BitTorrent - FalconX Brokerage Research

• Every week, FalconX shares market insights with our institutional digital asset brokerage clients.
• Later on, we share snippets of these with the public.
• Here are some of our thoughts on BitTorrent ($BTT), shared with clients on February 21st 2019. If you'd like to learn more about FalconX, request access here.

Authors: Anish Parvateneni and Robin Lobo.

I. History and Background

Tron made headlines in June 2018 when it announced that it was acquiring BitTorrent, the company responsible for the highly popular file-sharing protocol, for $140 million. BitTorrent is a pioneer in decentralized networks and allows users to download and upload files from/to various hosts instead of a single server. The protocol is used by more than 170 million people each month and is responsible for ~40% of the world’s daily Internet traffic. Post acquisition, BitTorrent launched the BTT token in Jan 2019 to tokenize what is perhaps the digital world’s biggest decentralized file sharing network.

II. What is BTT?

As per the whitepaper, BTT will incentivize network users to render infrastructure services, such as hosting files, in return for the token.

To test this proposed use case, BitTorrent is launching BitTorrent Speed that will offer faster download speeds for users who pay hosters in BTT. Therefore, users are incentivized to seed their files for longer periods of time and users downloading content benefit from faster speeds.

It is hoped that this will incentivize users (who become seeders post downloading a file) to keep seeding, even after their download is completed - a problem that has been present since the start of BitTorrent. While BitTorrent Speed is the first experiment, the team envisions more applications of this tokenization model - decentralized storage services, decentralized proxying services, etc.

Positives -

1. BitTorrent is a proven example of a successful decentralized network
2. Barriers to BTT adoption will be reduced due to existing network effects of BitTorrent
3. The sale took place on Binance’s Launchpad platform which provides BTT with a ready base of potential investors
4. The team has a great track record in building decentralized networks
5. There is massive hype surrounding BTT today

Criticisms -

1. Very high inflationary pressure in first few years as initial circulating supply rises from only 9% to 80% within 3.5 years
2. Torrents are known for free downloading of content. If participants were open to paying for torrents, they could have already migrated to paid services like Netflix and Spotify
3. Legal controversy surrounding the use of BitTorrent such as the sharing of copyrighted content
4. It will be difficult to build a blockchain that can handle the massive throughput of the BitTorrent network
5. No details on lockups and/or vesting for team tokens
6. Early investors got BTT at a ~68% bonus (compared with public sale price) and don’t have a lockup

III. ICO

The BTT ICO on Jan 28th 2019 sold out in just 15 minutes raising $7.2 million in funds despite the fact that some technical difficulties took place. Demand for BTT was so high that technical issues on the site prevented some investors from accessing the sale, and a separate airdrop was arranged to make up for them being shut out. The price per BTT was set at $0.00012. Since listing, BTT has secured a place in many major exchanges, such as UpBit and Binance, that account for over 90% of the last 24 hours of trading volume, amounting to $160 million. At the time of writing, the price of the BTT token has witnessed a 8 fold increase since its ICO price (34% below its all time high).

IV. Investment Potential

In our opinion, the sheer potential of leveraging BitTorrent’s network in a cryptocurrency project as well as the team’s experience in building decentralized networks make BTT a token to keep an eye on. However, in terms of investing in BTT, there continues to prevail uncertainty surrounding inflationary pressure, more favorable terms for early investors, opacity regarding team tokens and current technology limitations. There is limited reason for users to go fiat to BTC or ETH (fee) to BTT and then off exchange (fee) to pay for faster speeds for downloading torrents.

While it is possible that Tron protocol could improve the BitTorrent network in a new way, the market for BTT in its current state is still largely speculative. A more definite value may be assessed in the medium term when BTT tokens actually become used within the BitTorrent economy and their utility can be judged more objectively.
__________________________________________________________

The information provided in FalconX documents and accompanying material is for informational purposes only.  It should not be considered legal or financial advice.  You should consult with an attorney or other professional to determine what may be best for your individual needs. FalconX does not make any guarantee or other promise as to any results that may be obtained from using our content. No one should make any investment decision without first consulting his or her own financial advisor and conducting his or her own research and due diligence. To the maximum extent permitted by law, FalconX disclaims any and all liability in the event any information, commentary, analysis, opinions, advice and/or recommendations prove to be inaccurate, incomplete or unreliable, or result in any investment or other losses. Content contained on or made available through this material is not intended to and does not constitute legal advice or investment advice and no attorney-client relationship is formed. Your use of this information is at your own risk.

‍