Blockstack's A+ offering

This post was originally published on July 10, 2019, and sent to Messari Pro subscribers.

Earlier today news broke that Blockstack had received the green light from the SEC to conduct a $28 million token offering under Reg A+, a “mini IPO” that allows issuers to sell up to $50 million in securities to both accredited and non-accredited investors in the U.S. While traditionally reserved for equity issuances Blockstack is pioneering the use of Reg A+ to distribute tokens while complying with existing regulations. With the inclusion of non-accredited investors, Blockstack has reversed the trend of only accredited (i.e. wealthy) investors getting access to early deals and puts tokens in the hands of what will ideally be the platform's end users. For those that aren’t familiar, Blockstack is building a privacy-focused network and application ecosystem that allows users to control their data instead of storing it with app providers. The project started in 2014 as Onename, a decentralized user ID system, and has since expanded into a full network of over 120 apps. (for a deeper look at Blockstack ($STX) you can check out our profile).

Powering the network are Stacks, tokens that provide a similar functionality to ether on the Ethereum blockchain. While representatives at the SEC have stated that ether is not currently a security, it likely was at the time of issuance. Blockstack seems to be approaching things the same way by using the Howey Test and SEC framework to decide that Stacks are securities now…

... but have the potential to lose that designation if the network becomes sufficiently decentralized.

How sufficient decentralization is measured remains unclear, even from the SEC, and raising funds to pay in-house developers makes it hard to imagine when this would be achieved. The total offering size of the Reg A+ will be up to $40 million. In addition, Blockstack is running a Reg S for non-U.S. investors that could bring in another $10 million. Tokens will be priced at $0.12 for early supports who hold vouchers and $0.30 for the general public. Reg S participants are being offered tokens at a discounted price of $0.25 to compensate them for a regulatory-related one-year lockup that will be coded into the blockchain. Reg A+ investors will receive tokens over a 24 month period, again based on blockchain logic.