Syndicate vs. TokenTable: What kind of investment infrastructure does Web3 need after the collapse of Alameda?

Author: ChainCatcher

Due to the unique nature of on-chain transactions and the long-standing ambiguity of regulatory policies, it is difficult for crypto companies to find investment management tools or infrastructure that perfectly align with their business. Most crypto companies are still using the most traditional and inefficient Excel spreadsheets for manual data entry and reconciliation.

For example, for project teams, the record-keeping and management of Token ownership can consume a lot of unnecessary effort, while at the same time, this can easily lead to excessive freedom for project teams. In light of the frequent Rug events this year, along with the collapse of FTX and Alameda, the industry is gradually reaching a consensus on establishing financial norms and investment regulations.

On the other hand, the continuous expansion of the capital market based on Tokens is also increasing the demand for Web3 investment infrastructure. As certificates of asset ownership, Tokens will gain more use cases in the future, with Web3 companies' "stocks" and physical assets increasingly likely to enter the capital market in the form of Tokens. Currently, the total market capitalization of the crypto market based on various Tokens has exceeded one trillion dollars, a figure that once surpassed three trillion dollars in November 2021. An increasing number of institutional investors and angel investors also need tools for investment and account management.

Given these premises, what will the future investment and financing market look like? What tools and frameworks will be needed?

We can roughly imagine the following use case:

As an investor, you can discover quality projects through a decentralized on-chain platform, and you can view the project's Token financing history and progress, as well as allocation, unlocking, and other information through its public dashboard. After determining your investment intention and signing an agreement, you can directly transfer funds to the project team using your ENS address while receiving the corresponding asset proof, and manage your unlocked assets in your investment portfolio dashboard. As a Token holder and investor, you can track project dynamics in real-time and clearly, receiving notifications for unlocked Tokens as soon as they occur. Additionally, you can manage and analyze multiple investments simultaneously through a management panel, which can include both off-chain asset mirrors and on-chain assets like NFTs and Tokens.

As a project founder (financer), you can complete one-click Token minting through a Token management platform, quickly publish financing information, and batch send agreements and transfer documents to investors, which not only saves the hassle of operating across multiple platforms but also avoids low-level errors such as incorrect addresses that may arise during manual operations. After financing is completed, you can also manage the financing progress in real-time on the page. Furthermore, you can choose to publicly disclose investment and financing data, Token unlocking data, etc., to maintain good transparency.

Due to the immutability of on-chain data, the authenticity of data such as Tokens is guaranteed, which serves as a limited constraint for project teams. Ideally, on-chain investment tools can establish a completely trustless investment environment, allowing investors to save time and money on due diligence by inviting third-party institutions like Deloitte.

Balaji Srinivasan discussed the possibility of using on-chain ledgers to manage the Cap Table (equity structure table) of real companies in his article Mirrortable. In the coming years, investments will be decentralized, democratized, and community (DAO) driven. On-chain ledger management provides 24/7 uptime, international wallet support, and integration with smart contracts, significantly improving investment efficiency. The decentralization of wealth fundamentally introduces a more open, free, and fair new model of investment to society.

Balaji also mentioned that several startups and Web3 projects are already realizing this vision, such as EthSign and Syndicate Protocol. In this article, we will explore the development and future trends of Web3 investment infrastructure through the two projects, EthSign and Syndicate Protocol.

1. Syndicate: A Community-Centric Web3 Investment Club

Founded in 2020, Syndicate is a decentralized DAO investment solution and social network that allows communities to raise, coordinate, and invest. It aims to provide a fair competitive environment for builders, creators, influencers, and friends' communities to invest in new ideas and world-changing technologies, introducing a new investment model to society.

According to data from RootData, Syndicate has raised $27.8 million from several venture capital firms, including a16z, Circle Ventures, OpenSea, Uniswap, and Coinbase since its inception.

At the beginning of 2022, Syndicate launched the first crypto-native social investment tool, Web3 Investment Clubs, which is also its first investment product. Web3 Investment Clubs provide users with a tool to quickly create DAOs, helping them initiate and operate investment communities in DAO form.

Syndicate investment clubs support investments in Tokens, NFTs, startups outside the blockchain field, and various assets. Moreover, they can obtain legal resources, open bank accounts, and can be integrated with any DAO and Web3 tools. Syndicate is currently deployed on the Ethereum and Polygon networks, supporting MetaMask, Gnosis Safe, and Coinbase Wallet.

Specifically, investment clubs have the following features:

• User-friendly, one-click DAO creation: Traditional investment processes are very cumbersome, with different stages of investment spread across various applications, requiring payment for various services. However, Syndicate allows users to transform any wallet (MetaMask, Ledger, Gnosis) into an investment DAO in seconds, incurring only gas costs. Simple configurations provide on-chain deposit management, cap tables, governance tokens, investment portfolio dashboards, and more.

Asset management interface of Web3 investment clubs on Syndicate

• Automated management: Syndicate automatically generates a deposit link to send to members. When members contribute funds, the investment club automatically updates its on-chain cap table and allocates a certain number of ERC-20 shares to each member. Each dashboard of the investment club is supported by ERC-20 infrastructure, allowing it to fully integrate with any DAO or Web3 tools (such as Snapshot, Gnosis, Coordinape, and Guild) for on-chain governance, automated distribution, airdrops, and contributor recognition.
• Legal services and infrastructure: Syndicate collaborates with business formation service provider doola to obtain DAO legal entities, DAO legal documents, EINs, bank accounts, K-1 tax filings, and more. Additionally, Syndicate allows users to generate, send, and collect signed copies through the application, providing maximum privacy, security, and control since they are not stored on centralized servers.
• Composable and interoperable: Can be integrated with other DAO organizations, Syndicate products and tools, and the broader Web3 ecosystem.

