- Ethereum fund mimicking MicroStrategy folds after weak demand, security concerns.
- Depositors to be refunded after launch issues, including a misdirected funds bug.
- Co-founders cite lack of interest despite initial pledges of 40,000 ETH.
MicroStrategy has made a killing selling shares and issuing debt to buy Bitcoin.
An Ethereum-based version hasn’t done as well.
EtherStrategy, a project by a pair of veteran Ethereum developers, will refund depositors after a lackluster launch.
Marketed as MicroStrategy’s blockchain-based, Ether-focused alternative, EtherStrategy had attracted just 270 Ether as of Friday afternoon in New York, despite a 10,000 Ether cap.
“There was not enough interest or demand to justify launching the DAO in the current state,” EtherStrategy’s co-founders said in a post on X.
The project appeared to attract significant interest before launch, with some 5,000 people pledging to deposit about 40,000 Ether, according to co-founder Justin Bram.
But EtherStrategy launched on Thursday without having undergone a third-party audit, which may have deterred investors given crypto’s history of exploits. Moreover, a website bug caused deposits to go initially went to the wrong crypto address.
Blockchain-based transactions are irreversible, and sending crypto to the wrong wallet sometimes means that crypto is permanently lost. Co-founder Joseph Delong, the former chief technology officer at SushiSwap, has vowed to make those depositors whole.
MicroStrategy has been one of the world’s hottest stocks since Donald Trump’s US election win in November. Founder Michael Saylor is a Bitcoin evangelist, and his company has repeatedly issued new stock and taken on new debt to fund the purchase of more Bitcoin.
With Bitcoin’s meteoric rise, the strategy has worked: MicroStrategy’s shares have soared over the past year.
It’s done so well, in fact, that MicroStrategy is worth far more than the Bitcoin it owns, leading some critics to argue that it is wildly overvalued.
“We’ve been building for years, and this idea just sort of popped into our head after seeing MicroStrategy’s success,” Bram said.
EtherStrategy does something similar, issuing a token, ETHSR, that represents shares in a collectively owned pool of Ether. EtherStrategy would have sold new tokens or convertible bonds in order to finance the purchase of new Ether and grow the pool.
Bram didn’t expect EtherStrategy’s tokens to perform as well as MicroStrategy stock. But he still expected it to trade above the value of the underlying Ether, citing Ether’s staking yield, a feature absent in Bitcoin.
“ETHSR, it’s reasonable it would trade at a 1% premium or 2% premium,” he told DL News. “At a bare minimum, you’re just getting a liquid staking token like Lido’s stETH.”
But, he added, “Crypto is risky. Anything can and will happen.”
Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can contact him at aleks@dlnews.com.
