- After its token launch received some backlash, Patricia released a whitepaper detailing the intent behind the launch of Patricia tokens (PTK).
- It explained that the token is a debt instrument that will be issued to customers who lost bitcoin (BTC) and naira during the breach.
- While many questions about the token were answered, the exchange hasn't explained why it needs to be profitable before customers get funds or when, specifically, customers get their money.
After announcing that it had been a victim of a breach, Nigerian crypto exchange, Patricia, halted withdrawals and deposits on its platform in April 2023.
By August 18, 2023, it announced the launch of Patricia tokens (PTK), which all outstanding balances in naira and Bitcoin (BTC) will be converted to. It added that the newly launched token is a stablecoin equal to the US dollar in value — 1 PTK = $1.
However, customers who have not been able to access their funds for months were not too pleased with the announcements.
Questions such as how the token was backed and why Patricia converted the tokens without customer consent were raised.
To answer these questions, the exchange published a whitepaper for PTK tokens detailing how it would help it recover from the breach and how customers who have lost BTC and naira to the hack would use it to claim their funds.
Questions answered by Patricia token (PTK) white paper
The whitepaper released by Patricia addressed some of the questions customers have concerning the token launch. Here are some of the answered questions.
How will the Patricia token (PTK) work?
The Patricia token will work like an IOU (I owe you) document, a way for Patricia to acknowledge how much it owes you. Per the whitepaper, "It symbolizes a promise by Patricia Technologies to pay holders 1 USDT for each Patricia Token in the future."
It will serve as a "debt instrument" or debt token in exchange for the assets lost during the breach.
What will customers do with the token?
Customers whose BTC and naira balances have been converted to the PTK can redeem it for USDT, which can then be converted to other cryptocurrencies like BTC or fiat like naira. However, all conversion rates will be based on the US dollar value of the asset as of April 29, 2023.
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When will customers get the PTK tokens?
The PTK tokens will be available to customers who lost BTC and naira to the breach when the new Patricia app — Patricia Plus App — launches.
Who has launched debt tokens like PTK before?
Bitfinex launched BFX in 2016 when it lost 119,756 bitcoins ($72 million at the time) to a hack. Like Patricia, Bitfinex issued a debt token called BFX to customers who lost money to the hack and bought it back from them over a period of time.
Unanswered questions by Patricia
One major question in the minds of customers is when they will be able to access their funds. While the PTK whitepaper did not give a specific answer to this question, some information within and outside the paper might provide pointers.
When will customers be able to redeem their PTK tokens for USDT?
Patricia has not given a specific time as to when customers will be able to convert their PTK tokens for USDT.
How long will it take for all customers to get their money back?
When Bitfinex issued the BFX debt token, it took eight months for it to buy back $72 million worth of tokens from customers. Given that Patricia allegedly lost $2 million to the breach, the fund recovery process for customers could be shorter.
How will Patricia fund the token?
According to internal communications, Patricia is currently raising funds and has been largely successful at it. The exchange is confident customers will be able to redeem all PTK tokens for USDT.
How will Patricia release funds to customers?
Patricia will automate the release of funds with a smart contract. The contract will release funds based on the company's profitability. According to the whitepaper, it "will automate Patricia Token release in line with exchange profitability." This means the company has to consistently make money to release funds to customers. Interestingly, a source close to the company shared that other parts of the company, such as its over-the-counter (OTC) business, have remained profitable during the withdrawal freeze on its retail business.
While Patricia might have clarified the reasons why it launched PTK, it still has a lot of work to do to earn the trust of retail customers.