Introduction

We founded Ethos in 2016 with the mission of creating a financial ecosystem that is open, safe and fair for everyone. Our vision – unchanged from Day 1 – was to put the power of crypto directly into people’s hands through a robust, secure self-custody platform with integrated services. In other words, “your keys, your crypto” (although we have made huge strides in eliminating the consumer complexity of crypto keys)  If anything, the centralized crypto meltdowns of 2022 such as Voyager, Celsius, FTX and others have underscored the need for the Ethos vision more than ever.

The primary retail application of Ethos was the Ethos Universal Wallet, a crypto wallet that enabled users to generate their own unique crypto keys and to store, swap, purchase, send and receive hundreds of different digital assets.  The Universal Wallet became quite popular with over 100,000 users worldwide running on Android and iOS devices.  What we learned is that the mobile device can be a great storage device for crypto if properly secured.

Ethos self-custody and related blockchain technology was acquired in 2019 in a merger with what would later become Voyager. When we first met Voyager’s founders, we immediately saw the potential in combining the two organizations. We had built a best-in-class crypto platform and team with a large user base and Voyager had an order router and money services licenses. Combining the two platforms we believed we could create a company that could compete with some of the largest organizations in the space — and we were right. 

Shingo joined the Board of Directors, became its Chief Innovation Officer, and helped launch the first version of the Voyager trading app. The app was a huge hit and in 2020 growth exploded. The combination of an easy-to-use user interface, robust asset selection and native crypto functionality was unparalleled in the industry at the time. Voyager quickly went from a few hundred users to a few thousand, then hundreds of thousands and then millions, based on the scalable architecture built by the Ethos team. We learned that smooth and easy crypto trading designed for retail customers on a mobile app was indeed a “killer app” for the space. 

In February 2021, however, Shingo disagreed with the company’s direction and actions of its CEO. Due to these disagreements and ethical concerns, Shingo resigned from the Voyager Board and left the company. 

In 2022, Voyager shuttered the Ethos Universal Wallet entirely forcing its customers to relinquish self-sovereignty and  unknowingly turning control over their own assets to Voyager. At this point, management completely controlled funds, and users were in the dark about the risks inherent in a centralized trading platform. In fact, users were told the opposite: that Voyager always put customer safety first, that funds were FDIC-insured and that Voyager was one of the safest places to hold and trade crypto.   While supposedly “convenient” and protected by a “risk committee,” this was radically different from the original promise of crypto: “your keys, your crypto.”  

However the reality about how funds were managed were quite different. Rather than the cryptocurrencies being held safely in the hands of customers through self-custody, their crypto assets were co-mingled with other customer funds and then lent out by corporate management in incredibly risky ways.  While Voyager in theory had a “risk committee”, huge latitude for decision making rested with the CEO.  While consumers thought their crypto assets were safe and secure and owned by themselves, in reality they were invested into risky, unsecured loans without customer knowledge or consent to “hedge funds” such as 3 Arrows Capital.  Mind-bogglingly, Voyager lent customer funds with little conducted diligence or documentation from 3AC beyond their own assurances about their own assets.  No formal financials were provided (it’s unclear if 3AC could have even produced audited financials) Customers learned a hard lesson in the realities of centralized systems – that once you send your crypto to a centralized exchange, you lose all control and are subject to the sovereignty of centralized operators. Voyager – and by extension their customers, employees and shareholders –  learned a hard lesson, which is that once crypto leaves your control you don’t really own it anymore. 
Voyager turned out to be an early domino, with Celsius and then FTX following in rapid succession.  Rather than be a safe place to store crypto, centralization turned out to be a contagion infecting the crypto industry.  We wrote an editorial about this for Coindesk entitled The End of the Centralization Era in Crypto.

We Believe in a Decentralized Future

Users have a choice to either trust someone else to keep their assets safe (e.g. a centralized platform) or trust themselves and retain possession and control of their own funds. We believe in the latter. 

In the former case, we have now seen how co-mingling accounts on a centralized platform can subject customers unknowingly to the reckless behavior of others, exactly what they sought to avoid by investing in crypto assets in the first place. In the cases of Voyager, Celsius and others, it has led to massive losses and widespread pain . Would you knowingly hand the keys to your house to a potential burglar?  This is analogous to what could happen if you turn your assets over to the treasury management of a centralized platform or exchange, and did happen on some very large, previously highly respected platforms.

We wanted to create a better system where customers are in control at all times. Under a truly decentralized model, users are protected from the risks that come with commingling funds and turning control over your assets to someone else, whether that be a “risk committee,” treasury management, or a CEO.   

We want to bring users back to the original vision of Ethos and to the core philosophy of crypto. We believe in a Decentralized Future where the user makes their own decisions and controls their own destiny.

