The STORJ token is an integral part of the Tardigrade network. STORJ tokens provide a quick and easy way to transfer value between Storj Labs, those who provide storage capacity and bandwidth to the network, and those who use the network to store and retrieve data. We are pleased to publish our quarterly STORJ token report for Q1 2020. Please note below that, while we continue to explore technical mechanisms to perform the equivalent of our rolling token time-locks, we do not intend to relock the tranche that unlocks in Q3 of '20, as explained below.
We started publishing token reports in 2018 (see our first one here and our most recent one here), and have provided quarterly updates like this one, which are published in the subsequent quarter on our blog. We also provide regular updates on token balances and flows in our town hall meetings which are recorded and posted online.
The information in this report can be recreated directly from the Ethereum blockchain, but we find it helpful to compile the information for our community and present it in these blog posts in a clear and transparent format. Just as we make our code and other materials publicly available, we strive to make our token balances and flows open and accessible.
The detailed report appears below, but here's the TLDR (please make sure to read the disclaimer below):
a) 245.0 M STORJ are in rolling timelocked contracts. As previously discussed, we initially relocked 100% of our timelocked tokens every six months. During Q1 of 2019 we divided the timelock reserve into eight equal-sized tranches of 30.6 M tokens that unlocked in successive quarters. We announced a policy that as each tranche would unlock, it would be relocked to the same quarter two years later, unless at least 90 days advanced notice was provided. For example, the tranche that unlocked in Q1 of 2019 was relocked to Q1 of 2021; the tranche that unlocked in Q2 of 2019 was relocked to Q2 of 2021; and, the tranche that unlocked in Q3 of 2019 was relocked to Q3 of 2021. Each of the eight tranches has its own address, which are provided below. In Q4 of 2019, however, we began examining a technical solution that would alleviate the need for time-locked tranches. Currently, we have decided to continue our current mechanism for performing lock-ups until that mechanism is in place. The technical mechanisms we are exploring, including potentially using a third-party custody service, will achieve the technical equivalent of taking tranches that unlock and keeping them out of circulation for an additional two years, unless we provide notice 90 days in advance of the lock expiring. The tranches that unlocked in Q4 of 2019 and Q1 of 2020 have been relocked, respectively, to Q4 of 2021 and Q1 of 2022. The tranche that is unlocking at the end of Q2 '20 will be relocked until Q2 of '22. However, we plan to NOT relock the tranche that unlocks in Q3 of '20. This is primarily as a precautionary measure to ensure that we have sufficient operational reserves for the last quarter of this year. It is impossible accurately to forecast the rate of growth of our service, the general crypto markets, and the extent to which our token price will be impacted by global financial uncertainty.
b) We began the quarter with no STORJ reserved for converting the legacy SJCX token. As explained in our Q3 STORJ Token Balances and Flow Report and in our Q4 STORJ Token Balances and Flow Report, after providing ample notice to holders of SJCX, including via direct email messages, we executed on our plan to shut down the SJCX-STORJ converter at the end of 2019. The conversion from the Counterparty asset (SJCX), on the bitcoin blockchain, to the ERC20 token (STORJ), on the Ethereum blockchain, began over two years ago, with minimal conversion in the past quarters. To effectuate the closing of the converter, 6.8M STORJ was transferred out of the converter in Q4 2019 and into the operating supply. For that reason, there is no activity reported in the "Reserved for SJCX Conversion" section of our report, and this is the last time it will appear in our quarterly token flow reports.
c) Of the 36.4M STORJ in operational reserves held by Storj Labs at the end of December 2019, 9.6M were used in Q1 of this year, primarily for paying Storage Node Operators, third-party service providers, and Storj employees through the STORJ token salary and bonus programs, leaving a total of 26.8M in our operational reserves.
d) There were 143.6M STORJ in circulation at the end of December 2019. In Q1 2020, an additional 9.6M were put into circulation, making the total circulating supply approximately 153.2M STORJ at the end of Q1, with another 26.8M in operational and non-timelocked reserves held by Storj. The bulk of the operational reserves are held in a cold wallet.
e) The total non-circulating supply held by Storj Labs is 271.8M, comprised of the 26.8M in non-time locked reserves (operating supply at the end of the period) plus 245.0M in timelocked reserves (long term lock up at the end of the period). The total supply is 153.2M in circulation, plus the 271.8M non-circulating supply, which totals 425.0 M.
In May of 2017, Storj Labs International SEZC (formerly Storj Labs (BVI) Ltd), a wholly owned subsidiary of Storj Labs Inc., conducted a public token sale. While most of our focus in the past year has been on building our company and our network, we want to provide a detailed update on token flows since launching the network. As a reminder, we intend to provide a quarterly update on the business and network through our quarterly town hall meeting. It's our intention to produce this token report on a quarterly basis. This report has been independently verified.
