Analyzing the ‘Cartesi’ Token Sale on Binance

Project Reviews Jul 14, 2020

Since it appears that there's a lot of fanfare on Telegram regarding the Cartesi token sale (at least from the regular paid influencer channels)

We figured we would take a look at what Binance has cooking up next on their platform.

In conducting this review, we ask that users remain cognizant of the fact that:

A) We were (and are) not paid by any individual, entity, brand, organization or person to conduct this review

B) We have nothing to gain from either positively or negatively appraising this project

C) We will try to abstain from casting value judgments on the project and simply stick to the hard facts here - because facts always outweight opinion

D) Given everything written above, consider this review to be 'free' - which means that you're free to share it with whomever your heart desires.

With all that out the way, let's dig in, shall we?

Project Overview: Cartesi

A cursory search for more information on Cartesi should bring users to their main webpage -

The premise is laid out directly on the front page:

The Operating System for DAPPS

At first glance, this appears to mirror what Ethereum's core purpose is (remember, Ethereum branded itself as a 'super computer' for blockchain)

Scrolling Down the Page

A quick scroll down the page shows Cartesi promoting one of its alleged use cases (as shown below):

Apparently the game shown in the screenshot below is the, 'First fully decentralized game running on Linux'.

The meaningfulness of a game being 'decentralized' is not immediately apparent at this point, but we'll wait before appraising this advertisement for its merits.

A Further Scroll Down the Page

Using a very slick in-browser animation, Cartesi makes a pretty accurate assessment of the state of blockchain in stating the following:

Now as to whether this means that their proposed project provides the solution to this issue remains to be seen - but this brief commentary on the state of the industry is worth noting as it more than likely will serve as the prelude to why/how Cartesi believes that their project should be considered the superior alternative among all other blockchain options.

Scrolling a bit further down the page, we can see that the most unique proposed 'value added' in their project offering is the promise of a blockchain that will run on the backbone of the Linux kernel / OS (as to which is not yet clear at this point - we'll have to look at the whitepaper and their other technical specs to get a better idea of how they propose they will implement such a design in practice)

Red Flag #1: "Guaranteed Consensus"

Before moving forward, its worth noting that issues like the one that we're about to point out below may or may not stand out as a red flag to you, the reader, based on your personal motivations and goals. Its up to you to make that assessment rather than debating the merits of this label.

Scrolling just a bit further down the 'Cartesi' webpage, the following can be seen:

Of particular concern is the subheading (and underlying paragraph) for 'Guaranted Consensus'.

Why is This a Big Deal?

One of the more unique features of Bitcoin that is rarely spoken about is its asynchronous nature.

We've covered this concept a lot in the past in some of our prior publications, but to summarize briefly here - One of the main characteristics of Bitcoin's 'blockchain' that allows it to continue 'running', even in spite of chain splits / disagreements / would-be attackers attempting to double spend or re-orgnize the chain / block propagation delays / etc., is the fact that it is an asynchronous protocol.

What that means (in a nutshell), without getting too technical, is that Bitcoin is never in one defined state of truth - if that makes sense.

Which means that as miners are discovering blocks & relaying them to the network, all of the following is happening (at once):

A) Some nodes are entirely oblivious to the fact that a new block has been discovered - thus, their version of Bitcoin (if for a split second or two) reflects an 'outdated' chain if we're to assume that the block that our fictional miner has propagated is valid & will be accepted by the network

B) There are miners that may be aware of the fact that another miner has discovered a block, but they will continue to mine at that same block height in hopes that they'll be able to find a solution soon afterward to propagate. Depending on where they are geographically versus the geographical distribution of the network itself, the connection speed of nodes nearby them, & a confluence of other factors - like latency - they may still come out the 'winner' by 'orphaning' the competing block

C) The initial nodes that have received (and validated) the block that our fictional miner propagated have updated their chains to reflect a newer version of the previous chain that they had 'in memory', which has our miner's submission appended to the end of it. The height of the blocks is not as important as the proof of work behind said blocks (this stems from cryptographic validation - we won't get into that right now).

