This Week on Republic #4: The Gari Token Launch

This week Republic launched the first public offering of the Gari token, the first DAO asset offering on the platform. This offering demonstrates Republic's commitment to web 3.0 and vision for the future.

This Week on Republic #4: The Gari Token Launch

Chingari, the most prominent short video platform in India, has accumulated over 33 million users due to a federal Tiktok ban. It may become a massive player in the media space. Instead of going the route of Tiktok or Instagram, Chingari went the way of the distributed autonomous organization (DAO), a web 3.0 strategy.

So, what is a DAO?

The structure and purpose of DAOs are diverse, and they continue to develop as crypto and web 3.0 technologies mature. Somewhere between a social network and a company, DAOs employ distributed humans through a blockchain to achieve specific goals. In Chingari's case, they seek to provide authentic and transparent service to their content creators. Without content creators, a platform like Chingari fails. Chingari must appeal to creators and service their needs to prevent them from flocking to the next new platform. As our readers know, we are big fans of the creator economy. We believe the companies or organizations that focus on their creators will win in the long term.

How is Chingari Structured?

According to the Gari Token white paper, creators will control the platform's future through DAO governance. In general, this means that members of the DAO can vote on different platform upgrades, compensation policies, and more using social tokens. Looking at the business model described in the white paper, the DAO divides itself between centralized and decentralized components, both on and off the blockchain.

Source: Gari White Paper

To us, this flexible model demonstrates evolved thinking. Putting the app's videos on chain would require massive amounts of expensive and unnecessary storage. Additionally, keeping messaging private and off-chain makes sense. Conversely, governance through voting or any other activities with tokens will be on-chain. This means that the public may audit these transactions. These properties make it more challenging to manipulate the network. They make the business transparent to the people who should benefit the most, the creators. The chain also protects content consumers. Trading goods and services will create a record on the blockchain that consumers can use as proof of purchase.

How does Chingari make money?

The Gari token is built on the Solana blockchain and has a total of 1 billion tokens. Using the network on Chingari requires the social token. Think of it as the "gas" of the network. The token unlocks certain perks and benefits, and it pays for improvements to the system. As the DAO creates more value, the value of the token grows. Early adopters will receive large rewards.

Source: Gari White Paper

According to the white paper, the founding team will hold 15% of all tokens and receive additional tokens for upgrading the DAO. Like a large tech company would compensate employees with stock, Chingari compensates developers with tokens on the network. If the DAO can build a positive feedback loop of value creation between content creators and platform developers, then the DAO will prosper. Initially, we expect a more centralized platform development. However, over time we envision decentralization as the community assumes governance functions.

Is this a good investment?

We are not certified financial advisors and only provide this content for educational purposes. Our research shows that some big names in venture capital are investing in Chingari and the Gari token.

Source: Gari White Paper

Angel List, Kraken, Alameda Research, and others are big investors. If they see value in this DAO, that is a bullish signal. Naval Ravikant is a big player in Angel List and Republic. He also addresses DAOs extensively in the content he puts out. You can listen to a recent offering from Tim Ferris conversing with Naval and Chris Dixon here. We would be surprised if he was not involved in this project.

The enormous total addressable market in India continues to multiply year on year. We see a future where millions of creators thrive there in a web 3.0 ecosystem.

We think that the number of DAOs and social tokens will increase over the next 10-15 years as new business and governmental structures are tested and take shape. Innovative, tokenized incentive systems are a great way to amass market share. DAOs could outcompete legacy institutions by creating user buy-in and morphing content creators into partial owners.

The Bad News

One point of concern is the number of tokens being sold vs. the fundraising cap. Chingari's offering is 200,000,000 tokens or 20% of the total 1 billion token supply. The fundraising cap for the offering is $70 million. Each offered token is therefore worth $0.35 if the cap is reached. The Reg D price per token is listed at between $0.254 and $0.36.  You can read the Republic Reg D FAQ here. You will notice that there is a potential error under "How many GARI tokens will be issued at launch?" The FAQ lists 20 million not 200 million. We think that Republic needs to clarify this.

The Gari token offering sold out in 24 hours and is now closed. According to Republic, the company raised almost $20 million. Based upon funds raised and assuming 200 million tokens offered, each token is worth ~$0.10. We find this confusing because the fundraising cap is $70 million. If Chingari decided to stop the raise at $20 million, then the company left $50 million on the table. Even more confusing, the Indian Economic Times announced that the token offering raised almost $40 million. While watching the raise on Republic, we also saw $40 million as the quoted value of the raise. Now Republic shows $20 million. Uncertain what happened here. We intend to keep a close eye on the list price of Gari when it hits crypto exchanges.

Source: Republic.co

Additionally, in the U.S., only accredited investors could take part in the token offering. We think that this is unfortunate and illustrates the inequities of the U.S. accredited investor system. We believe that this DAO will be highly successful over the next 10 years. By locking out non-accredited U.S. investors, U.S. regulators place their citizens at a significant disadvantage in capital markets. Once this coin is available on exchanges, we intend to open a position if the price is right.

If you are not in the U.S., then congratulations, you could probably have taken part in it. Check your local laws and regulations before investing.

Conclusion:

We will be keeping a close watch on future Republic token offerings. We hope that non-accredited investors can take part in the next opportunity. This offering is only the beginning.

If you found this article helpful, consider tossing a coin to your analyst.

If not, tell us what we can do better at feedback@polybiussquare.com

I am not a financial advisor. This article is for educational purposes only. You should do your own independent research before making any investment decisions.

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