Below is the transcript of the speech that the founder of Broxus, Sergey Shashev, delivered at the Everpoint 2024 conference, an annual event dedicated to the development of the Everscale network.
How It All Started: “Launch Through Pain” in 2020
With Everscale, we have been through a lot. There have been various times, some bad, some good. I will talk about how we will move forward, because there must be some fundamental changes, and they need to suit our aspirations, for what Everscale can become. This requires major changes in governance. But without a good understanding of how we got to this point, making future decisions and forming a new governance probably makes no sense, so I will start from our history.
Probably everyone knows about it anyway, but we originally came from what was called Telegram Open Network.
At that time, there was TON, and a company called TON Labs, which later became EverX. It was a shock for everyone when it turned out that TON was not about to launch due to a lawsuit. And, around the end of April [2020], when the last ruling came out in New York, stating that TON could not launch, wouldn’t be able to do so in the next several years — at that moment, TON Labs showed great initiative by saying: let’s launch the network ourselves. They invited several companies, including ours.
At the start, there were 23 companies that launched the network, which we called Free TON. It seemed like a very fun adventure because personally, I had no understanding at all… That is, there would be some kind of network. And it would somehow work. There needed to be some services made. But I didn't have any business tasks or goals for it yet.
A very important point was what happened with the Treasury. Blockchain networks are launched in different ways. Some collect a lot of money from respected funds, then launch the network, and then get listed on exchanges. That's how Ethereum or NEAR was launched, that's how Solana did its reboot. But we had our own path.
It was a launch through pain, because we started without a single dollar. We only had tokens, divided into three Treasuries: one for partnerships, another for software development, and a third for validators. And some upside formed, because commercial companies, whether developers, funds, or businesses, did not truly engage with a project unless they knew why they needed it. Of course, there were enthusiasts, and some of them are still in our community. But generally, business is done with companies. Companies with resources, connections, networking. There was 6-7% of the total token supply, which was vested and distributed among these companies. TON Labs led the entire network. This involved the development of compilers, SDKs, wallets. We began to gradually make our own wallets, APIs, and some other things. We sponsored Pokerton and maybe a couple of other companies at the start in order to create something at least.
We know that governance is not simple. Because real operational management involves hundreds of decisions every day that a single person or a company is not capable of processing. Because it involves core development, developing different products, business integrations, it concerns listings on exchanges, it involves marketing, PR, community growth, design decisions, working with lawyers, and so on. You have different partners and companies in different countries. Someone needs to onboard them, immerse them in network processes, so that everyone starts working together.
There should be some system of goals and beliefs, strategy, tactics, answers to questions. We had nothing of that sort. At that time, no one had this operational experience. The key idea and response to this became the Governance of initial members, and the system of sub-governances. There was a sub-governance for Korea, a sub-governance for the development of some tools, and another one for games, esports, and so on. Governance 1.0 began to emerge, and there was an idea that people could be given a certain amount of tokens, and for this, they would develop the network in their aspect. Through a voting system, they would make the right, balanced decisions. And that this equation essentially turns into the network's revenues and its growth, upward with the number of tokens you spend.
All the network management seemingly boiled down to one equation. Back then, it simply seemed that the network should grow faster than the number of tokens you were spending. Because the spent tokens will not develop the network, they go into the market, and if there is little retail demand and no institutional support, it leads to the same drop in cryptocurrency capitalization.
“You Can't Get Far on Goodwill Alone:” How DeFi Alliance Tried to Get EVER to the Top
Turned out, most of these sub-governances and companies were actually not interested or didn’t want to, they found it uninteresting, trivial, they didn’t see any upsides, didn’t see opportunities, lacked competence. For a bunch of reasons, the network started to rapidly decline in terms of capitalization.
But outside, there was a different world. And what was happening there? DeFi was beginning to revive. Money began to appear, the concept of TVL emerged, and it became a staple metric of success. Some stablecoins started to appear, and so on.
So, there was a huge movement, but, I repeat, our network never had an investment strategy. And there were no dollars in the treasury. As a response to this, the DeFi Alliance was formed. The DeFi Alliance was formed partially from the members of the governance that existed, and also with some new companies. For example, Warp Capital appeared.
What did we do? DeFi Alliance members placed their own crypto liquidity in the yet to be formed Free TON DeFi ecosystem. Everyone remembers, EVER soared to 80 cents as a result. The idea was that we would now grow significantly, stabilize this liquidity, and end up with a higher capitalization, maybe even enter the top-100 cryptocurrencies by the market cap, and another game will start. This marked the Governance 2.0.
It was a desperate and bold step, when DeFi Alliance members cheerfully bought tokens with many of their dollars, and a real economic motivation was formed. A lot of tokens were bought, a lot of dollars were spent, and then there was an obvious intent to convert these tokens back. But it was not possible to do so, because the capitalization had severely plummeted. One of the main problems was that the many other companies that founded Free TON, which did nothing and participated nowhere, just sold these tokens. It turned out to be a very negative action for the network. I cannot blame them, because nothing was explicitly prescribed about who should do what and how, there was no KPI system, no accountability. It was based on what is called in English “goodwill.” Everyone acted based on goodwill, but as practice showed, you can't get far on goodwill alone.