D) There are some miners that are aware of the fact that another miner has already found the solution & rather than continuing to mine on that block height until >50% of the nodes on the network have propagated that block to other peers, they will immediately begin creating a block template for the next block height and start mining away (there's a lot of money at stake, so there's no time to waste).

Keep in mind that all of these realities can coexist simultaneously without 'splitting' the chain or causing a breakdown in what's considered the 'truth' in terms of which transactions are validated (not verified - there's an important distinction in those terms).

The only reason why this is possible is due to Bitcoin's asynchronous nature as described above.

What Happens if You Take Away Bitcoin's 'Asynchronous' Nature?

Then you will strip Bitcoin of its consensus architecture.

Please read that above statment closely - because there's a stark difference between a blockchain being distributed and/or decentralized (even those two terms are mutually exclusive to a greater extent) and consensus architecture.

Bitcoin's Consensus Architecture

Bitcoin's consensus architecture is premised on proof of work down to its core.

In laymen's terms, that means that Bitcoin nodes are programmed to accept whatever valid chain that they receive with the greatest proof of work.

No politics, subjective versions of the truth based on the node operator's 'opinion' on what the 'legitimate' chain should be, or anything else.

Bitcoin was designed this way in order to ensure that there would be a reliable means of authenticating valid chains for nodes that were 'offline' for any period of time or those just joining the network for the first time.

How Do We Know This?

Because Satoshi told us this directly in his correspondence with Hal Finney in the Metzdowd e-mail list conversation chain stemming from his original proposition of Bitcoin as an idea and concept.

See Below:

[source:] ; (Satoshi's direct reply to Hal Finney's questions are highlighted in the above screenshot)

What Are the Consequences of 'Guaranteeing Consensus'?

The same ones that Stellar, Ripple, NEO, Ontology and a slew of other 'Proof of Stake' / 'BFT' / similarly situated protocols have had to come to grips with - if there is no consensus, then the protocol halts.

Yes, halts.

That means that no transactions are verified, validated, processed, etc., until there is a consensus reached that exceeds whatever fault tolerance threshold that the protocol in question has specified as necessary to be considered 'consensus'.

In most cases, this is agreement among 2/3 of nodes (classic BFT fault tolerance of 1/3 or 33% - $NEO exhibits this property).

Below Are Real Anecdotes of Major Blockchains Coming to a Dead Halt Due to the Protocol's Failure to Reach Consensus:

CoinTelegraph Article From May 2019 Detailing the Time When Stellar's Blockchain Went Offline Temporarily Due to a 'Node Outage' on the Network, Which Reduced the # of Available Nodes for Consensus Below the Threshold Necessary to Reach Consensus on the Network =

$NEO's Blockchain Goes Offline After One (or more) of its Nodes Goes Offline [this situation was further exacerbated by the fact that there were less than elevan 'validating nodes' at that point in time (which were all ran by $NEO's team ; thus, under their BFT fault tolerance directive, their protocol could not reach consensus if more than 3 nodes were to go offline at any point in time, even if all the remaining online ones were in unanimous agreement)] =

CoinTelegraph Reported About $EOS' blockchain downtime in 2018 (what would be the start of an increasingly concerning pattern for them as time went along) =

At this point you probably get the picture.

