Synereo / HyperSpace Post Mortem

I’ve been doing Synereo for a long, intense period. Longer than my Ph.D. student days. Longer than my compulsory military service. Longer than Trump has been president.

It all started with a vision, announced to the world 6 years ago, and a lot of passion to materialize it. I had been deep in the blockchain space since early 2011, waiting for the opportunity to do more with the technology than play with better forms of money.

Synereo was announced October, 2014 as I hosted the “Bitcoin 2.0: The Next Generation of the Decentralized Economy” panel at the Inside Bitcoin TLV conference with David Johnston (MasterCoin), Vitalik Buterin (Etherium), Stas Oskin (Counterparty) ,Lior Yaffe (NXT), Dr. Gideon Greenspan (CoinSpark) and Alex Mizrahi (Colored Coins).

After years of going through many iterations, testing out (and becoming disappointed with) many forms of emerging tech, raising funds from a supportive community, launching multiple products and iterations on these — the Synereo team finally launched something that we all loved in HyperSpace.

[From a Cointelegraph piece]

HyperSpace had sufficient elements of decentralization, both technological and organizational, to be a meaningful contribution to the world of decentralized social media. It corresponded well with the original vision, and could also evolve towards realizing it in full. It had a stable, cohesive team working on it, almost all of them sitting in one office in Tel-Aviv. Most importantly, HyperSpace was embraced and liked by its forming community, also showing exponential growth in users and activity.

Then, in early 2019, a short few weeks after launching it, we knew we had to shut it down.

Synereo, Team HyperSpace

In a way, having to shut it down was not unexpected; the reasons leading to the decision — forced on us — have been plaguing us from the get go. Synereo was the first blockchain and crypto-token project in Israel that has acted legitimately, above board, in collaboration with the best experts available for regulation, governing laws, and accounting, and jumped through all of the hoops put in front of us so that we could (supposedly) operate smoothly. We were Deloitte Israel’s first blockchain client, and I personally spent dozens of hours (if not more) in their Offices in the Azriely towers, explaining again, again and again what blockchain was to old men looking at me like a curiosity, often with ridicule, though eventually morphing into awe.

As a startup CEO, the last thing you want to do is spend hours and hours speaking with people who aren’t directly involved with creating a product, marketing and selling it to potential users, or raising money for the endeavor. In my days as Synereo’s CEO, and even at some particularly critical times, I’d spent up to 30% of my hours dealing with legal, accounting, and regulatory nonsense. Even later down the road, with both a COO and a CFO on board, the weight on our necks was always there. Always some risk, always some exposure, always some position that we have to take — and continually fight to uphold.

[Some more on that; skip if you like: to make things worse, the hundreds of work hours spent in endless discussions with Deloitte ended up amounting to absolutely nothing. After three years of working with them, and while they were celebrating themselves as “leaders in blockchain” in various fancy events, they were still completely unwilling to take any position with regards to how Synereo should account for its created AMP tokens, for their crowdsale, or for the Bitcoin received for them.

After years of explaining, pushing, planning, refining, and hunkering down on the depressing minutia of accounting law — kilohours wasted and dollars down the drain — we had to restart the whole process, 3 years behind on submitting financial reports, from scratch with BDO — who, good ending — actually had the balls to take a stand.

Of course, due to the novel accounting paradigm inherent to the blockchain space and the convoluted nature of the laws (or absence thereof) regulating it, the company is still undergoing an audit by the tax authorities, all the way back to its first ever submitted report in 2015 and going to this day. A special kind of punishment for a blockchain entrepreneur, and one that I will likely have to deal with for years to come.]

In short, instead of working to realize the vision so many people bought into — investors, co-founders, team members, community ambassadors and members, and our users — I’d wake up every morning and go to work at the shit factory, fighting for Synereo’s basic right to survive as a “blockchain company”.

But it wasn’t all doom and gloom. It was still a lot of fun, and certainly, I spent much of my time actually doing something awesome: designing a decentralized social network where people were incentivized, and rewarded, for contributing to what makes the platform great. Encouraged to create, curate, and share content others appreciate. Motivated to form and manage communal spaces, micro-internet cultures, that thrive as they attract the attention of more and more users. And not just that, but working with a collection of lovely, committed and skillful people — for bringing my own designs into existence.

I also got to travel all over the world and give talks, and have chats with amazing people, about what I care about. About the foundations of my thinking about this going back to my Neurosci research and work on technological deliberative democracy platforms; about how this is an evolution of collaboration springing directly from the same recipe pushing human history along throughout the ages; about the importance of decentralization in social networks, and beyond, in addressing some of the biggest challenges today.

This is the sort of thing you rarely hear about being a startup CEO; about how great it is to be around top thinkers, experts, and movers from your industry and related spheres. So much to learn, so much personal growth, and — if you’re doing it right — all in service to your own company; to your shareholders, to your team, to your users.

