Back when Top Dogs first launched in July, we were one of the first collectible projects to link an ERC20 token with an NFT and for each day you held your Top Dog NFT you could claim 10 $SNAX. We envisioned $SNAX (then called $BONES) to be deeply integrated into the Top Dogs narrative and ecosystem.
Since then $SNAX has undergone various revisions based on community feedback. One recurring theme was the desire to create an ETH/SNAX liquidity pair, making $SNAX readily exchangeable to ETH—and ultimately USD—via a Decentralized Exchange (DEX) such as Uniswap or SushiSwap. And $SNAX staking bonuses if you locked in your NFT. We could immediately see the value that this provided so we took the suggestion onboard and began to work it in to Roadmap 2.0.
As the space matured and we began to work out the details, it slowly started to become apparent that whilst creating a token with a liquidity pair was relatively easy (it can be done within an hour), ensuring it is legally and regulatory compliant across various jurisdictions; it abided by marketplaces Terms of Service; and it had the correct governance structures in place, is difficult. We still believe no team or project has "cracked it".
Based on the advice we have taken, the opinion of experts, and our own understanding, we came to the conclusion that it is not possible to create a legally, regulatory, and platform-compliant token as we originally envisioned $SNAX to be. Specifically we are referring to the combination of the 10 $SNAX passively earned per day, the ETH/SNAX pair, and staking rewards.
Our vision for the Top Dog brand spans decades, not months or years. So for us to survive in to future we must pivot how we've positioned $SNAX...
Platform and regulatory compliance
100% of our NFT sales and the majority of the businesses revenue currently comes from secondary sale royalties via the OpenSea platform (although this is changing with our LaunchPad). Without these sales the business is at risk of "drying up" and unable to pay it's bills, staff salaries, marketing expenditure, event funding, team travel, etc.,—ultimately killing the project. Therefore we are required to accept and abide by OpenSeas Terms of Service or face the risk of our NFT collections being removed from their platform. This is not a unique problem to Top Dogs and all collections on OpenSea have to do the same.
To quote OpenSeas terms: we [users of the platform] must NOT "Use the Service to participate in fundraising for a business, protocol, or platform, including but not limited to creating, listing, or buying assets that are redeemable for financial instruments, assets that give owners rights to participate in an ICO or any securities offering, or assets that entitle owners to financial rewards, including but not limited to, DeFi yield bonuses, staking bonuses, and burn discounts." (emphasis ours).
There are two technical terms in here: "financial instruments" and "securities offering" which are used by the U.S. Security and Exchanges Commission (SEC) and what's known as an "investment contract". The SEC and Courts use something called "The Howey Test" to determine if an asset or transaction qualifies as an investment contract and therefore considered a security under the Securities Act of 1933 and the Securities Exchange Act of 1934. An investment contract exists if there is an "investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others."
Whilst it is ultimately for a Court to decide, we believe the way we positioned $SNAX was potentially subject to U.S. securities laws AND broke OpenSeas Terms of Service. Whilst we believe the risk of being investigated by the SEC is low, we deem the risk of OpenSea removing Top Dog Beach Club from their platform as medium-high risk. In fact, this has already happened to other collections with similar offerings and we believe OpenSea will come down hard on other projects as their internal processes mature and their legal and compliance teams become more embedded within the business.
If it was just a regulatory issue then of course we would do what is necessary to register as security. The main crux of the problem is the risk of being de-listed by OpenSea. We have attempted to contact OpenSea for clarification through many channels only to be met with silence.
And of course we would all prefer a fully decentralized NFT platform but we are just not there yet. And yes, we could roll own marketplace but generally OpenSea is a great platform that users trust as shown by it's trading volumes.
But most of all, it's opportunity cost
Additionally we had to consider the opportunity cost of having such a token. It is highly likely that other US-based platforms would have similar terms to OpenSea and potentially prevent us from being listed there, i.e., Coinbase.
Coinbase are going to bring in millions of new users and potentially hundreds if not thousands of new Top Dog holders. It would be a shame if the project couldn't be listed on Coinbase due to the way we positioned $SNAX. You deserve better.
But what about other projects with similar tokens?
Many projects are currently offering tokens similar to $SNAX. We won't name them but they are easy to discover. In short we believe they are also potentially breaking U.S. securities laws and OpenSea's Terms of Service. Whilst nothing may happen for a month, a year, 2 years, we believe they will be forced to either kill their token or face being de-listed from OpenSea. Both of these outcomes can be project killers.
Okay, so what's changing?
A lot. But for the better.
Firstly, $SNAX will move off-chain. With no trading or ETH liquidity pool, it doesn't make sense to pay for gas. Gas fees also severely limit our ability to innovate with the token and deeply integrate it in to our ecosystem.
Staking will still exist but again it will happen off-chain—something we're calling pseudo-staking. The end result will be the same but it means you will be saving ~$150-$200 in gas fees for approving your tokens, staking, and un-staking. Staking your Top Dogs and Top Cats will grant you extra $SNAX bonuses and will be launching soon.
The $SNAX marketplace. We've already had a number of $SNAX auctions for Top Cats, whitelist spots, and NFT raffles for Superlative Secret Society and Smilesssvrs ::). Going off-chain means we can have regular items in the shop that everybody can afford... imagine paying ~$30-$50 gas for buying a raffle ticket 😢.
The $SNAX marketplace will allow for community-to-community trading of works and services, i.e., if you would like one of @NVSBLAB's awesome drip pieces them you can spend X $SNAX that will directly go to him. We will also be implementing a "bounty" system where you will be able to move your wallet $SNAX to a particular Top Dog or Top Cat, either making your NFT more attractive for buyers or to encourage other people to buy up floor NFTs.
Deeper integration in to our GameZone. You can already earn $SNAX in the digging game and by playing PawZone, again this is only possible by going off-chain. We also plan to deeply integrate the economy in to our Discord and reward $SNAX based on engagement.
We hope this post clears up any $SNAX confusion and the way forward. We will shortly announce Roadmap 2.1 that will include some further detail. If you have any questions then please reach out to the team via Discord.
The Top Dog Team ❤