WHILE still in the thick of building its blockchain solution and business model, startup Band Protocol is now the first blockchain bet of venture firm Sequoia Capital India in Southeast Asia.
Singapore- and Thailand-based Band Protocol has secured US$3 million in seed funding led by Sequoia India, the startup announced on Monday. Other investors include early-stage venture firm SeaX and Dunamu and Partners, the investment arm of Korean fintech Dunamu, which operates crypto exchange Upbit.
Founded in mid-2017, Band Protocol is building a blockchain protocol that businesses can use to create a "token-curated community" - an online community where data providers are rewarded with tokens for providing "high-quality contributions".
Band Protocol will use the fresh funds to accelerate development of its mainnet, the main blockchain network on which transactions are carried out. The funds will also be deployed for its go-to-market strategy this year.
Token-curated communities encourage the spread of quality information online, Soravis Srinawakoon, co-founder and CEO of Band Protocol told The Business Times in a phone interview.
He cites a theoretical example: A Web portal aggregating restaurant listings could launch its own "community token" using the protocol and get restaurants to buy those tokens to list on the portal.
Designated "curators" holding tokens can then "upvote" or "downvote" each restaurant, giving curators and data providers a financial incentive to gather the "best set of data".
"If such a community gains a reputation and more users trust the data, then there will be more demand for the token as restaurants want to apply and get listed," Mr Soravis said. "Instead of the opaque 'Michelin-starred restaurant', you now have a transparent, community-driven consensus."
Thailand is currently Band Protocol's main target market. To demonstrate its product, Band Protocol is building CoinHatcher, a Web portal aggregating news on crypto and blockchain, where content can also be voted on using the tokens.
But how Band Protocol would actually earn revenue from its protocol itself is "a bit tricky" and still in the works, Mr Soravis said.
The community tokens' value would correlate to the value of underlying BAND tokens held by the startup. The value of the BAND token should appreciate when there is more demand for the community tokens, he said. The startup is working on how the tokens can be cashed out.
This model is currently the only way the protocol makes money because it is open-sourced, Mr Soravis said. The startup is still exploring other possible models.
When asked if the tokens' value will be volatile and speculative, Mr Soravis said: "We believe that in the next few years, when people understand this asset better, the volatility will come down, and it will be much easier for people to use and understand."
In future, Band Protocol may collaborate with Upbit. The latter recently faced scrutiny, after its office was raided by South Korean prosecutors last year.
When asked if he was worried about the raid, Mr Soravis said he thinks such raids are common among Korean crypto exchanges, and that Upbit is "okay" compared to "smaller, sketchy" exchanges. Dunamu could not be reached for comment.
SeaX founder Supachai Parchariyanon, who also runs corporate innovation accelerator RISE, told BT that trust is a key reason for his investment. He has worked closely with Band Protocol for over a year.
"We are also confident that we can help accelerate their growth exponentially," he said. Band Protocol is the first South-east Asian deal for SeaX, which launched in Q4 last year.
Pieter Kemps, principal at Sequoia India, said in a media statement that he is encouraged by the Band Protocol team's technical skills and strategic approach. "We have been very impressed with Band Protocol's experience in the blockchain space across several industry cycles," he said in the release.
Dunamu and Partners is a good fit as an investor because of its long-term view of the industry, said Mr Soravis. "A lot of crypto funds are reputable for being short-term investors… Dunamu and Partners takes a five to 10 year approach, and that's the time frame we are looking at."