Written by: Nancy, PANews

After three years of support, it ended with a "witch hunt judgment".

On March 23, the eagerly awaited trading platform Backpack finally held its TGE. In the current market, which is experiencing a deep bear phase, Backpack did not bring any surprises; the opening coin price kept declining, and as of now, the fully diluted market cap is less than 200 million dollars. What shocked the community was the widespread behavior of "reverse farming," with important community members expressing their grievances in the community; those listed as witches included long-term small-scale participants and high-volume traders alike. The rules were never disclosed, and the judgment was executed unilaterally, triggering a severe trust crisis for Backpack, which had to hastily open a complaint channel on March 24.

"When the market is good, you take advantage of others, and when the market is bad, you take advantage of the project." Someone pointedly highlighted the focus of the problem. With Opinion and Backpack's consecutive airdrops leaving many users empty-handed, it effectively declared the end of reverse farming, leading even experienced reverse farmers to announce their exit from the field.

Even KOLs Couldn't Escape Reverse Farming, Chinese Community Became Heavily Affected

The promise of "pure community distribution" ultimately turned into a large-scale scene of reverse farming.

Yesterday, Backpack finally opened the token claiming channel for BP. According to the rules previously announced by the official, 25% of the total token supply (approximately 250 million BP) from this TGE will be entirely used for community distribution, with 24% allocated to point holders and 1% to Mad Lads NFT holders. The official emphasized that apart from this portion of tokens, all belong to the community, and no team or investor shares took part in the initial circulation.

However, when the claiming channel opened, it dealt a heavy blow to community users; many users found their points significantly reduced or even wiped out completely, ultimately receiving only a symbolic participation prize or nothing at all. More frustrating was that most of the users affected were not marginal accounts but rather long-term active single-wallet users, high-point farmers, and core participants such as Mad Lads NFT holders.

Anger quickly spread throughout the community, particularly among Chinese users, who became the hardest hit in this witch hunt. Many large traders and KOLs flooded the community with complaints, "4 billion dollars in trading volume, witch rate 100%", "Over 1.5 billion dollars in trading volume, spending 800+ hours, over 300,000 dollars in fees, airdrop only 50% returned", "330,000 points exchanged for 2000 tokens", "Number one in trading volume, only receiving 20,000 tokens with 170,000 points"... Behind these numbers are real investments of funds and time, but in the final distribution, they were all classified as witches and lost their eligibility.

What amplifies the dissatisfaction is not only the gap in earnings but also the denial of contributions. Among these users, some had long communicated with the project party, others continuously produced content to endorse the project, and some actively participated in community engagement and ecosystem expansion, but these investments were not considered in any weighting, effectively erased.

Even more controversial is the collective punishment approach. Some community leaders responsible for community growth and ecosystem expansion not only faced cleansing themselves but also impacted the real users they invited. This kind of punishment mechanism turned the growth logic, which originally relied on social expansion, into a source of risk.

Moreover, the rapid decline of the BP token after its opening further amplified overall losses and intensified negative sentiment in the market.

All the controversies are focused on the lack of transparency in Backpack's rules.

The standards for determining witches at Backpack have never been publicly disclosed, and instead, the risk control mechanisms were continuously upgraded during the process. Just before the TGE, Backpack not only required all accounts participating in point activities to complete KYC but also conducted a large-scale review under the pretext of "purifying the environment and rewarding real users," ultimately identifying more than 50 million points from non-genuine behavior and retrieving them for redistribution. However, for users, there has never been a clear answer to what constitutes non-genuine behavior, the basis for evaluation, or the boundaries.

Will Returning Points and Initiating Token Compensation Rebuild Trust?

Under public pressure, Backpack urgently initiated a "fire-fighting" response.

Backpack team member Claire tweeted a response, stating that the Chinese team of Backpack had intense discussions overnight with the Western team. The Chinese team does not want to see the interests of users who once supported them being adversely affected and has 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, "one person, one account" is the absolute bottom line. Under this standard, compared to other regions, there were indeed more Chinese-speaking users affected, which is also a result of naturally different user habits. The strict adherence to rules and sensitivity to KYC information among Western users made multi-account behavior itself exceed their comprehension. In the subsequent processing, Backpack founders Armani and the core team are preparing to immediately open a complaint channel, to establish clear rules that maximally protect user interests.

Subsequently, Backpack's Chinese account announced the opening of a manual complaint channel, allowing users to submit materials for review, and announced adherence to the "Rule No. 3," where if the number of accounts operated from the same device is 3 or less and is deemed a witch, more than 50% of points will be returned after manual complaint verification. In addition, the Backpack team plans to launch a special program in the coming days to repurchase tokens from the secondary market for targeted compensation to users who meet the requirements.

However, for those users who had previously invested their all, these remedies may make up for some losses, but once trust is broken, it is challenging to rebuild easily.

Locking for a Year in Exchange for Equity? Backpack Bets on IPO Narrative

From previous scripts, most crypto projects often see a high opening followed by a decline after issuing tokens, inevitably leading to silence. Against the backdrop of a crypto bear market, Backpack chose to bet on an IPO narrative to boost market confidence before officially issuing its tokens.

In February this year, Backpack CEO Armani Ferrante stated that the company follows a core principle in its token economic model to prevent insiders from offloading to retail investors. No founder, executive, employee, or venture capitalist should gain wealth through tokens until the product achieves "escape velocity". For Backpack, the answer to "escape velocity" is clear: the company plans to IPO in the United States.

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

On the token unlocking front, Backpack also demonstrated "sincerity." Besides 37.5% of the tokens being gradually unlocked prior to the IPO according to major milestones, Backpack will also store the remaining 37.5% in the company treasury and lock it for at least one year after the IPO, with team members only holding company equity.

In addition, Backpack announced that it would allocate 20% of equity to provide users who stake BP tokens for at least one year with the opportunity to exchange tokens for company equity at a fixed ratio. Recently, Backpack has also launched a chain-based IPO new share allocation feature, allowing users to directly obtain IPO allocations through the platform and open a waiting list for registration.

However, the specific details regarding the exchange of tokens for equity have not yet been disclosed, including the form of exchange, scope of rights, and timetable, leading to community concerns that this might be a new round of PUA, locking users in before slowly delivering on promises and using equity swaps to buy more survival time for the project.

Armani Ferrante has also hinted that the IPO could come soon, or it might take longer, or may not even be achievable at all. But, in any case, he and the team will do their utmost.

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