Overview
Basis was an unlaunched cryptocurrency project that sought to keep a token's price stable without backing each token with dollars. Its proposed system would expand and contract supply using two additional tokens. Intangible Labs, the company behind the project, raised $133 million in a 2018 private placement.[1] [2]
The team shut the project down later that year. Founder Nader Al-Naji said its lawyers concluded that the bond and share tokens would be treated as securities. The resulting transfer restrictions would undermine the open trading the design relied on.[3]
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Founding Story
Al-Naji developed the idea in 2017 and founded Intangible Labs with fellow Princeton graduates Josh Chen and Lawrence Diao. Reuters reported that the idea grew from an essay about changing a cryptocurrency's supply to stabilize its price. Their project was originally called Basecoin and later became Basis.[1] [2]
The team wanted digital money that could be used for payments without the large price swings common in cryptocurrencies. Al-Naji told Reuters: “Volatility of cryptocurrencies has prevented their widespread adoption.”[1]
Timeline
- June 2017: The team published the first version of its white paper.[2]
- April 2018: Intangible Labs announced a $133 million private placement with investors including Andreessen Horowitz.[1]
- December 2018: Al-Naji announced that Basis would shut down and return capital.[4]
What They Built
The white paper described an algorithmic central bank: software would adjust the supply of Basis tokens in response to their market price. When the price rose above its target, the system could issue more tokens. When it fell below the target, the system would sell bond tokens to remove Basis from circulation. Share tokens represented a claim on future issuance after outstanding bonds were repaid.[2]
This structure depended on market participants buying and trading the extra tokens. It also assumed that future demand would support the system when it needed to contract supply. The design was a proposal, and the team did not launch it at scale. Its stability therefore remained unproven.[3]
Market Position
Target Customers
The project sought users who wanted the transfer features of cryptocurrency with a more predictable unit of value. It also anticipated exchanges, wallets and applications using a stable token.[1]
Market Size
The team did not establish a realized market or transaction volume before shutdown. Capital raised is evidence of investor interest, not evidence of customer demand.
Competition
Basis proposed adjusting supply rather than holding a dollar for every token. By contrast, Circle describes its USDC reserves as held separately from operating funds and redeemable for dollars. The comparison shows a different trust model: reserve-backed tokens rely on custody and redemption; Basis proposed relying on token incentives and market demand.[5]
Business Model
The $133 million raise was a private placement. The team described a stabilization fund and a token system, rather than reporting revenue from an operating payments business. Public sources reviewed do not establish revenue or unit economics.[1] [3]
Post-Mortem
Trading restrictions changed the mechanism
Al-Naji said company lawyers concluded that bond and share tokens would be securities. He described proposed restrictions on transfers and eligibility checks, including a first-year limit on US ownership to accredited investors. Al-Naji wrote that there was “no way to avoid securities status for bond and share tokens.” The team judged the alternatives inconsistent with its intended open system.[3]
The problem concerned the system's supporting assets, not only the token intended to track a dollar. If the instruments needed to contract supply could not circulate freely, the team would have to redesign the market it depended on. This explains the team's decision, but it does not prove that an unrestricted system would have held its peg. Basis never had the operating record needed to test that claim.
A planned return protected capital
The Block reported that investor agreements required much of the funding to remain held until launch and to be returned if Basis did not launch. The company announced its intention to return capital. The source does not establish the exact amount ultimately returned.[6]
A later algorithmic stablecoin, TerraUSD, lost its peg in 2022. The Reserve Bank of Australia described a breakdown in its stabilization mechanism. Terra was a different system; its failure does not establish what Basis would have done. It does show why an untested stabilization mechanism needs more evidence than a successful fundraise.[7]
Key Lessons
- Legal treatment reaches the mechanism. Basis needed its bond and share tokens to trade; the team's legal assessment affected the system's core design.
- A private placement is not product validation. The company raised $133 million but did not launch the proposed system at scale.
- Plan for the binary outcome. The return-of-capital terms gave investors a route to recover funds if the launch did not happen.