The New World of DeFi

Interestingly, with the exception of the volatility of digital asset prices, DeFi has proven itself while other centralized exchanges went bankrupt.  It is a financial ecosystem based on immediate validation and transparency and where “code is law.”  There are the inviolate principles that crypto currencies were based on, not the whims of individuals,  institutions, or governments who too often have conflicting motivations that can be quite opposed to the ultimate safety of your assets.  While still in its early development, this new approach has already led to many millions of transactions and billions of liquidity.   While the centralized platforms like Voyager and Celsius went bankrupt and algorithmic “stable coins” such as Luna lost value, the DeFi ecosystem has remained robust, fluid and liquid. DeFi paints a bright future where users defy the status quo by taking control back from centralized financial institutions, defying the middleman and doing transactions with counterparties directly on-chain, governed by code, not people driven by emotions, outside influences, and conflicting motivations.

A Foundation of Magic Keys and Vaults

We are building a new Ethos app built from the ground up to address these challenges head-on.  As founders, we are leveraging our experience building a decentralized solution (Ethos), contributing to the core rails of a centralized solution (Voyager, Celsius, others) as well as a community-driven collective ownership model (Particle) to rebuild a new decentralized platform where user control and decision making are sacrosanct core principles on which everything is based.  from the ground-up.  We are also honored to have many of the original Ethos team and community members joining us once again to make this vision a reality.

We are architecturing and building a new Ethos mobile app based on five fundamental  building blocks:

1. Magic Keys: We have rethought the crypto key from the inside out, and propose a new form of key that utilizes all of the latest advancements in technology to marry world-class security with convenience and ease of use.

2. Universal Vault: These keys will secure a user’s personal Universal Vault.  These Vaults will be similar in nature to crypto wallets, but with extra security options to keep the assets inside them safe and secure and equally important, easily backed up and recoverable.

3. Live Analytics: Users will be able to broadcast and execute transactions directly on the Blockchain.  There will be no need to withdraw or transfer funds, thereby eliminating counter-party and centralized risk. This same mechanism will extend to yield and more complex trades. 

4. Best Price Execution: Price discovery will occur on an aggregate basis across decentralized protocols, thereby allowing users to find the best prices and liquidity.  In this model, transactions can be split across multiple providers for optimal execution.

5. Ethos Rewards: The Ethos token will be a decentralized token encouraging users to take control of their own crypto vs. exposing themselves to centralized risk.

All five elements listed above will be integrated into a single user-friendly mobile app. Much like the original Ethos, this project will abstract and simplify what was previously a complex world.  This will let users access transparent pricing and complex offerings to their own individual risk profile while staying in possession of their funds at all times. You can simply think of this as a “Decentralized Voyager” – taking what worked and what was positive about Voyager and jettisoning those elements that didn’t put consumers first.

Magic Key Sharding

No single point of failure means – in our interpretation – minimizing the attack surface of a single mnemonic via sharding and also incorporating Social Guardians into the design of the app. We want to remove as many barriers as possible to make self-custody accessible to anyone. One of the most common issues that the average individual has with self-custody is losing their key. Our keys will be “magic” in the sense that they will be able to be sharded using Shamir’s Secret Sharing, and those individual shards are encoded and backed up with a double layer of encryption.  This gives the user the benefit of being able to restore their key in the event of loss or a new device.  In addition, keys can be easily “re-sharded” on a regular basis for an additional layer of security and peace of mind. 

Universal Vault

A Universal Vault is similar to a wallet, but with more layered options for security.  For example, we will use social guardians, a concept espoused by Vitalik Buterin in his paper referenced above. In this approach, a guardian can be anybody (friend, relative, spouse) who only holds “veto power” if they see suspicious activity.  In other words, if someone is trying to steal your crypto or identity, the social guardians act as a simple yet highly effective line of defense for your vault.  In addition, we will incorporate 2FA technologies to vaults, and envision hardware keys such as Yubi being added to Vault’s capabilities.

Ethos Rewards

The ETHOS token will be the native token of the Ethos protocol. The token will be used for improved pricing, early access to features and exclusive functionality. We envision the ETHOS token as a way of attracting users by giving back. There is no token sale. Initial tokens will be given away, for free, to individuals who have been affected by centralized meltdowns and users will be able to earn more by participating in the Ethos platform. The Ethos token will be a decentralized token encouraging users to take control of their own crypto vs. exposing themselves to centralized risk.

Users who hold or lock up sufficient ETHOS tokens will receive access to tiered “Trade Rewards” which will result in rewards based on trading activity on the platform. Ownership of the token is not necessary to access rewards, however, rewards will become more enticing the more tokens that the user owns.

The ETHOS token will also provide holders with early access to new features and discounts to future features. 

The ETHOS token will also provide holders enhanced referral rewards based on token ownership. The more tokens you own, the more you will be rewarded for inviting your friends!

The Future is For Everyone

It is time for you to take control. It is time that crypto was made transparent. It was time that crypto was built for people, not CEOs. It is time for crypto to be made accessible to all. Together, we’ll go back to crypto’s roots to create the future of finance. Because the future is for everyone.

www.ethos.io

The Future Is For Everyone

This is not an offer to sell or a solicitation to buy any digital assets.  The cryptocurrency space is volatile.  Please be careful and thoughtful  when purchasing any cryptocurrency coin, digital asset or token. This paper can be changed at any point without prior notice.  You are responsible for complying with local jurisdictional laws and regulations.  We encourage and support reporting and paying taxes on your cryptocurrency gains.