Syscoin: No Pressure, No Diamonds

Syscoin just had its 10th birthday, standing tall as one of the few original projects that has continuously evolved and pushed new, innovative boundaries for a decade and counting, in the face of being a bootstrapped team with limited funding, never having the luxury of VC-backing. The past decade has been challenging to say the least, replete with numerous instances where the pressure often felt overwhelming. Yet, Syscoin has always emerged stronger, more lustrous, and valuable with each market cycle, much like a diamond formed under immense pressure.

Current Situation

Leading up to the celebration of our 10th anniversary, we have found ourselves in another period of immense pressure. However, we are confident that this will result in another robust and valuable evolution of Syscoin.

In this post, we aim to explain to the community what has transpired, clear up misconceptions, and share our vision moving forward. Reflecting on our journey, there are things we might have done differently. Nonetheless, we assure you that every decision was made with the primary goal of healthily growing the Syscoin project and ecosystem with the community at heart.

Syscoin and Rollux

For practical, compliance, and business reasons, we chose to separate the UTXO and NEVM layers from the utility layer, Rollux - with Rollux being affiliated with SYS Labs.

Rollux Group, SYS Labs, and Foundation Group Leadership

At the beginning of this year, SYS Labs engaged See Wan Toong, a.k.a. Kenneth Kliane, to assist with investor relations (IR). His focus quickly shifted to Rollux due to the rising interest in BTC L2s. Discussions were held about a potential RLX token, ensuring it would be synergistic with $SYS and would not cannibalize $SYS.

See Wan recruited several SYS Labs members, including Lead BD Matthew Mappin, to help with IR and strategy. Despite their efforts, they were unsuccessful in raising capital.

In response, without consulting the SYS Labs leadership or the Foundation board, See Wan and Matthew brought in two of the Syscoin Foundation members, Willy Ko and Bradley Stephenson (who was also part of the SYS Labs leadership team at the time), to form the "Rollux Group." This group called a meeting asking for greater autonomy in decision-making, along with a bigger stake in the Rollux project. They felt this would ease their efforts to raise capital and with business development. This was granted by the SYS Labs leadership team.

During this same multi-day meeting period, numerous brainstorming sessions were conducted, exploring a wide spectrum of ideas—from conservative to radical.

One of the more radical ideas suggested by the Rollux Group was to merge RLX and $SYS and increase the supply 3 to 4 times. Although there have been multiple projects that have gone through a similar change, three members of the Foundation Group (Jagdeep Sidhu, Chris O’Shea and Michiel Näring) did not fully support the merger, as it would significantly dilute $SYS holders' value and conflict with the Foundation's principles. The Foundation Group insisted that any merger would require an informed community vote and adherence to all corporate governance rules. It was evident that this decision did not sit well with the Rollux Group, and it is at this time they seemingly accelerated their plans to conspire against the Foundation and to organize a coup/hostile takeover, later termed "Syscoin Red."

During the following period, communication between the Rollux Group executive team and the Foundation started to decline. Disagreements on the technical and leadership direction continued to emerge. 

From July 25-27, 2024, the Bitcoin 2024 conference was scheduled to take place in Nashville, Tennessee. The Foundation group obtained evidence that the Rollux Group, under the guise of "Syscoin Red," was organizing side events using the Syscoin name and branding. They promoted these events with the claim that attendees could "meet the brilliant minds behind Syscoin," all without informing the Foundation Group or without any discussions at the Foundation Board level. This discovery prompted the Foundation Group (with the exception of O’Shea) to fly to Nashville in order to confront the Rollux Group. João Fernandes created two events on Luma, clearly using the Syscoin name and branding. Once confronted, the Rollux Group later verbally admitted that they intended to announce Syscoin Red at the first event. The subsequent event, featuring red-themed branding, was planned to follow the announcement, explaining the otherwise unusual color scheme. 

Upon arriving in Nashville, Michiel, and Jag scheduled meetings with the Rollux Group, during which the Rollux Group openly admitted their plan to conspire against the Foundation. The Rollux Group revealed their intention to create a competitor, which later appeared to be a hostile takeover, and planned to announce this new venture during the Syscoin-themed side event. The Rollux Group issued an ultimatum to the Foundation Group, stating their intent to proceed with forking the Syscoin blockchain to create a new token that would compete directly with $SYS, the Syscoin community, and the Foundation itself—thereby breaching the Foundation's articles.

