Truebit Launch — A Tale of Mania and Despair

The last week has been quite hectic for Truebit ($TRU): from Vitalik Buterin enthusiastically posting about it, to accusations of being a rugpull. The goal of the following article is to take a closer look at the claims around the project and clearing some confusion on what happened. I am apologizing in advance if you expected to read an article discussing Truebit technical fundamentals because it won’t. In the meantime I can only invite you to explore the official website and the multiple interventions by Jason Teutsch on Youtube.

What is Truebit anyway?

Truebit ($TRU) is in nature a novel Layer 2 solution. While current solutions like sidechains or rollups are enough to scale small dApps this is nowhere near enough to empower bigger scale projects like, let’s say, a truly decentralized video streaming platform or any kind of resource heavy application required to transition to a true Web 3.0. Truebit is able to fill gap this by leveraging off-chain computations.

Now let’s move on to focus on the claims that popped over the last few days.

“Vitalik co-authored Truebit”

Truebit whitepaper, published in 2017, was co-authored by Jason Teutsch and Christian Reitwießner.

Teutsch, the founder of Truebit, is a researcher and mathematician. Reitwießner holds a PhD in Computer Science and is credited to be one of the fathers of Solidity (Ethereum smart-contract language), he is currently working as an independent researcher for Truebit.

So as you can see: no Vitalik here (outside of an acknowledgment in the whitepaper).

But Jason Teutsch published another paper with Buterin the following month on Interactive Coin Offerings, however it is not directly related to Truebit.

So ultimately Vitalik Buterin did not co-author Truebit whitepaper but he certainly helped in its conception. It is good to point that the project is still on his radar as he recently (few days ago) discussed an Optimistic Rollup implementation relying on Truebit;

“Truebit is backed by Coinbase”

The first thing to point is that there is no record or mention of direct funding by Coinbase Ventures. The rumor seems to originate from this tweet by Fred Ehrsam (Coinbase co-founder) back in 2017:

Also another medium article by him in 2017 mentioned Truebit among other L2 solutions:

Finally Fred Ehrsam also appeared in the video presenting the Dogethereum software demo back in 2018 with the Truebit team (you can briefly see him at 00:13).

It is not possible to say if Fred Ehrsam is invested in TRU (yet), what we can say at least is that it is not listed on Paradigm portfolio (his VC company). However one thing to keep in mind at this moment is that TRU has been stealth/fair launched, which means there were no pre-sales of any kind and all the tokens have been minted directly from the TrueOS contract.

But there is a third lead with Polychain Capital, another crypto-fund created by Olaf Carlson-Wee, the “first Coinbase employee” back in 2013.

An article on Smith and Crown suggests that Truebit is financially backed by Polychain capital.

A subsequent blog post also explains the genesis of the Truebit protocol and the various people involved in its creation.

So is Truebit “backed by Coinbase”? It is not, however it is clearly on the radar of many high profiles figures connected to the company.

“The project is dead, the last update on Github was two years ago”

The repositories are currently private and on invitation only as Truebit is in “early access”. To get an access you have to reach out to @teutsch on Gitter and briefly explain your intended usecase.

In an era where “copy paste and rug” happen everyday it is understandable developers tried to avoid such thing happening to the project they worked on for the last five years. Hopefully now Truebit is “out there” the code and documentation will soon be accessible to everyone.

“The TRU token on Uniswap is a scam”

The Q&A on truebit.io lists the address contract as 0xf65B5C5104c4faFD4b709d9D60a185eAE063276c.

This matches the token used in the Uniswap pool. Finally the contract address was confirmed again on the official Gitter:

“A third-party created the Uniswap pool”

This one appears to be true as no official Truebit channels have claimed to do so. The TRU contract token was deployed on April 11th according to Etherscan.

In the meantime the Uniswap pool was launched a week later on April 18th by a different address:

Liquidities arrived few days before the mainnet was announced on social media.

An early-access email was sent to people subscribed to the newsletter linking to an announcement on Truebit Substack April 21th (thanks to Carsten Munk for the information).

Finally, April 26th Truebit was officially announced on Twitter.

So what likely happened? Someone got access to the documentation on the private repositories and decided to use a consequent amount of funds in order to mint millions of TRU with the TrueOS contract and subsequently promote the token on social media. After that the hype caught up and the mania began.

There is absolutely no reason to believe the team is involved in any of these events. Jason Teutsch has been vocal in multiple talks recorded that they always intended to do a fair launch and that the project was more interested in onboarding developers in the ecosystem early on than generating speculation (even if ironically Truebit just had one of the noisiest launches this year).

“The bonding curve failed to keep the price up!”

The first thing to point is that there is no mention of a bonding curve anywhere on Truebit website, this is simply an interpretation of how the minting/burning with TrueOS works.

The way it works is that you can, at any time, interact with TrueOS smart-contract to mint new TRU tokens against ETH and expand the supply. However the more tokens there are in circulation the more expensive is the minting.

On the other side it is possible to sell TRU tokens to TrueOS who are then burnt. The rate at which the TrueOS smart-contract buys back tokens is at 12.5% of the highest minting price:

In effect this creates a channel in-between these two rates in which the token price is freely valued by the market but outside of which the volatility is dampened.

Now if you‘ve been around crypto or any financial market for some time and see such a diagram, the first thing you will probably think about is “arbitrage”. Why? Because as the market price approaches one of the two colored zones (for example during price discovery when you constantly reach new ATH) then there is a huge opportunity to mint new tokens on TrueOS to sell them at a higher price on Uniswap (or any other exchange).

Of course in such a scenario it is highly profitable to keep the FOMO going on by then creating a floor encouraging actors to keep “buying green”. Especially if you are a liquidity provider on the pool and the volume reaches hundreds of millions in a few days. Mixed with the “bonding curve” narrative this led many people to misinterpret the chart as if price discovery was supported by the tokenomics.

So in effect the “bonding curve” or whatever you want to call the tokenomics and supply behind Truebit did not “fail”, in fact it worked just as intended as “late buyers” could obtain the token at fraction of marketcap appreciation which is the intended goal behind TrueOS minting mechanism.

So why did it look like a rug?

In short? because of this guy:

To summarize it quickly, May 2th at 10 pm UTC one whale decided to remove his tokens from the liquidity pool and at the same time marketsell his TRU.

The arbitrage bot maintaining the price floor was either turned off or unable to sustain the sell. This generated a cascading reaction where suddenly not only the market could not handle the sell volume but in bonus generated a panic among uninformed holders who believed they were rugged. This compounded the crash to such an extent that the price went from $1.40 to $0.20 in the span of 2 hours.

Oh and by the way, this guy bought back the dip and now owns 1000 000 TRU:

Conclusion

Many accusations have been thrown around over the last few days based mostly on misunderstandings and likely few very sharp whales able to take advantage of the situation. The team has announced that they will soon publish a Q&A to centralize all interrogations related to Truebit which hopefully should dispel the last supicions around a fantastic project.

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