Main takeaway here is that:

a) 'Guaranteed Consensus' takes away one of the 'fan-favorite' features of Bitcoin that makes it "blockchain", for lack of a better way of phrasing things

b) It places projects / protocols under the burden of always coming to a consensus, lest the protocol come to a screeching halt. And, as we've seen with the examples above from projects that had market capitalizations in the billions ($EOS raised $4 billion from investors alone during their 'ICO' phase) - a failure to reach consensus is much more than just a vague possibility

c) There is no 'natural' / 'built-in' means of resolving consensus conflict. For instance, on a PoW (proof-of-work) based chain, if there is a true divergence in philosophy in terms of development or a split among miners regarding which chain they personally consider legitimate and wish to mine on - there will be a "chain split" (beyond the scope of this write-up). Thus, rather than coming to a halt, the chain will merely split into two different versions - much like we saw with Bitcoin and Bitcoin Cash in August 2017

Now We're Getting Worried: 'A Decentralized Internet'

Scrolling down even further past the last section that we took issue with (re: 'Guaranteeing Consensus'), the following was displayed:

'Decentralized Internet' is Not the Issue

Well...not here at least.

Putting aside the natural qualms that should arise when seeing a concept like 'decentralized (fill-in-the-blank)' is promoted without qualifying why decentralization is a desired characteristic (keep in mind that Satoshi never wrote the word 'decentralizational' / 'decentralized' or any variant thereof even once in the original Bitcoin whitepaper; yeah, seriously)

Our biggest concern with this advertised feature of the blockchain is the audacity of the overal claim now

What that above statement means is that, in light of the previous claims made by Cartesi on their website - specifically that they had created a blockchain platform that solves problems that have plauged this industry for the better part of the last decade - they are now adding on to an already sensationalized promotion of their project by asserting that Cartesi will also power a 'decentralized internet'.

Issue #1: The Internet is Already Decentralized

Yes. It is. This is even in spite of the IETF / IANA / ICANN / registrars / their ARPA origins (internet started as a U.S. military research project) and other associated features that may lead many to believe otherwise.

A) Despite only 13 'root zone' servers being in existence ( - these 'zones' (labeled by letter; 'a' through 'm') do not represent one fixed location, but rather a zone (for DNS resolution). There's a website that provides a constantly updated list of all root zone servers (link = One quick look at the map will show that these servers are located all over the planet

B) There is no lofty moral reason behind the internet's decentralized nature. It must be decentralized in order to function the way it does (and continue to function). Otherwise, this 'world wide web' protocol that we're using would be limited to what's available locally and we certainlly would have an OSI7 layer structure creating the 'backbone' of all communications on the internet. Root zones in specific are purposefully replicated among several hundred / thousand servers, with the information on each duplicated & shared among each other in order to ensure that the "internet" (as we know it) will continue to function should one of the 'root zones' ever be taken down for whatever reason (yes, people have tried). [If you're curious, read up a little on root zones! You might find it interesting]

C) The different players that leverage the internet are all independent actors. From Google on to folks like ourselves that are publishing content about blockchain - and, perhaps not ironically, Bitcoin and blockchain itself (can't connect to a blockchain w/o internet - the network is built on the internet). When looking at the infinite ways that the internet is being used today, it should be more than clear that its existence is extremely decentralized.

All the points made above are obvious facts though and as readers, you were probably well aware of each.

Thus, We Should Ask a Few Hard Questions, Such As:

  1. Why would Cartesi feel the need to advertise that their blockchain project creates a 'decentralized internet', when its patently obvious that their idea proposes leveraging the ineternet to deploy a 'decentralized' network? There is a stark difference between using the 'World Wide Web' and using the internet. Proposing any solution that rebuilds the internet itself is ludicrous and should raise eyebrows when issued by those that are implicitly suggesting they have an unrivaled level of expertise in protocols / networks / etc., if they have truly curated a solution to the most pressing issues facing the blockchain industry today.
  2. Why is there a continued emphasis on 'decentralization'? There are plenty of decentralized networks in existence (like, the internet, for example). This is not a novel concept. Again, decentralization was not mentioned once in the Bitcoin whitepaper once.
  3. Why is there no greater information about the team that's behind the project on the front page? Almost equally as important as the project's merits are the ones responsible for bringing it to the forefront. Many times, that can be another major indicator of the project's true intention among other things.

