Encryption startup NuCypher has finished distributing its network’s native token, NU, to over 2,000 prospective node operators who staked more than $125 million worth of ether (ETH) during the month of September. NuCypher's system will hit Ethereum's mainnet on Oct. 15.
Primarily marketed as a solution for developers building decentralized applications (dapps), NuCypher helps firms encrypt data before they upload it to decentralized storage networks, while also retaining control over who can read the data once its uploaded (using an advanced form of flexible cryptography called proxy re-encryption).
On the other side, participants who run the network’s nodes earn fees in return for performing cryptographic functions and maintaining the network. To participate, nodes need to stake NuCypher's token, NU. The company needed a way to distribute NU to entities it might reasonably expect to participate once it goes live, and the solution it came up with was called “WorkLock.”
Under NuCypher’s WorkLock token distribution program, participants looking to run nodes were required to lock in a minimum of 5 ether (worth roughly $2,000 depending on when the ETH was committed). It also requires the staked ETH stay locked for a minimum of six months, starting the day the mainnet launches. The onerous collateral requirement levied on aspirant node operators was meant to dissuade users from claiming NU tokens and not participating in the network.
While participants can choose to stay or leave with their escrowed ETH after the six months pass, if they attempt to withdraw earlier or act maliciously, they would have to forfeit the staked ETH.
“What it allows you to do is stake or escrow ETH into this WorkLock smart contract. You lock it up for six months from mainnet launch and that grants you this new stake that you can use to operate a new NuCypher node,” co-founder MacLane Wilkison said in an interview.
Last October, NuCypher announced the completion of a $10.7 million token sale from investors such as Polychain Capital, Bitmain, CoinFund, Arrington XRP Capital, Notation Capital and others.
Wilkinson founded the company alongside Michael Egorov, who also founded the popular automated market maker for stablecoins Curve.