In January 2023, VitaDAO, a decentralized organization focused on longevity research and drug discovery, received $4.1 million in funding led by traditional pharmaceutical giant Pfizer. This was a milestone in the DeSci Biotech field and also brought DeSci into the mainstream for the first time.
Different from DeFi's closed-loop business model that can be achieved only through encrypted native assets, DeSci's underlying assets come from off-chain and need to be closely integrated with the off-chain real world. This not only involves the transformation of traditional Science using Web3 technology and token economic models (such as scientific research collaboration, funding acquisition, data sharing, results transformation, technology transfer, product commercialization, etc.), but also involves many off-chain issues such as privacy protection, data security, IP property rights, product commercialization and compliance with the on-chain encrypted world.
Since the DeSci field covers a wide range, this article will take two iconic Biotech projects in the DeSci field as examples - Molecule and VitaDAO. From the perspective of a Biotech entrepreneur and an investment and financing lawyer building a legal framework for Web3 projects, this article explores the feasible path for Biotech projects to enter Web3.
#desci #vita #biotech #去中心化
1. What is Decentralized Science (DeSci)
Decentralized Science (DeSci) is a movement to build public infrastructure to fund, create, review, validate, store, and disseminate scientific knowledge and research through fair and equal use of the Web3 technology stack. The movement aims to create an ecosystem that incentivizes researchers to share their research openly and get credit for their work, while allowing anyone to easily learn about and contribute to research.
DeSci is not intended to, nor can it, solve all problems related to scientific research and development. At present, DeSci uses the Web3 technology stack to solve the problems of early scientific research funding (on-chain DeFi liquidity), organizational governance (decentralized autonomy, open permissionless participation), and transparency of scientific processes (openness of research data and results).
DeSci is creating a more decentralized and distributed scientific research model (such as the autonomous operation of smart contracts and the decentralized governance of DAO organizations), which enables it to better resist the review and control of funds and scientific research results by central institutions, obtain diversified scientific research funds in a decentralized manner, connect scientific research data islands with external exchanges, and provide incentives for reproducibility, creating an ecological environment that allows scientific research and discovery to flourish.
2. Biotech Practice in DeSci
In the field of biotech, early basic research is often the lifeline for subsequent clinical trials and drug development, but it is usually constrained by many factors such as tight funding channels, complex legal rights and interests, and urgent project commercialization, which makes it difficult to start potentially promising research projects. The academic community calls this loss problem between basic research and clinical trials the "valley of death."
In addition, the intellectual property IP and data assets related to the research institute are themselves a highly illiquid, centralized, bureaucratic and opaque asset class that restricts the development of scientific research.
In this helpless situation, Molecule provides a fund-raising platform for early life science projects through the Web3 technology stack, and builds an open and transparent market for funding, collaborative R&D, and IP property rights transactions.
Molecule's slogan is: The future of medicine belongs to everyone.
2.1 Molecule
Molecule AG is a European company that has built the decentralized Molecule Protocol platform to provide funding, collaborative R&D, and IP property transactions for early-stage life science projects. Currently, about 12 scientific research projects have received funding on the platform.
The infrastructure of the Molecule Protocol platform is built on Ethereum and includes two layers: Marketplace Discovery and Molecule Finance.
A. Marketplace Discovery
In the Marketplace, researchers can publicly showcase their research projects and find global funders and collaborators to advance their projects. Investors and funding organizations can also access early-stage life science projects to provide research funding and technical support.
This includes the University of Copenhagen longevity project, which was subsequently transferred to VitaDAO in the form of IP-NFT.
B. Molecule Finance
The Molecule Protocol platform converts off-chain Sponsored Research Agreements (Sponsored Research Agreements) into IP-NFTs and brings them to the chain, allowing funders to raise funds for projects by purchasing IP-NFTs, or integrate into DAOs that manage portfolios for specific disease treatment verticals.
Funders can provide funding and liquidity for scientific research projects by purchasing and holding IP-NFTs. IP-NFT holders can obtain the research property rights and future results of researchers (such as intellectual property rights, royalties, data, etc.).
C. Molecule Ecosystem
So far, the Molecule Protocol platform has built a relatively complete on-chain and off-chain DeSci ecosystem through a modular open stack. It uses various DeFi components (Balancer, Gnosis) to build liquidity for project funds, uses governance components (Moloch) to achieve collective participation in governance by patient communities, researchers and investors, uses DAO's Launchpad infrastructure Bio.xyz to raise early community funds and build a community framework, uses open scientific research experimental tools (The LAO) to further accelerate research and development, and uses the legal framework (OpenLaw) to protect the rights and interests of off-chain scientific research intellectual property IP and the rights and interests of on-chain investors and participants.
On June 13, 2022, Molecule completed a $13 million seed round of financing led by Northpond Ventures, with participation from Backed VC, Shine Capital, Speedinvest and former Coinbase CTO Balaji Srinivasan.
