Their ETH will be burned, however, unless they use the NuCypher tokens to stake a node for a certain amount of time.
This should discourage people from claiming NuCypher tokens unless they intend to be users. Somewhere between 25o–400 million tokens will be designated for distribution through the WorkLock.
While participating requires technical skills, NuCypher has tried to facilitate it as much as possible. It has already released staking documentation. Many well-known staking operators such as Bison Trails, Grassfed Networks and Staked (among others) are already running NuCypher.
To foster app building, NuCyhper ran a hackathon with CoinList and several minimum viable products are live now, including Stridon, for paid blogging; Snowden, for posting on social media so your friends can read it and the platform can’t; and NuBox, for encrypted file storage.
NuCypher team deploying testnet image courtesy of the company