Did Blockstack PBC Really Reach 1 Million Verified Users as it Claimed?

Blockchain-based project, Blockstack, has been at the center of some controversy after it announced earlier this week that it has successfully achieved Milestone 2, a crucial mark that would enable the project to unlock approximately $6.8 million in funding.

Notably, the debate is on whether Blockstack which labels itself as “a decentralized computing network and app ecosystem that puts users in control of their identity and data,” now has 1 million verified users.

Any project would be ecstatic about unlocking access to appr. $6.8 million in funding, but did Blockstack take any desperate measures just to get access to the fresh capital?

The Initial Agreements

First, Blockstacks has since launch strived to be regulatory compliant, irrespective of whether the wider crypto industry believes that those rules are stringent or not.

A December 2017 token sale exclusively to accredited investors successfully raised $50 million while in 2019, Blockstack became the first to be qualified by the SEC under Regulation A+ to sell crypto-based tokens to retail investors.

But the current debate surrounds the initial agreement by Blockstack that it would a majority of the capital raised in 2017 would only be unlocked when certain, specific milestones were reached.

In its July 2019 Reg A+ circular, Blockstack reiterated that the second milestone for unlocking more funds is for 1,000,000 verified users to be registered on the Blockstack network by the end of January 2020. 

Worthy of note too is that as of the date (11-07-2019) Blockstacks said that “the network had approximately 115,780 registered user accounts, with roughly 16,100 accounts having provided a ‘social proof’ as evidence of having a human user.”

Failing to reach the 1M user milestone would mean that Blockstack may be obligated to return part of the earlier raised funds ($50 million).

“If we do not receive these funds (the now unlocked $6.8 million), we may not be able to complete the development of the Blockstack network.”

The above agreements between Blockstacks and its investors both in the Reg A+ and the earlier sale to accredited investors would have meant that reach the 1M user milestone was a crucial step.

“At current growth rates, the Blockstack network will not have reached one million users by the second milestone date, and we will not achieve the second milestone,” Italicized texts are excerpts from Blockstack’s Reg A+ offering circular.

How Did Blockstacks Suddenly Reach 1M Verified Users?

So how exactly did Blockstack go from approximately 115,780 registered user accounts to 1M verified accounts in under six months?

At this point, it is vital to note that the decision regarding whether Blockstacks has reached 1M verified users lied with a certain independent Advisory Board for the Blockstacks token fund. 

The Advisory Board was formed in October 2018 and according to Blockstack had seven members who did not overlap with Blockstack PBC executives or board members. 

Back to the present, Blockstack supposedly reaching the 1M verified mark meant that the network had added at least 884,220 users to the 115,780 registered user accounts (only 16,100 verified then) that it reported only six months ago.

Is this possible?

That decision as noted earlier would rely on the decision of the said Advisory Board, and their definition of a verified Blockstack network user, which at this point appears to simply mean having a Stacks (STX) wallet address and giving off any evidence that a user is a human being and not a robot.

Barring any users that Blockstacks acquired through its other marketing efforts in the last six months, the project reportedly onboarded 300,000 New STX Holders by distributing Stacks to them via a partnership with Blockchain.com exchange.

Users were mandated to complete a KYC process, meaning that they likely fulfilled the Board’s definition of a verified user, albeit in a more compelling way that the earlier reported 115,780 registered user accounts.

Still, that would leave us with roughly 585,000 users needed for Blockstacks to reach the 1M mark. Unless of course, we have to fall back to the number of users trading Stacks (STX) on Binance exchange and HashKey Pro where the token was recently listed to complete the numbers. Even at that, the number still doesn’t add up as STX trading volume on Binance is just 14.99BTC.

In conclusion, being a self-imposed milestone means that Blockstacks’ new fund unlock doesn’t breach any known regulatory laws. The project has already filed the SEC form 1-U to confirm reaching the 1M mark, and will likely not face any opposition.