Israel was not, and still is not, ready for blockchain. The “startup nation”, from which so many FinTech startups emerged, simply could not wrap its regulation around non-fiat money and its almost-frictionless DLT-based use. Oh, it taxed it alright — but good luck getting money into the bank to pay these taxes or convincing the authorities not to repossess your ass as you struggle to do so.

And so, after years in the making, and following a depressingly short time up in the air, Synereo/HyperSpace had to shut down because banks in Israel simply refused to continue working with us. Despite paying our taxes, working under a legitimate legal and accounting framework that took us years to design and get approved, being a household name in the blockchain world, and employing top-tier expert employees in Israel, there was nothing we could do to convince our bank to continue working with us, nor start an account with any other.

For a short grace period given to us to find an alternative solution, we gritted our teeth and tried to continue business as usual. We pulled on every thread, fired in all directions, but were ultimately unable to find any reasonable solution allowing us to continue employing our existing team. All the while, we learned of new regulation that made the basic premise of HyperSpace — users holding their AMPs on the platform and using them as “utility tokens” to Amplify content and Spaces on HyperSpace — illegal as long as we did not obtain a particular license, at the time not given to any of 2000 other businesses operating in Israel.

And so, HyperSpace was stillborn, suffocated in the womb of its mother. Unable to pay its employees, and with its basic premise of operation falling outside of regulatory guidance and without recourse, the incredibly hard decision, but simple in its inevitability, was made to shut down.

Oh, we still looked for lifelines. Partners in other places in the world… new decentralized tech that could help us transcend regulatory concerns… and even a hand-off to the community. But we were exhausted, defeated, and, in the depths of the 2019 bear market, had a hard time finding excitement for a struggling blockchain project in anyone around us.

A company that spent significant time at the top 20 of CMC, peaking at 5; a household name in the entire early blockchain space; a pioneer bringing new technology to its homeland - wasn’t good enough for Israel

A couple of other things that took the wind out of our sails are worth mentioning:

The Universal Music Saga

Somewhere in 2017, we started a long — and depressing — ongoing conversation with Universal Music Europe about entering a collaboration for a music competition run on WildSpark, our earlier product.

Synereo co-founder, Anderson Mccutcheon, meeting the head of UM in Vienna, Austria

Long story short, it was always “two weeks away” from being launched until the death of us. Going through the infinitely intricate bureaus of the slow moving giant, every month or so we’d receive a revision for how the contest would work; its conditions; it legal requirements; its technical specifications; its prizes; its timelines; its fucking GDPR compliance; its UI; its allowed language; and so on and so forth. Synereo ended up spending hundreds of man hours dancing around these specifications, also keeping WildSpark going for much longer than we would have otherwise, delaying the launch of HyperSpace significantly.

Eventually — to everyone’s amazement at the time — the contest was a go on HyperSpace. By that point, to assuage the “blockchain fears” of the UM overlords, the contest was rebranded as a “research project”. A site was created, a plan was formed, and the launch was imminent.

Aside from precious dev hours, we also spilled lots of capital on PR. This would be an event that would lend credence to HyperSpace, and finally, really show off its capabilities. Its unique offering to the world. The day came, social media posts were made, PR was published around various tech sites, and …

And nothing. Vivendi, UM’s parent company, freaked out about it — there was some blockchain scandal du jour, now long forgotten — that made them immediately pull out all communications, hours after they were released, and before the contest had a chance to begin. An indefinite halt was put on the collaboration, effectively signing the final death warrant for this wasteful project.

Wading through the swamp

“Hey, can we make it so everyone who holds AMPs is essentially an owner of the cooperative that is Synereo, enjoying revenue generated on the platform, capable of voting and steering the ship, and staking AMPs on community Spaces and posts they like?”

“No Dor, that’s against the law.”

“Hey, can we make it so that people who hold AMPs [insert another awesome idea that will become basic expectation in all networks in the world in 5 years]?”

“No, that makes it too much like a security/promise of future benefit/a share in a company/revshare. Don’t even go there.”

“Hey, can we-”

“NO! THAT’S ILLEGAL AND IMMORAL!”

Repeat ad nauseam for any idea too cool for the centralized world and not yet supported by a completely decentralized framework.

Yes, there’s regulation for a reason. It makes sense that people are protected from scams involving schemes like the above. And yet, the degree of inflexibility meeting the novel ideas we were trying to implement was a constant gutpunch.

And so, here we are, after 6 long years. Will Synereo, or its ideas, ever materialize in other forms? Most probably. Will I be involved? Who knows. But I do know this — I am never again doing anything in Internet/tech that is not 100%, bottom-up, all-across decentralized.

Thank you so very much, everyone who has supported Synereo and me throughout all this time. Your support and encouragement kept us going when nothing else seemed to work. So many committed members of our community, volunteering their time to contribute in meaningful ways out of pure passion for the vision and forming social network. Truly, you all deserved better than this, and it pains me that you, and we all, never got to reach a satisfying end to this journey.

It is my hope that, at the least, the ideas and vision Synereo championed, and Amplified through our community, were empowered and heard throughout the world.