The Company reports its tokens to management in two categories:
a) Long Term Lock Up
b) Operating Supply
Long Term Lock Up
245 M STORJ are held by Storj Labs for future use (lines 1-3). These tokens have been split into eight equal sized tranches, which are currently locked, with expiration dates over the eight successive quarters. As noted above, we paused locking and unlocking in Q4 2019 in anticipation of a technical solution to lock ups. However, we have not yet found and implemented a better technical solution than our current approach, and so we have relocked the Q4 2019 tranche and Q1 2020 tranche to Q4 2021 and Q1 2022 respectively.
Reserved for SJCX Conversion
At the time of the 2017 token sale, we established a reserve and conversion mechanism for the conversion of SJCX tokens to STORJ tokens at a predefined rate of 1:1. We initially set aside approximately 51M SJCX tokens for conversion, and announced a deadline of October 2017 to convert SJCX to STORJ token. We extended the deadline to accommodate requests for conversion. Ultimately, we saw no material conversions in Q2, Q3, and Q4 of '19. So, we deprecated the converter on January 1, 2020, and returned the remaining 6.8M tokens to the operational reserve.as reported in last quarter's token report (lines 4-7).
We track the operating supply of Storj tokens (lines 8-17). These tokens are held by Storj Labs, Inc. or Storj Labs International SEZC and are intended to be used for operations as described below.
While we quote payment rates to Storage Node Operators in dollars, Storj Labs pays Storage Node Operators using the STORJ token, based on the current spot price on the major exchanges. If, in any given month, the amount to be paid to Storage Node Operators exceeds the amount of STORJ tokens received from customers, there is a net outflow of STORJ tokens (line 9). As expected, this number increases with the launch of the V3 network, which occurred in Q1 2020. In Q4 2019, there were .8M in payments to Storage Node Operators. That number increased in Q1 2020, as reported above, to 2.5M.
Line 10 is to report any repurchases of STORJ from the open market. There were no repurchases in Q1 of 2020.
In addition to Storage Node Operator payments, we make payments to certain service providers (e.g., community leaders who monitor our various forums, respond to questions from users, and perform other community-related tasks; bug bounty participants; consultants; contractors) in STORJ token (line 11).
Line 12 is for any SJCX conversion made outside of the token converter referred to above.
We have a quarterly bonus program for Storj Labs employees based on company milestones defined by management. We also have a voluntary program to allow employees to take a portion of their salary in STORJ token. Finally we have various spot bonus programs from time to time. We track all of these programs in line 13.
Line 14, "Other," is reserved to report activity that doesn't fall into any of the other categories including, for example, payments to service providers paid out in a quarterly timelock.
Line 15 is to report a decision to transfer STORJ from Long Term Lock Up to Operating Supply. We have announced our intention to NOT relock the tranche that will unlock at the end of Q3 '20, and those 30.6M tokens will be reported here in the Q3 20 token report.
Line 16 is to report any transfer of STORJ from Reserved for SJCX Conversion to Operating Supply, as occurred in the previous quarter due to the scheduled deprecation of the converter.
Line 18 is the non-circulating supply of STORJ, which is the number of tokens in Storj Labs custody.
Line 19 is the total circulating supply of STORJ tokens, which is the number of tokens outside of the custody of Storj Labs.
The maximum total that could be in circulation is 425.0 M (line 20).
We've provided addresses for our major reserves below, so that totals can be easily verified.
If you have questions, clarifications, or suggestions on how we can better present this information in the future, please let us know!
This report is provided to the many individuals in the Storj ecosystem, concerning the circulating supply and flows of the STORJ token.
STORJ tokens are intended to facilitate the provision and receipt of data storage and related services through Storj Labs' software application, which serves as a user interface and development platform on the network. STORJ tokens are not intended to be a digital currency, security, commodity or any other kind of financial instrument.
The contents of this publication contain a high-level overview of the network and the STORJ token, and are subject to change as Storj Labs refines its plans. Changes to the network, the STORJ tokens, and other information referenced in this post are entirely within the discretion of Storj Labs, and could result from commercial, technical or legal issues, among others. We believe that greater transparency around the STORJ token will contribute to the willingness of users, Storage Node Operators, and other service providers to participate in the network. While we have made every attempt to be accurate and thorough in the production of this report, it is provided as is, and you should not rely on this report for any decisions regarding the use, acquisition, or disposition of STORJ tokens.