Binance Launchpad Announcement

Of particular interest to us in this analysis is Binance's Launchpad announcement (and subsequent promotion of the 'Cartesi' IEO on their platforms).


Since Binance is essentially doing business with this project (they certainly aren't listening them for altruistic reasons), it seems worthwhile to take a look at how Binance has depicted this entity.

Are their statements about the project overly favorable? Are they minimal and explicitly factual?

The answer to those questions above (and many other) will more than likely give us significantly more insight on Binance's true involvement and ties. And if not, then should at least give us a place to go look as well as a 'whiffing' scent.

Taking a Look at the Most Recent Binance Press Release for Cartesi

Just two days prior to the publishing
/ completion of this report (April 13th, 2020), Binance published their traditional promotional announcement on their website (link =

See below:

What is Binance's Cut in All of This?

To recenter our focus here (because we haven't forgotten about Cartesi at this point) - we're only curious in finding out more about where Binance's interests lie as far as IEOs are concerned because history shows that Binance has been far from transparent and forthcoming about their listing fees and arrangementes.

Its also worth keeping in mind that, not so long ago, CHangpeng Zhao (CEO of Binance) issued this statement on Twitter regarding listing fees:


However, their track record - in terms of the quality of projects listed on their exchange has fallen woefully short of the implicit promises made in the Twitter post shown above.

In addition, there have been a number of complaints and varying numbers tossed around by project leaders and other entities in the crypto space that engaged in business with Binance at some point.

In lieu of perpetuating rumors, we were able to uncover a verifiable source that provides at least some clue to how much Bitcoin stands to gain from coin listings.

Blockstack SEC Filing

[link =]

Above is a link to Blockstack's Reg A Exemption submission to the SEC, which was filed in October of last year (10/04/2019).

In the report (still available online), there is an entire section that outlines the project's business dealings with Binance.

The details of the business arrangement between Binance and Blockstack that were provided in the SEC report shed considerable insight on just how profitable the IEO craze has been for the exchange.

Statements like the following from the report are worthy of special attention:

"[Blockstack]...has provided a deposit, which is ultimately returnable to the Company provided certain adverse trigger events do not occur, of the equivalent in bitcoin, binance coin or other stablecoin of USD $500,000, plus 2,500,000 Stacks Tokens which were allocated but not distributed as part of the hard fork described above (the "Deposit")."

Let's pause for a moment.

The only reason why Blockstack would be mentioning a business agreement with Binance in a Reg A exemption filing with the SEC is because Binance was an investor.

Quick Breakdown

If you're not familiar with SEC filings - a Reg A exemption is one of the various exemptions that businesses can file with the SEC before (or after) holding a public offering that allow for a loosening of the requirements that must be followed in order to hold an offering in the first place.

Loosening of What Requirements?

Specifically, the requirements that the SEC is now accusing Telegram of shirking, resulting in a $1+ billion dollar litigious action by the federal agency

What's a 'Reg A' Exemption?

A Reg A exemption is generally pursued when an entity is holding an offering that:

A) Does not offer / proffer the securities to any U.S. residents [at home or abroad]

B) Promotes the offering in such a way to where U.S. citizens are not 'caught in the crossfire' <— in laymen's terms, this means that on top of not accepting money from U.S. citizens for the offering, entities looking to attract investors must not do so in a way that would also involve inadvertently (or purposefully) targeting U.S. customers as well.