D. Conclusion
DeSci is not intended to, nor can it, solve all problems related to scientific research. Molecule uses the Web3 technology stack to solve problems such as early research funding (on-chain DeFi liquidity), organizational governance (decentralized autonomy, open permissionless participation), and transparency of scientific processes (openness of research data and results).
Some people think that Molecule is more like OpenSea in the DeSci track. However, unlike OpenSea, which trades native assets on the chain, the most important thing about the DeSci project is still the underlying scientific research projects and intellectual property IP data off the chain. The underlying scientific research projects still need to be incubated, governed, and promoted for development.
Therefore, VitaDAO, incubated by Molecule and focusing on the field of life longevity, came into being.
2.2 VitaDAO
VitaDAO was officially established in June 2021, advocated and initiated by Molecule. It is committed to building a decentralized, community-governed platform focusing on anti-aging drugs and life longevity projects, aiming to accelerate the research and development of life longevity and extend human lifespan and healthy lifespan.
VitaDAO plays the role of a funder on the Molecule platform. It provides funding for life and longevity projects and acquires intellectual property IP data through community fundraising. It also conducts decentralized governance through the DAO organizational method, becoming the world's first DAO focused on life and longevity.
A. Community Fundraising and Community Governance
VitaDAO launched the community round of financing on June 23, 2021. Anyone can obtain VITA tokens by purchasing or actively participating in community contributions, and actively participate in VitaDAO's community governance by holding VITA tokens.
Currently, VitaDAO has established multiple working groups to support the decentralized operation of DAO, including the establishment of governance, token economics, information & awareness, legal, longevity and operations (compensation/incentives/ops) groups. Their main work includes funding early scientific research projects or investing in start-ups to obtain intellectual property data and equity.
B. Business Model
Although VitaDAO has achieved on-chain fundraising and on-chain governance, its main business model still comes from off-chain.
VitaDAO needs to commercialize the intellectual property and data assets obtained from funding scientific research projects (such as authorized use of scientific research data, transfer/authorization of intellectual property IP, cooperative research and development with medical institutions, etc.). The funds obtained will further fill the DAO's treasury to support more projects, thus forming a virtuous circle.
In August 2021, VitaDAO acquired the first IP-NFT of the Molecule Protocol platform, an anti-aging and longevity project from the University of Copenhagen.
To date, VitaDAO has successfully funded 22 projects with a total investment of more than $4.2 million.
C. Token Economy
According to VitaDAO, as of January 2023, 60% of the tokens have not been put on the market (Unminted). At the beginning of its establishment (i.e. June 2021), the community auctioned 10% of the tokens, and in the $4.1 million financing led by traditional pharmaceutical giant Pfizer in January 2023, 7% of the tokens were replaced in the form of a Token Sale. In addition, service providers, working groups, and the treasury each received 10%, 10%, and 3% of the token shares. Tokens that are not put on the market are released at a rate of 0.4% every quarter.
VITA token holders enjoy governance rights rather than ownership of IP-NFTs, but the value of VitaDAO treasury assets (IP-NFTs, life science project equity, scientific research data) corresponding to VITA tokens will continue to increase as the number of VitaDAO-funded projects increases, and it has huge potential.
D. Conclusion
VitaDAO is the first Biotech DAO successfully incubated by Molecule after building the Biotech ecosystem. This model has also been recognized by the mainstream traditional pharmaceutical giant Pfizer. It has symbolic significance and is worthy of reference for all DeSci projects.
Compared with Molecule, a relatively large and comprehensive life science discovery market, VitaDAO's more segmented and focused DeSci operation mode is more likely to attract the attention of funds and can superimpose the resources of the market segments in this field, thus forming a unique community in this field.
For example, VitaDAO, a community focused on the development of “life longevity” research, can: (1) gain attention and support for on-chain and off-chain liquidity; (2) allow patients to voluntarily contribute data in exchange for the hope of future cure and recovery; (3) more open science can attract global talent and resources that focus on the development of life longevity, and help scientific research projects through various stages such as basic research, clinical trials, and product commercialization.
3. Explore feasible paths for Biotech projects to enter Web3
Many projects related to the real world are not completely decentralized at the beginning, and still have to follow a process of gradual decentralization from a company-like entity to a protocol entity.
Especially for Biotech projects in the DeSci field, intellectual property IP and data assets still need to be held, operated, and patented by off-chain entities, and must comply with the regulatory requirements of each jurisdiction for intellectual property IP and data assets.
The Web3 path of Molecule and VitaDAO is worth learning from.
3.1 Molecule — A progressive decentralization path from platform to protocol
In the above case, Molecule AG is a European operating company that gradually shifted from centralized operations to building the Molecule Protocol platform on Ethereum.
The centralized Molecule AG built its own on-chain and off-chain Biotech ecosystem by embedding various protocol components on the Molecule Protocol platform, such as Balancer, