ConsenSys Confirms 13% of Staff Will Be Laid Off

John Vibes

The Ethereum production studio ConsenSys, recently announced that 13% of their staff will be laid off, in the midst of bear market conditions.

On Thursday, ConsenSys told Coindesk:

“Excited as we are about ConsenSys 2.0, our first step in this direction has been a difficult one: we are streamlining several parts of the business including ConsenSys Solutions, spokes, and hub services, leading to a 13% reduction of mesh members. Projects will continue to be evaluated with rigor, as the cornerstone of ConsenSys 2.0 is technical excellence, coupled with innovative blockchain business models.”

ConsenSys founder Joseph Lubin hinted that restructuring was coming in an earlier interview with Coindesk on Tuesday. Lubin said:

“We are looking at lots of different situations – some of them will shrink, some of them will grow. There’s nothing I want to say concretely about that at this point.”

In an email sent out to the company's employees last week, Lubin said:

“We will more quickly declare projects a ‘learning success’ and disband them, enabling their elements – technology, technologists, and entrepreneurs – to diffuse back into the sea of potentiality and reconstitute into another project with the benefit of greater experience.”

Bear Market Downsizing

As this year's cryptocurrency market has seen a downturn, many of the new start-ups that were banking on a steady revenue stream from investors are watching their business model fall apart as prices continue to fall. Last week, CryptoGlobe reported that blockchain-base social media network Steemit is laying off 70% of its staff in restructuring efforts directly related to the bear market.

Steemit’s CEO Ned Scott admitted that his team was “relying on projections of basically a higher bottom for the market,” which ultimately led to the decision to cut members.

Last month, CryptoGlobe reported that cryptocurrency exchange Huobi laid off 60% of its Brazil staff, although it is uncertain whether it was regulators or the bear market that was to blame for that downsizing.

In one of the Coindesk interviews following the news of restructuring at ConsenSys, Lubin expressed the need for these businesses be able to succeed regardless of market conditions. Lubin said:

“Certainly one goal is to enable ConsenSys and its projects to not be dependent on the price of these value tokens, that essentially they are all thriving businesses in their own right.”

Trans-Fee-Mining Exchanges' Market Share in Decline - Report

  • TFM exchange volume down 53% in September
  • Only 32% of crypto trading volume is TFM volume

According to the latest exchange report from CryptoCompare (September), the trade volume on “trans-fee-mining” -- or transaction fee mining (TFM) -- exchanges dropped dramatically between August and September, more than halving. The overall proportion of transaction volume in the crypto markets comprised of TFM has thus declined significantly during this period.

Overall volume by fee-typeSource: CryptoCompare

Specifically, trade volume on TFM exchanges accounted for $174 billion during September, down from $375 billion during August. The more classical taker-fee exchanges, which charge a small percentage to execute a market order, typically outdo trans-fee exchanges even if only slightly. But during September, they exchanged $358 billion, up from $355 billion in August, far out-trading TFMs.

Transaction fee mining (or “mining”) occurs when users are rewarded, rather than taxed for executing orders on an exchange. Typically, exchanges allow free trades for users posting limit orders, which are orders set at a certain price. Otherwise, if users want to buy or sell immediately at whatever the current price is, they are usually charged a small fee. The rationale here is that exchanges want as many users as possible to post orders, so that order books are nice and thick (traders like liquidity).

Trouble With Trans-Fees

The TFM exchanges go one step further by rewarding all users just for trading on their exchanges, with in-house tokens. The idea is, again, to attract more traders and thus more liquidity.

In a sense, this model is the epitome of speculation, whereby users accrue large quantities of tokens betting that they will someday be worth more. Some have claimed, however, that this incentive encourages “wash trading,” an unwelcome form of market liquidity that is actually banned in traditional, regulated markets. This is when the same entity, or colluding entities, trade back and forth with each other.

In traditional markets, this is done in order to manipulate assets’ prices and set up exploitative trades. Here, the goal would be different but the effect is still undesirable: exchanges with high transaction volume but low order book depth may result in erratic price changes on cryptoassets. CryptoGlobe tackled the question last year of whether or not this sort of trading constitutes “fake volume.”

In CryptoCompare’s June 2019 Exchange Benchmark guide (pdf available here), exchanges employing the trans-mining model were generally classified as “Lower Quality,” despite volume on such exchanges rising as a percentage of the total market at the time. It seems that the trend may be shifting again.

Featured image via Pixabay.