More information on the exact regulations, guidelines, etc., associated with a Reg A exemption can be found here:

Re-Analyzing the Deal Between Blockstack and Binance

Here are the highlights, to quickly summarize things:

  • The agreement between Binance and Blockstack ironed out the terms by which Binance would, "list the Company's [Blockstack] Stacks Tokens on its cryptocurrency and token exchange platform (the 'Platform') an enable users of the Platform to trade the Stacks Tokens on the Platform."
  • The deposit that was given to Binance was [and perhaps still is] "ultimately returnable to the Company provided certain adverse trigger events do not occur" [the means & nature of such events were not stated in the SEC filing]
  • The funds that are to be returned in the event of said undisclosed 'certain adverse trigger events' ultimately adds up to at least the value of $500,000 (worth of USD) + 2.5 million 'Stacks Tokens'

Sidebar: (Determining the Value of the Stacks Tokens)
Based on an SEC filing by Blockstack, submitted on September 9th, 2019 - Blockstack initially sold/offered 62 million of their tokens at a price of $0.30 each in conjunction with another 78.3 million tokens that were sold preferentially to investors at a value of $0.12 / token.

link =

Doing the Quick Math on the Blockstack Token Sale

If we were to opt for benchmarking the higher price / token sold by Blockstack (30 cents each), then those 2.5 million tokens that Binance pledged to pay back Blockstack in the evenut of 'certain aderse trigger actions' were worth approximately $750,000.

Combined with the $500,000 in value from USD (that would be paid via the equivalent amount in USDT / Bitcoin / $BNB [that last option is of interest]), the total amount for the listing (by Blockstack) was more than likely $1.25 million (based on the information that we have available at our disposal).

Quick Look at the Blockstack Price Chart (from CoinMarketCap):

Captured above, the initial listing price of approximately $0.21 falls in line with what was publicly recorded regarding Blockstack's offering.

For some reason, this total was grossly misreported by 'The Block Crypto' - a publication that has been excorciated in the blockchain space many times over due to their failure to accurately report events as they occur in the blockchain space.

Full Breakdown of the Binance IEO Scheme

In case the information presented above did not make it explicitly clear - the actions of Binance in their Initial Exchange Offerings are entirely devoid of ethic, legality or integrity and rather than catering to its customers by providing the suite of services that they frequently advertise - they have instead decided to treat their userbase as a pool of potential 'marks' for their next payday.

Rather than continuing to define this in such hyperbolic terms, we're going to go ahead and break down the Binance scheme, in full, for everyone below.

Binance Charged Blockstack At Least $1.25 Million and Essentially Ran a Micro-Ponzi With the Token Offering

The listing price for Blockstack can be determined by analyzing Blockstack's Reg A+ exemption filing with the SEC in October 2019. (link here =


In the filing, it is stated explicitly that a business agreement was forged between Blockstack & Binance

Barring any 'certain adverse trigger events' (which Blockstack failed to expand on in their filing), they claim that they would be entitled to receive (at some point in the future)  a reimbursement of $500k (in equivalent USD value in the form of Bitcoin / Binance Token / USDT) as well as 2.5 million 'stacks' tokens.


From those details above, we know that at least $500k was entitled to Blockstack (there's no reason for Binance to be making charitable donations to an entity that raised $80M+ in their Reg A+ exemption)

Additionally, there is another SEC filing that outlines the cost, per token, throughout Blockstack's offering period.

That document can be found on the SEC's website here =


In specific, it is stated that:

a) 62 million tokens were sold at a price of $0.30 / token

b) 78.3 million tokens sold at $0.12/token

The latter option clearly refers to the Binance token sale as they state explicitly that these tokens were designated to be sold during a 'voucher program'.

Reading Between the Lines

The 62 million token offering (at $0.30 / token) is designated as the general offering in the SEC filing.

The 78.3 million tokens (at $0.12/token) were designated to be sold as part of the voucher program.

We're going to focus on value #2 for a second.

(keep in mind as a preface that all of these tokens were generated by the Blockstack team ; no tokens can be listed or sold anywhere without them explicitly forging this business agreement, then subsequently shipping the tokens off to the other party [Binance in this case])

Doing the Math

They state that, "37,946,900 Stacks Tokens [were] sold in the voucher program for which the Company received proceeds of $4.6 million."

