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It is not uncommon for early-stage companies to go through recapitalization events when faced with turbulent market conditions. Funders might inject mission critical capital for a significant stake in a company to keep the lights on. In some instances, early backers face heavy dilution, but it is better than the company going under. We borrowed this line of thinking related to our token model, and evaluated if it was possible to "recapitalize" the project by "relaunching" under a new token model whereby a percent of the new supply would be owned by the provider of fresh capital. Unfortunately, we were unable to find precedent for this for a venture-backed project. This is likely due to the lack of feasibility or certainty of the feasibility under most projects' governance models. In the latter case, this opens the backer and project up to unknown liability. As a result, we determined scenario iii, also, was not viable. Building out a Portion of the Ecosystem To assess our ability to secure funding for the buildout of a portion of the project ecosystem, we reviewed a variety of tokenization models for IoT Dapps. In addition to evaluating our previous proof of concept work, we explored new product ideas, ranging from wearable gadgets aimed at enhancing human performance to industrial IoT sensors that serve as secure data brokers, providing information for AI modeling and analysis. In each case, we came across the same stumbling block: building on the app layer for IoT is not conducive to tokenization which accrues in value. In other words, we could create a Dapp with a native token, but for each use case we looked at, there is no rationale for the token price to appreciate -- and without an appreciating token economy, there is no rationale for funders to back a project. As an example, take a basic Dapp which allows you to open your garage door using a remote secured by Beyond Protocol. (mattb7 had built prototype of this on our testnet. The benefit of the Dapp is that it would be impossible for someone to spoof your remote and open your garage). Users might transact a certain amount of the Dapp's native token per use or pay a monthly subscription fee in the Dapp's native token. With a fixed supply of tokens, the more users there are, the more the token would go up in price, but after a while the price becomes prohibitively high, hits a ceiling, and the Dapp can no longer grow. Conversely, by fixing the price and allowing a dynamic number of tokens to be minted, the value of the initial token allocation doesn't appreciate. One potential solution is the payment of "dividends" or "royalties" in the form of newly minted tokens or existing tokens which have transacted, but the returns and time horizons of such a model are not aligned with those of web3 funds or most retail backers. Unlike layer 1, where different architectural and economic strategies can be adopted to permit an appreciating token economic model without making gas fees prohibitively expensive (allowing for a dynamic number of validators with no upper bound, for example), this does not appear to be viable at the moment for IoT Dapps. Our Big Lesson: Do Not Have TGE Until Product Launch (Mainnet for L1s) When we raised capital in 2021, we roadmapped a token generation event in Q3 and a token swap at mainnet which would be released sometime thereafter. We believed releasing tokens before mainnet provided three primary benefits: i. it enhanced the attractiveness of our offering by providing a definitive liquidity target in the near term ii. it enabled the development team to focus on PoC work on the testnet vs. rushing to mainnet allowing us to evangelize the project's vision through use case demonstrations with strategic partners iii. it provided long-awaited liquidity to our earliest community members and supporters, who had made contributions in 2018, three years prior.

Hi everyone, In our last project update in June 2023, we detailed how the GEM token facility continued to be unviable given market conditions, and as a consequence, we were unable to resume mainnet development and instead were left with the option of "battening down the hatches" and remaining "default alive" for period of 12-24 months while we evaluated what might be possible moving forward. We discussed how there seemed to be two potential paths: i. resuming mainnet development or ii. launching another part of the ecosystem which leveraged our assets (such as a Dapp). Should we be able to pursue the latter, we highlighted our commitment to determining a way to bring the community along (through a token swap, grant, or something similar). Today, it is with a heavy heart that I write to let you know that after careful consideration, we were unable to identify a path forward under either scenario. In this update, I will discuss what went into our evaluation and offer insight into what seemed to be the single greatest factor contributing to our inability to push ahead; a pitfall we hope projects might consider and avoid in the future. It is my hope that our journey and resources we were able to provide along the way might be useful to the ecosystem. Evaluating the Viability of Moving Forward with Mainnet or Building out a Portion of the Beyond Protocol Ecosystem As recounted in our last updates, in 2018, the project raised a modest amount of capital just prior to the onset of the 2018-2020 "crypto winter." With the proceeds, we were able to develop a testnet which leveraged PUF technology and utilized the Ignite/Tendermint consensus architecture. While many projects opted to shut down as markets contracted and funding dried up, we chose, first the first time, to "batten down the hatches" and remain "default alive" to assess what might be possible in the future. Our decision paid off. When funding for blockchain projects resurged, we secured capital to build out proof of concepts with real world applications on the testnet, develop the ecosystem, and grow the community. By achieving meaningful milestones within each of these areas, we planned to raise a growth round of funding ahead of mainnet launch. Despite meeting or exceeding project objectives, unfortunately, like in 2018, the markets started to contract and a new winter set in. In the midst of this, we were able to secure a funding commitment via a token facility from GEM Digital to pursue a leaner operating plan for the launch of mainnet. After initial progress, funding under this arrangement became inaccessible due to market conditions following the FTX collapse. This led us to decide to "batten down the hatches" and remain "default alive" for a second time, allowing us to evaluate what might be possible in the future. Mainnet In assessing the viability of continuing to execute a bare bones mainnet plan, we reviewed three scenarios to secure funding: i. utilization of the GEM facility ii. partnering with backers under the existing tokenization model and iii. partnering with backers under a "relaunch" (a recapitalization of the project). Since our previous announcement, market conditions significantly improved for late-stage projects. Unfortunately, however, this did not occur for early-stage projects which were bridging, like ours. If these projects had not already been "washed out" in the downturn, they were subject to a vicious cycle: unable to make meaningful progress as market conditions improved due to lack of access to capital, asset prices remained depressed; and because asset prices remained depressed, the projects were unable to access additional funding. Eventually, the cycle would prove existential. (For what it is worth, we were probably already "washed out" before conditions began to improve). Due to this, scenarios i. and ii. were not viable.