We found ourselves in another significant crisis of this network. And one of the innovations that the DeFi Alliance made was that in order to create incentives for network actors who perform useful actions, but not to give them tokens which they would use to crash the price, we started giving them LEVER tokens. Essentially, LEVERs are bonds. We created a long position with a 10% APR yield, which allowed us to settle many obligations within the network. Essentially, we acted not quite like a country, but like some kind of small state, because this is their usual strategy. This was probably one of the first actions when we transferred some economic aspects of the real world into blockchain. Then other networks did the same. We were probably one of the first, if not the first, to use this approach. And there was the first change in governance. That is, about 10 companies that really did nothing and were not willing, were replaced by new actors engaged in useful actions.
An Operation to Bring Dollars to The Network, and the Rebranding to Everscale
But the lag in decision-making was almost 8 months, which is extremely slow in corporate business. Okay, there is now more or less normal governance, in which there are more strong actors who can theoretically add value to the network. But then we realized that it is necessary not only to have tokens, otherwise it's a one-way street, but also to have dollars. And then the Crystal Hands program was developed. It allowed us to make deals with funds, with lockups. This is an established mechanism, all blockchains make deals with lockups. We looked at how others do it in order to adopt their practices, because expenses in dollars were, are, and will always be there.
We started working with funds, and then we realized that there is a thing called a cap table. This is the distribution of tokens and their holders, how many you have in locks, where they are located, and all funds fight for the cap table. And as a cap table, we looked very strange, because we did not meet market standards. And therefore, one of the decisions was to burn 3 billion EVER tokens from the Treasury. And then in terms of the cap table, we began to look more or less normal.
Here it's also important to understand that tokens are an illusion. What number of them you have doesn’t matter, what matters is the cap table, the distribution, and what matters is the market, demand, supply, DeFi, and everything else. Because even if there are, say, 100 billion of these tokens and you have a free flow of 1 billion, it doesn't mean you can multiply it by 100. That's the amount of money you can get for these tokens.
At that moment, as you remember, Toncoin appeared. And then, sort of, questions arose because there were two blockchains with the word “TON.” And then we became Everscale. And the key reason why it's Everscale: it's about scalability, yes, about the fact that we can expand infinitely through the mechanics of workchains, shards, everything else, and create completely diverse mechanics. And the funds said: we have tokens, everything is great, but you have governance, and we, as funds, can't make decisions about where the tokens will go, and this is strange.
So, such requests started to arise. Plus, there was a community with tokens, who also had similar plans, questions. And then we launched Ever DAO to make EVERs as a tool of voting. Then the hypothesis arose that DAO is an open system, meaning anyone can come, make their proposal, and have it implemented by the network. We had 270 proposals, of which 2 were from the community. The DAO was originally proposed as a tool for working with the community by external structures, but it turned out to be just a corporate tool for conducting some decisions and making them. This is a bit strange. We were expecting something different, but what happened, happened.
The Expansion to Asia, and the Partnership Between Everscale and Venom Network
And then the war also happened, which also created certain friction. People started to move. This way, Broxus ended up in Serbia almost entirely. But with all due respect and the love to the Balkans, it's not a market where you can do something big and significant. Therefore, I went to Asia. Essentially, at this point, there was a switch from Governance 2.5. There appeared probably 7 or 8 companies that at least tried to engage in business, while de facto not having any levers. Really, in terms of, so to speak, goodwill. We had a big cooperation with South Korea at that time. And there were huge plans. We held a crazy conference in Bali.
Just two days after the conference, the LUNA event occurred, and all plans related to South Korea, market making, and listings went nowhere, because our potential creditor lost several billion dollars. He became, well, a little too preoccupied to launch new projects, because he had to address issues of an entirely different class.
We responded to that challenge by working on the Venom TestNet. Then, we found a major technical loophole, the actual speed of our network. You see, it doesn’t matter how your network scales, what matters is finality. It’s important that you complete your action within a very definite time interval. One of the people sitting in this hall helped us formulate the real business requirements for the network, that is, conducting DEX swaps within a range of no more than 3 seconds.
And a swap is not just one transaction, it's many transactions. And it doesn’t matter if you conduct a million transactions sequentially one after another, but if the user doesn’t complete their action in 3 seconds, then your scalability doesn’t matter to them. So the finality comes first. This was a big engineering challenge. We came up with a solution: we merged the core development of EverX and Broxus, and implemented what we called the fast finality, which allowed us to continue. And at that moment, there was a certain change of roles in the network. Broxus became not an actor that created some ecosystem and tried to do business in the network, but a principal customer of what the protocol should be like in order to meet market realities.
There was a vision that Everscale would become part of Venom as one of the subnetworks. Not everyone liked this. I personally received hundreds of threats, insults, and everything else. But what were the alternatives, guys? Well, at that time. There were none. And having worked closely with Venom, and other new groups from different countries, we began to think about the configuration, in which Everscale would regain its commercial value, because there's no use in technology when the price is 3 cents, or 2 cents, or 5 cents, when the benchmark was 20 cents. Now let's move on to the plan.
