Blockstack, one of the first blockchain startups to have raised funds as part of a Reg A + offer, hired GSR Markets to exchange its stacks token (STX).
According to a document filed October 24 with the US Securities and Exchange Commission (SEC), the start of the channel chain will pay GSR for the provision of liquidity in markets outside the United States.
Blockstack raised $ 23 million in its chips offering in September, including $ 7.6 million from investors in Asia.
For a one-time setup fee of $ 100,000 and a monthly payment of $ 20,000 for six months, GSR has agreed to "provide STX's liquidity-enhancing services," as well as Analyze the market conditions. Blockstack will also lend $ 1 billion of bitcoins and zero-rate Ether to finance the deal.
If the agreement were to be terminated at a later date, GSR will return the bitcoin and ether, with half being calculated using the value of the cryptocurrencies against the value of STX.
Under a separate agreement, GSR will exchange STX with the help of its proprietary trading robot, provide Blockstack with daily reports of STX's market activity, analyze market conditions and seek new trading. All these activities must take place outside the United States, reads the document.
Eric Wall, former head of the Cinnober trading chain, said Eric Wall. It is also common to use a professional market maker to provide liquidity.
"Market makers play a crucial role in the poorly traded markets and are prevalent wherever there are transactions, be it NASDAQ or Bittrex," Wall said, adding:
"They provide a liquidity base where there would not be otherwise. This is essential to give investors the opportunity to enter and exit an asset without depending too much on being paired with a seller or buyer at the same time. "
Without such market participants, the volatility of cryptographic tokens can skyrocket when there are too few real orders. This can prevent people from trading a token and "creating bad publicity for the issuer," Wall explained.
Blockstack listed STX on Binance and HashKey Pro exchanges last week. Blockstack paid 833,334 STX, or about $ 250,000, for the Binance list, according to a previous filing.
The company's CEO, Muneeb Ali, told The Block that it was a "long-term payment" to incite Binance to keep the STX list "for many years".
The token is currently trading at $ 0.20 per chip on Binance, 30% lower than its original price of $ 0.30.
Muneeb Ali (right) image of Brady Dale for CoinDesk