There is substantial evidence to suggest that the Rollux Group hired a PR agency to fabricate a narrative and publish about an internal dispute within the Foundation. The intent behind this narrative and article was to position Bradley Stephenson and Willy Ko as whistleblowers who exposed alleged mismanagement, with the aim of swaying the community and partners to support the proposed fork and hostile takeover.

The proposed fork would be detrimental to Syscoin, especially considering the manner in which it was being orchestrated. This wasn't intended to be a friendly split between teams; instead, their goal was to garner support from exchanges and partners, effectively rendering $SYS obsolete if they succeeded. This is evident by their attempt to lure developers and contractors from the Foundation to Syscoin Red. Fortunately, after discussions with the Foundation Group, the Rollux Group agreed to refrain from moving forward with the fork.

In the weeks that followed, we made considerable efforts to reach a consensus and explore opportunities for continued collaboration. Despite our best intentions, we were unable to find common ground. We proposed strict and world-leading corporate governance protocols to be instilled within the Syscoin Foundation Board, which included audit requirements, independent committees, and trading blackouts when in possession of material nonpublic information. These initiatives were met with absolute resistance (the reasons for which seem to be becoming quite apparent). It became increasingly evident that their actions did not align with the best interests of the Syscoin community and $SYS holders.

As a result, we initiated legal proceedings to prepare for the termination of Willy Ko and Bradley Stephenson. We have filed a petition in Dutch court for their removal from the Board. We have also scheduled a Board Meeting to suspend their membership on the Board while the court processes are carried through. Given that their involvement in Syscoin Red clearly violated their fiduciary duties as Board members, we feel this is absolutely necessary to maintain the viability of the Foundation, the community, and all $SYS holders.

Based on the prior actions of the Syscoin Red team, we anticipate that they may not step down quietly. Therefore, we felt it was important to keep the community informed about the current situation. We have strong reason to believe that they will not only oppose our petition, but also begin a slanderous and defamatory PR campaign, which we will take further legal action against.

The remaining members of the Rollux Group—See Wan Toong, Matthew Mappin, Nathan Hatzfeld, and João Fernandes —have already resigned from their roles on the Rollux team and have not been officially connected to SYS Labs for many weeks. They have had no role or official connection within Syscoin since they were granted the greater autonomy they sought under the  Rollux team earlier this year. Any representations they may make claiming any authority or relationship with the Foundation are categorically false, and any third party should cease and desist any contact they may have with them relating to Syscoin, the Syscoin Foundation, or SYS Labs.

 

Syscoin Foundation's Evolution

Established in 2018, the Syscoin Foundation has seen the industry mature significantly. To keep pace, the Foundation will integrate new internal guidelines and rules, ensuring it continues to guide the decentralized blockchain protocol of Syscoin effectively, prioritizing community and ecosystem growth. We will share more about this later.

Addressing the FUD

The article about the internal controversy created an opportunity for a third  party to spread FUD (Fear, Uncertainty, Doubt) for various motives. Fortunately, most of our community is well-informed. Nonetheless, we are here to clarify any misconceptions brought up by the article or other voices since this began.

The 100 Million $SYS Mint 

Allegation: The mint was made without proper communication or community consent.

The proposal to mint additional $SYS during the mandatory upgrade fork, which activated SYS NEVM on December 6, 2021 was thoroughly discussed within the community on Discord and was introduced more than 30 days prior to the governance vote.

Initially, we proposed four conservative proposals: https://support.syscoin.org/t/increase-to-governance-proposals/549

Following community feedback, a fifth proposal was introduced: https://support.syscoin.org/t/increase-to-governance-proposals-proposal-5/558

This proposal received the most votes within our governance by Syscoin’s masternode (sentry node) operators: "AbsoluteYesCount": 437, "YesCount": 487, "NoCount": 50.

Allegation: The minted $SYS was dumped shortly after it was minted.

This is not true. Fortunately, the blockchain is a public ledger, and anyone can verify that the funds were not moved out of the wallet shortly after minting https://explorer.syscoin.org/address/0x94EBc5528bE5Ec6914B0d7366aF68aA4b6cB2696

Allegation: The funds were not held in a multisig wallet.

This is true. Although it might not seem ideal and is not considered best practice in the industry, we believed it was the best solution at the time. We did not have a NEVM multisig solution then. Additionally, there are many instances where funds are lost using multisig without a robust solution like Gnosis Safe. We managed the cold wallet with excellent operational security and made sufficient backups accessible to other Foundation members in case of certain events.