Everscale Relaunch: What The Governance 3.0 Will Look Like
I would call this conference the Everscale Relaunch. Because what I am about to tell you is essentially our relaunch plan.
First, no one knows how many tokens in the network belong to no one. There is DeFi Alliance managing some structures, there are vestings, there are tokens that are part of the historical Rust Cup contest, and there are some other tokens. We've already counted all of them. Honestly, I don't even remember where they are, on which multisig address, and mainly, why. The only explanation is that this turned out so historically. To move forward, we need to perform this cleansing and create a unified treasury, so that the cap table becomes absolutely clear to everyone.
Second is about the commitments given by different companies. Previously, it didn’t matter if they were given by core developers or commercial companies, they were not always upheld to. Because business is a very complicated thing, a lot of force majeure appears. Meanwhile, the community members believe they are owed this, because someone said it would be done. This creates waves of negativity, disputes, and everything else, as well as wasted time on communications that bring no commercial value. Therefore, this system must be normalized in relation to the community, so that the community and investors do not have expectations that may or may not come true, and do not become unhappy as a result. The management system should adhere to this second principle.
And third, there should be a very good incentive system for new participants in the network, or for those who were already in the network but were not seriously involved with it. The incentive system should be transparent and clear. Not under the table, as it often was before. So they clearly understand that if we bring, let’s say, 5 million users to the network who will perform 5 million transactions, we as a company will get this. And this will help companies make decisions in favor of Everscale at the launch of a particular product. And here lies our competitive advantage — I will talk about it a bit later — why this incentive system is extremely important, and why it can work precisely as a transparent system.
So, these are all the key points of Everscale Governance 3.0.
The first decision for implementing these is a single treasury. Currently, we have about 1 billion tokens. Well, 900 million plus something, I don’t remember the exact numbers. I am talking about the unification of the treasury. We will have a single treasury on one address, comprehensible to everyone. And this means abandoning vestings. The DeFi Alliance is giving up its vesting, because we did not make the network commercially great. And EverX will probably follow the same path, to create a single treasury for everyone. Because now, I remind you, vestings are still locked under conditions where the tokens are there or not, it doesn’t matter. So, we will become transparent in terms of our cap table.
Second is the governance board. Only company participants who have a certain minimum amount of tokens should be in the governance. It doesn’t matter whether they hold EVER, StEVERs, or LEVERs, even if these tokens are locked in the pools, it doesn't matter. We are ready to meet the large validators halfway, but after verifying with some tests their tokens do indeed exist. Yes, you can manage the network with a governance key, because you are in the network, you have tokens that were probably bought a long time ago and at a high price, thus you have a clear incentive to do something useful to correct this situation.
Next, regarding the commitment system. Let's say a kind person comes and says: I will make it so that Everscale appears in Trust Wallet, and it will be done in 6 months, and I want to receive 3 million EVER tokens for this. This is an example of a business commitment. However, as a network and as a governance, we are not insured against failure, even if it’s a very good person. He might simply not succeed, or he might never intend to do it in the first place. The number of times where Everscale or Broxus, or other companies have been subjected to scam is just off the charts. There is no time for scoring, because the Everscale network involves a huge number of decisions daily. Therefore, payments must be collateral-based.
This means that, if you commit to a task where the conditional prize or reward is 3 million EVER tokens, you put up collateral in advance. And if the proposal is not fulfilled, these collateral tokens are burned. Such a rigorous condition probably doesn't exist in any other blockchain. This will ensure full accountability for actions, meaning there will be no empty promises because they are backed by collateral. If not fulfilled, it leads to economic loss for the agent who made the promise. Given that there have been quite a few experiments in Everscale, the new governance, as it can work, seems at least not worse than the current situation we are in.
We have Ever DAO, which works as a decent, legitimate, and tested mechanism. Its legitimacy has been recognized by crypto exchanges and government bodies in South Korea. Thus, Ever DAO is a fully functioning system, and it will oversee governance. It won't be that the control of governance actions and business commitments are managed only by actors who have tokens and are involved in this network. Ever DAO will also provide oversight over this mechanism at the budget allocation level and everything else.
I already mentioned vesting. What this system will lead to is expressed in this cool meme:
When we started doing all this in Free TON, we tried to build various KPI systems for governance to ensure that tokens were not allocated without reason, but they were easy to manipulate. But now the situation will be simple. Responsibility comes immediately if you make a collateral-based commitment. Of course, commitments need to be verified, but they should be very clear. Like the example with Trust Wallet that I mentioned. This could be with exchanges, it could be with Venom Network, and so on. Since the people who are in governance have put their tokens on the line to have the right to manage the network and receive these various incentives, they are not interested in making bad decisions. Because if bad decisions are made, their stakes will all lose value. So, this new governance system seems quite economically balanced.
Thank you for your time, this is Governance 3.0, welcome to the Everscale Relaunch!