Related reading: “Understanding DAO Investment Tools: Web3 Investment Clubs on Syndicate Protocol”

2. EthSign TokenTable: A Token Ownership Registration and Distribution Platform for Web3 Startups

TokenTable, created by the electronic agreement signing platform EthSign, is a Token ownership registration and distribution platform aimed at Web3 startups and DAOs. It provides token holders, including founders, investors, advisors, and community contributors, with tools for token supply allocation, allowing users to issue, sign, and execute various token investment contracts and team token grants. In November last year, TokenTable launched its Closed Alpha version, with a public beta expected to go live in the first quarter of this year.

EthSign investors, data source: RootData

The features available for founders using TokenTable include:

• Ownership registration and management: TokenTable provides founders with a panel to manage Token allocation and a complete list of stakeholders; all stakeholders can clearly understand and manage their unlocked assets in various projects. Additionally, founders can easily add previous financing rounds on the management page, allowing users to monitor round details and plan token allocations through interactive charts.

• Publishing financing: Compared to the inefficient collaboration methods of communicating payments through traditional Telegram and Email, and then using off-chain tools like Docusign for online signing of agreements, founders can create financing on TokenTable and directly manage financing progress, batch sending agreements and transfer documents. Once investors sign agreements (supported by EthSign Signatures) and successfully transfer funds, they will automatically appear on TokenTable.

• Contract settlement: Settle contracts through the platform, including signing SAFE, SAFT, warrants, side letters, and team token grants, thereby simplifying the financing process and automatically executing fund transfer contracts.
• Stakeholder collaboration: In the future, TokenTable can help founders solicit and record stakeholder consent for new plans. For example, if a project currently has the founding team owning 15%, investors owning 15%, and the remaining 70% reserved, if the founder plans to allocate 15% from the reserved 70% for the next round of financing, TokenTable can quickly send this amendment draft to all investors to solicit and record their consent. If not approved, the founder will have to revise the draft again.

Investors can view the project team's Token holdings and signed documents

Related reading: “EthSign Officially Launches New Product TokenTable”

3. Comparison of the Two

TokenTable and Syndicate are similar in overall functionality, serving as investment management tools for both investors and Token issuers (financers). They both have basic functions such as publishing Tokens and financing, managing on-chain assets, and team collaboration. However, while Syndicate focuses more on community and investor-centric Web3 investment clubs, TokenTable, although it can also serve investors, leans more towards the needs of founders of startups and project teams.

Syndicate investment clubs are more suitable for secondary market investments, while TokenTable is more suitable for primary market investments. Therefore, whether in UI interaction, smart contract design, or the supporting services provided, TokenTable will place greater emphasis on the management of project Tokens.

In the pre-launch phase of a project, TokenTable provides founders with a panel to manage Token allocation and a complete list of stakeholders; all stakeholders can clearly understand and manage their unlocked assets in various projects. After the project issues Tokens, TokenTable provides a complete smart contract Token unlocking solution, and stakeholders will receive email notifications once Tokens are unlocked, allowing them to easily claim Tokens on the platform.

In terms of compliance, TokenTable supports various contract types, including SAFE+Warrant, SAFE+Side Letter, and SAFT. TokenTable is collaborating with top law firms in the U.S., Singapore, and Hong Kong to provide founders with financing agreement templates and entity establishment advice, reducing their concerns about compliance in the early stages of the project. On the product side, TokenTable generates tax forms for community contributors and employees, facilitating their reporting of Token-related taxes.

In contrast, Syndicate has not yet established a bridge between Web2 and Web3 for institutions and angel investors in compliance as TokenTable has, relying more on off-chain third parties to provide compliance services. Specifically, Syndicate collaborates with doola to create DAO legal entities, DAO legal documents, K-1 tax filings, etc., but the platform does not provide services like generating tax reports. Syndicate emphasizes being an infrastructure provider, not offering legal, investment, or tax advice, and encourages users to consult their legal and tax advisors.

Additionally, if Syndicate's investment clubs reflect DAO and flattened investment relationships, then TokenTable's product design is more aligned with the actual needs of institutions, adapting better to the vertical structural relationships of institutional organizations. For example, TokenTable is preparing to establish a subdomain system based on ENS NAME Wrapper to facilitate better permission allocation and control according to the organizational structure of founding teams and investor teams. Besides the ENS subdomain system, TokenTable can also develop more features like Token payroll management to serve institutions.

From the perspective of ecosystem effects, TokenTable, as a project within the EthSign ecosystem, has interoperability with products like EthSign Signatures. EthSign Signatures is the first product of EthSign, providing electronic signature services for agreements. Currently, EthSign Signatures complies with the digital signature laws of mainstream countries, giving it a strong advantage in legal compliance.

Conclusion

Investment is a complex system; it is both a financial network and a social network. With the development of Web3 and decentralization, the way capital is allocated will be restructured, and the future investment methods in the primary market will lean more towards atomization and democratization. Under this premise, on-chain investment tools will undoubtedly establish a trustless and transparent investment environment.

Tools like Syndicate and TokenTable can provide investors with a more intuitive and clear understanding of a Token's allocation and unlocking status. Rather than the current situation where investors have to bear certain risks due to the inability to verify the authenticity of the data provided by the founding team. At the same time, the high efficiency of on-chain smart contracts will greatly enhance the increasingly complex and fragmented investment scenarios. Therefore, on-chain investment tools represented by TokenTable and Syndicate will undoubtedly become the main trend in the future investment market.