If they received proceeds of $4.6 million from the token sale and they're the only counterparty of these tokens that we know of (apart from Binance), then it is more than logical to deduce that Binance took whatever was left over.

Back of the Envelope Math

  • 37,946,900 * $0.12 (per token) = $4.55 million

^^ This would account for all of the money reported by Blockstacks as their revenue from the general token sale on Binance.

So why in the world would Binance still be on the hook for >$1 million?

Final Answer

There will be people that don't want to accept that this is what the reality is - doesn't matter to us. Let's keep it to the numbers.

The only way that Blockstack could receive all of the funds accrued in that token sale is if Binance was the counterparty purchaser.

Which makes even more sense, because ultimately - the project listed on Binance at >20 cents per token (an approximate +70% delta directly at listing).

How This is a Symbiotic Business Partnership

a) Blockstack just needs to put up the up front costs in order to get listed on Binance

b) Binance can sweeten the deal to entice projects to list on their exchange by saying, "Hey - you won't have to pay out of pocket in the long run. Just agree to sell your tokens for a seemingly below market value [remember other investors were buying these tokens at $0.30/each vs. the $0.12 / token via the general offering] ; We'll forward you the funds from the token sale up front because we know we'll make our money off the backend when we sell these very same tokens on our own exchange."

Why This Works For Binance

It isn't just the price bump. They're set up so that they can't lose.

If you look very closely at the SEC offering, Blockstack explicitly stated that they were entitled to recoup some portion of funds back from Binance (barring some unforeseen negative circumstances - whatever that could be), that would be an equivalent [in dollar value].

Those equivalents were Bitcoin / USDT / Binance Coin.

Breaking Down the Binance IEO Ponzi Scheme

In order to participate in these token offerings, users on the Binance exchange must hold a certain number of Binance coins over a pre-defined time period that's announced beforehand. These tokens essentially serve as a 'weight' that's then applied to a "random" lottery ran by Binance to determine who has the right to purchase tokens with the number of tokens also being based on the amount of $BNB that the user held.

What's above in #1 is kind of complex. In laymen's - think about it this way - users must purchase $BNB in order to participate in the token sale

We know from the Etherscan wallet history (here (, that at least 85% of all $BNB tokens are on Binance's exchange ; out of that 85%, >98% of those tokens belong to wallets that are not an exchange storage / hot wallet (i.e., they're not for customer use - Binance just owns them outright).

Given the # of $BNB that Binance owns - its no leap in logic to say that they must be the counterparty for at least some of the $BNB trades that users on the exchange make (i.e., the buy order). Again, this is math based on the percentages of how much of the $BNB is owned by Binance & the total alleged user participation in each of these sales (remember, they publicly report this on their site / Binance Labs).

That same $BNB that was sold by Binance is then given back to Binance in exchange for an asset (like Blockstack, for instance) that they may or may not need to pay an upfront cost for (remember, they gave Blockstack an IOU for something)

Blockstack's IOU can be (and most likely would be) paid back in the form of $BNB. You know, the same $BNB that users bought from Binance, then gave right back to Binance in exchange for yet another speculative, zero-worth digital asset that had zero price discovery outside of what Binance / Blockstack decided it would be (IEO per token price)

Now Binance can take the tokens that they have left and sell that against the Bitcoin that the pairing will be listed against.

^^^ Let's not forget that the listing price for Blockstack was >70% from the IEO price at listing.

TL;DR: The above describes how Binance has been able to liquidate down hordes of its tokens by hyping up IEOs for projects with zero objective value in order to covertly swap said tokens out for $BTC.

Main Takeaway

As has been stated in this channel countless times - there is hardly six degrees of separation between Binance and the coins that they list as 'IEOs'.

In fact, under this scheme - it would be more accurate to consider Binance to be part of the team.



Happy to serve and help wherever I'm needed in the blockchain space. #Education #EthicalContent #BringingLibretotheForefront

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