A Stablecoin for HODLers? 'Pizza CEO' Raises $3 Million for New Crypto

A fixed price coin whose value increases over time? Only in crypto.

Coming out of stealth mode Monday, crypto project Fragments is revealing that it has raised a $3 million venture round led by True Ventures, with additional participation by Pantera, FBG Capital, Founder Collective and Coinbase CEO Brian Armstrong.

Co-founded by Pythagoras Pizza founder Evan Kuo, the project was originally designed as a gig economy token but has since pivoted from that vision to one that addresses a fundamental problem in crypto: the need for a token that can easily trade in and out of government-backed currencies. Kuo's co-founder on the project is Brandon Iles, who previously worked as an engineer at Uber and on Google's search team.

The big idea behind the project, as described in its documentation, is this: "At a high level, the Fragments protocol stabilizes price by moving volatility from unit price to unit count."

But while that may sound complex, the idea is simple at heart.

When the price goes up, the protocol will automatically issue a new cryptocurrency called "fragments." Some of those fragments will go to the wallets of existing users. So, a holder who bought one token and never sold would find more tokens in the wallet over time, even if they never made later purchases.

It's worth noting that emissions won't go solely to wallet holders, though. They will also go into two reserves, one that funds future development and another that buys ether, ethereum's blockchain token, to have ready when supply needs to contract because prices are falling.

It's natural to think that inflation and deflation tend to occur in equal measure, but Kuo noted that there's no theoretical limit to how much a currency can be worth, but the value can't go below zero.

And every time deflation gets triggered, holders come out ahead.

Venture interest

And because of this built-in incentive scheme, investors see the idea as one that could last.

Kuo explained that Fragments wanted a venture fund to lead its round in order to signal that the project is oriented around long-term thinking.

He told CoinDesk:

"In the crypto world, things tend to move faster. With a venture fund, they are really looking to be involved in a project for five to 10 years, ideally"

True Ventures partner Adam D’Augelli also spoke to this long-term vision, telling CoinDesk that he believes the project will open up new business opportunities in crypto over time.

"Evan brings a unique perspective to this problem, which is to be fair to all participants in the market and focus on long-term usability," D’Augelli said.

It's worth noting here that Kuo resists the stablecoin category, preferring to describe fragments as a "low-volatility cryptocurrency," but it's hard to imagine the market won't think of it alongside the other similar efforts, such as Tether, MakerDao and Basecoin.

"Not that this won't be stable, but more that it is a holdable token as well as a spendable token," Kuo said.

Pantera partner Paul Veradittakit told CoinDesk in an email that the firm likes the approach of "utilizing a reserve to help stabilization. The stablecoin segment is going to evolve quite a bit but this team should be able to navigate the waters well."

Complementing crypto

It's worth noting that Kuo came around to the idea after he first considered building the aforementioned project for the gig economy. So, like many entrepreneurs before him, he pivoted to solving the first problem in front of him and held off on his original idea.

But to be able to work at scale, the company will need enough clout to register in the crypto economy. That will take capital if, for nothing else, stocking its reserve. (Kuo declined to say how much he thinks Fragments will need or how it would be raised in any token sale.)

"I don't see us raising an enormous amount," Kuo said.

The most he would say is that it should be about six months until the project runs a testnet. "Since we're not going to be launching a token in advance ... it's just all about getting it functional," Kuo said.

The first token will be a U.S. dollar-pegged fragment, which doesn't necessarily mean that future coins will be pegged to other fiat currencies.

Kuo concluded:

"Ideally, we'd like to be a stabilization service for utility tokens, because I think that would be the ultimate stablecoin."

Wooden puzzle image via Shutterstock