Additionally, it is important to note that the funds were used sustainably for the benefit of the Syscoin ecosystem and community. We have operated quite lean, ensuring that resources were allocated efficiently to maximize impact. This prudent financial management has allowed us to develop significantly, even with a limited budget. By prioritizing strategic initiatives and community-driven projects, we have been able to foster growth and innovation within the Syscoin ecosystem without unnecessary expenditure or waste.

Allegation: Funds were sent from the cold wallet to a hot wallet.

Yes, most transactions occurred this way. Here is how the Foundation is structured and operates:

The Foundation is a non-profit entity that doesn't own any funds. It manages the funds in accordance with its statutes, aiming to:

• Promote blockchain technology globally among companies and individuals.
• Represent the interests of Syscoin partners and community.
• Develop and manage the Syscoin platform.
• Conduct any activities directly or indirectly related to these goals.

To achieve these objectives, the Foundation:

• Acts as the official organ of Syscoin.
• Stimulates developers to improve the Syscoin source code.
• Provides accessible information to use the Syscoin blockchain.
• Promotes and supports academic and general blockchain research.
• Encourages academic exploration of blockchain.
• Distributes funds to benefit Syscoin's partners and community.

In practice, this means the Foundation receives funding requests from teams like SMT (Syscoin Marketing Team) for marketing, PR, developers, etc. If the request aligns with the statutes and benefits Syscoin and its community, the Foundation approves the funding.

Allegation: Syscoin Foundation has funded a for-profit entity named SYS Labs.

The Syscoin Foundation itself does not own any assets or funds. The Foundation is responsible for the management and development of the Syscoin ecosystem, as per the articles of the Foundation. Part of that management is to utilize funds in a way that will benefit the Syscoin ecosystem and community at large, which comes in the form of marketing, development, and providing capital resources for other entities that contribute to the growth of the Syscoin ecosystem.

Yes, the Foundation has provided funding to SYS Labs, recognizing the significant benefits these initiatives bring to the Syscoin ecosystem and its community, which are consistent with the Foundation’s articles. While the Foundation is structurally restricted from profiting from products that compete with for-profit entities, the products developed by SYS Labs are designed to enhance the Syscoin ecosystem, offering clear and substantial advantages to the entire community.

For products still under development, the Foundation not only provided financial support but also strategically secured allocations in future tokens and that the Syscoin community would benefit from this on top via airdrops of any token launching. This approach ensures that if the products do not directly benefit Syscoin, then the Foundation's interests—and by extension, the community's interests—are safeguarded. Moreover, these token allocations strengthen the Foundation Community Treasury and airdrops that will be distributed to community members, further reinforcing the mutual benefits.

For transparency, the Foundation, through funding, has invested in various key initiatives and products, including Pachira, Superdapp ($SUPR), Camada and Rollux. Further, the Foundation also provided support to key products and marketing efforts, including Pali Wallet, Pegasys, Luxy, and the Frictionless Bridge, along with various events, conferences, and meetups, which are essential to the Syscoin and Rollux blockchain ecosystem. 

We believe this clarification effectively addresses much of the recent misinformation. Together with our partners, current and new team members, and advisors, we are developing an enhanced roadmap and vision for Syscoin, designed to ensure another decade of innovation, growth, and a thriving future for the project.

Thank you on behalf of the majority of the Syscoin Foundation—Jag, Chris, and Michiel.

All press releases issued by the Syscoin Foundation are intended solely for informational purposes, unless expressly communicated otherwise or published in connection with information required by law and statutory duties of notification. Certain statements in this press release that are forward-looking or contain specific expectations for the future are based on currently available information. They are made on an "as is" basis without any express or implied warranty, fitness for purpose or merchantable quality and may be subject to change without notice. Such statements inherently entail risks and uncertainties. Circumstances such as general economic developments, future market conditions, extraordinary loss expenditures due to catastrophes, movements on capital markets and other circumstances may cause actual events or results to differ substantially from those projected in forward-looking statements. Insofar as press releases do not contain information required by law and are not subject to statutory duties of notification, the Syscoin Foundation assumes no responsibility for the correctness, completeness, accuracy, reliability and timeliness of the statements. All claims for damages in connection with decisions and actions taken on the basis of this press release are also excluded, insofar as legally permissible, and are expressly rejected.