Author: Nancy, PANews

After three years of accompanying, it resulted in a "witch trial."

On March 23, the long-awaited trading platform Backpack finally welcomed its TGE. In a deeply bearish market, Backpack did not bring any surprises; the opening coin price continued to drop, with the fully circulating market value currently less than 200 million dollars. What shocked the community was the widespread actions against users, where important community members complained in the group, and those listed as witches included both long-term small-scale traders and large volume traders at the top of the list. The rules were never disclosed, and the judgments were executed unilaterally, leading Backpack into a severe trust crisis, prompting an urgent opening of a complaint channel on March 24.

“When the market is good, you benefit from others; when the market is bad, you benefit from the project party.” Someone pointed out the crux of the issue. With Opinion and Backpack's consecutive airdrops leaving many users empty-handed, it indirectly declared the end of the airdrop race, leading even seasoned airdrop hunters to announce their withdrawal.

KOLs also can't escape the backlash; the Chinese community becomes a disaster area

The promise of “pure community distribution” ultimately turned into a large-scale backlash.

Yesterday, Backpack finally opened the token claiming channel for BP. According to the rules previously released by the official team, 25% of the total token supply (approximately 250 million BP) in this TGE would be used entirely for community distribution, with 24% allocated to points holders and 1% to Mad Lads NFT holders. The official emphasized that apart from this portion of tokens belonging solely to the community, there were no team or investor shares involved in the initial circulation.

However, when the claiming channel opened, it dealt a heavy blow to community users, as many found their points drastically reduced, with some even set to zero, ultimately receiving only a symbolic participation reward or nothing at all. Even more discontenting was that many of these affected users were not marginal accounts but rather long-term active single-wallet users, high-point farmers, and core participants like Mad Lads NFT holders.

Anger quickly spread throughout the community, especially among Chinese users, who became the primary victims in this witch hunt. Numerous complaints from large traders and KOLs flooded the community, with remarks like "4 billion dollars in transaction volume, witch rate 100%" and "over 1.5 billion dollars in transaction volume, spent over 800 hours, over 300,000 dollars in fees, yet the airdrop only half-delivered," "330,000 points exchanged for 2000 tokens," "number one in network transaction volume, with 170,000 points only receiving 20,000 tokens"… Behind these numbers were substantial financial investments and time costs, but in the final distribution, they were collectively categorized as witches and directly lost their qualifications.

Amplifying the grievances was not only the disparity in earnings but also the negation of contributions. Some among these users had long maintained communication with the project team, some continuously produced content endorsing the project, and others actively participated in community expansion and ecosystem development. Yet, none of these contributions were factored into any weight consideration, rather they were erased.

Adding to the controversy was the collective punishment approach. Some community captains responsible for growth and ecosystem expansion were not only removed themselves but also impacted the real users they had invited. This punitive mechanism turned the growth logic, which relied originally on social viral expansion, into a source of risk.

Moreover, the rapid decrease in the token BP's price after its market debut further magnified overall losses and exacerbated market negative sentiment.

All the controversies pointed to the opacity of Backpack's rules.

The witch determination criteria of Backpack has never been publicly disclosed, while the risk control mechanisms have been increasingly tightened. Just before the TGE, Backpack not only required all participating token activities accounts to complete KYC but also conducted a large-scale review under the guise of "purifying the environment and rewarding real users," ultimately identifying over 50 million points as coming from non-authentic behaviors and uniformly reclaiming them for redistribution. However, for users, there has always been no clear answer on what constitutes non-authentic behavior, what the judgment basis is, and where the boundaries lie.

Will refunding points and initiating token compensation rebuild trust?

Under public pressure, Backpack urgently took action.

Claire, a member of the Backpack team, tweeted in response that the Chinese team had discussed intensely overnight with the European and American teams, emphasizing that the Chinese team did not want to see the interests of previously supportive users impacted, and they had in-depth communication with those responsible for executing the anti-witch actions.

As an experienced compliance officer, Claire stated that in the logic of the anti-witch team, "single person single account" is an absolute bottom line. Under this standard, compared to other regions, indeed more Chinese users were affected, which was also due to the different user habits involved. The strict adherence of European and American users to rules and their sensitivity around KYC information made multi-account behavior exceed their cognitive realm. In the follow-up processing, Backpack founder Armani and the core team are prepared to immediately open the complaint channel, establishing clear rules to protect user interests to the maximum extent.

Subsequently, Backpack's Chinese account announced the opening of a manual complaint channel, allowing users to submit materials for review, and stated that they would adhere to the "Rule 3", whereby if the number of accounts operated on the same device was 3 or fewer and were judged as witches, after manual complaint verification, more than 50% of the points would be refunded. Additionally, the Backpack team plans to initiate a special program in the coming days to conduct token buybacks in the secondary market, aimed at compensating those eligible users.

However, for those who were once fully invested, these remedies may partially compensate for losses, but once trust is broken, it is very difficult to rebuild it easily.

Locking up for a year in exchange for equity? Backpack bets on an IPO narrative

From past experiences, most crypto projects often start high and fall after issuing tokens, ultimately leading to inevitable silence. Against the backdrop of a bear market, Backpack has chosen to bet on an IPO narrative before officially issuing its tokens to boost market confidence.

In February this year, Backpack CEO Armani Ferrante stated that the company follows a core principle in its token economic model that prohibits insiders from dumping tokens on retail investors. Before the product reaches "escape velocity," no founder, executive, employee, or venture capitalist should benefit materially from tokens. For Backpack, the answer to "escape velocity" is clear; the company plans to conduct an IPO in the United States.

This means that the value capture of tokens will be reanchored and closely tied to the overall valuation of the company. At this juncture, Axios recently reported that insiders indicated Backpack is negotiating for a new round of financing, seeking to raise 50 million dollars at a pre-money valuation of 1 billion dollars.

Regarding the unlocking of tokens, Backpack has also shown its "sincerity." Apart from 37.5% of tokens gradually unlocking before the IPO based on key milestones, Backpack will also deposit the remaining 37.5% in the company's treasury and lock it for at least a year after the IPO, with team members only holding company equity.

Additionally, Backpack announced that it would allocate 20% of its equity to provide users who stake BP tokens for at least a year with the opportunity to exchange tokens for company equity at a fixed ratio. Recently, Backpack also launched an on-chain IPO new stock allocation feature, allowing users to directly obtain IPO shares through the platform and opening a waiting list for registration.

However, the specific details regarding the token-to-equity exchange, including the method of exchange, rights scope, and timeline, remain undisclosed. This has raised concerns within the community, fearing it could be a new round of PUA, locking users in first and then slowly fulfilling promises, using equity exchanges to buy more time for the project.

Furthermore, Armani Ferrante has also revealed that the IPO may happen soon, may take time, or might not happen at all. But regardless, he and the team will give their all.

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