Criticized by Reflexer, Has Paradigm Abandoned Its Faith in Encryption?

Author: Lotist

Yesterday, a piece of news about "the well-known encryption venture capital firm Paradigm will focus on the AI field, and delete the official website encryption currency and Web3.0 expression" was released, and it quickly spread throughout the entire encryption industry.

As this incident unfolded, Reflexer, the DeFi protocol that Paradigm invested in, couldn't sit still. Today, Reflexer issued an article denouncing Paradigm for switching to the AI field and asking it to destroy its holdings of FLX (its governance token). Reflexer tweeted, "Paradigm, remember the $270M you once invested in FTX? FTX going to zero became a scar on our industry and now you're repositioning away from crypto? Please destroy all your FLX tokens , we don't want to work for you anymore."

This blaming proclamation inevitably made people wonder what virtue and grievance had there been between the two? The Odaily Planet Daily comes from the relationship between Reflexer and Paradigm.

The relationship between Reflexer and Paradigm

As a cryptocurrency investment company, Paradigm's investment goal has always been to support early cryptocurrency and blockchain projects, and help promote innovation and development in the cryptocurrency field. Its investment portfolio covers multiple fields, including DeFi, blockchain Infrastructure, digital identity and privacy, and more.

Paradigm has invested in Uniswap, Compound, Anchorage, StarkWare, Optimism, Terra, Nervos, Solana and other well-known projects, as well as ReflexerFinance, another protagonist of this article.

ReflexerFinance aims to establish a stable currency system to solve the volatility problem in the cryptocurrency market. Its governance token is FLX, and FLX holders can participate in the governance of the Reflexer protocol, including voting and making proposals.

And Paradigm is one of Reflexer's investors. In early 2021, Paradigm participated in Reflexer's $2 million seed round as a lead investor. Paradigm invested about $1 million in this round of financing, which also means that Paradigm holds FLX tokens and participates in the early development and governance of the Reflexer protocol.

The trigger for the relationship to become tense

Paradigm recently revised the homepage of its official website. The title of the homepage was changed from "Paradigm supports disruptive encryption/Web3.0 companies and protocols with as little as $1 million and as much as $100 million+" to "Paradigm is a research oriented technology investment firm” and deleted expressions related to cryptocurrencies/Web3 such as “we believe cryptocurrencies will define the next few decades”.

Netizens in the encryption community have speculated, is Paradigm going to jump out of the encryption/Web3.0 field?

In order to avoid causing unnecessary panic, relevant people quickly stood up and said that this is just a repositioning of Paradigm in response to some thunderstorms in the encryption field and uncertainty in US regulation. Shying away from cryptocurrencies, the company has not changed its mission and continues to focus on cryptocurrencies and Web3, with an updated website copy designed to emphasize its technical research.

Reflexer proposes to break up

Some members of the encryption community believe that Paradigm, as the VC leader of the encryption industry, has shifted from the cryptocurrency industry to the field of artificial intelligence, which deviates from the cryptocurrency community and supports its original values. And Reflexer became the leader of this criticism movement and took the lead in speaking out.

In the tweet, Reflexer referred to Paradigm’s famous “Battle of Waterloo” — “a $270 million investment in FTX.” Paradigm was one of the main backers of FTX, and when FTX eventually collapsed, the investment evaporated. Paradigm co-creator Matt Huang also apologized for this, "We invested in a founder and company that ultimately did not conform to the values of cryptocurrency, and we are sorry for the huge damage caused to the encryption ecosystem."

Reflexer also made it clear in a tweet that this "irresponsible" investment has brought significant damage to the encryption ecosystem and is contrary to the principles of decentralization and transparency. At the same time, Reflexer also believes that Paradigm is abandoning its commitment to the cryptocurrency industry and its stakeholders. Reflexer simply asked Paradigm to destroy all FLX holdings, officially breaking away from the only remaining bond with Paradigm, as if announcing, "If you switch to AI, we will not enter the river from now on."

At present, Paradigm officials have not responded to this matter.

Moreover, Paradigm did not take any selling action and still retained its previous position. Perhaps Paradigm has never changed its original intention as it promised, insisted on its belief in the cryptocurrency ecosystem, and will continue to support and invest in promising innovative projects and companies in this field.

Chain Reaction

Perhaps, this "speech in the air" will trigger a series of chain reactions: the tension between Reflexer and Paradigm may affect its future business relationship, limiting the cooperation opportunities of the two companies; and Reflexer's criticism of Paradigm may damage Paradigm's reputation among the cryptocurrency community and other investors has caused the market and the community to lose confidence in Paradigm's investment decisions.

In addition, "the role of investors, their values and principles for the industry, and what kind of responsibilities they should bear" may become a question for everyone to think about deeply. In the near future, the industry may conduct stricter scrutiny on investor behavior in order to maximize the protection of industry interests.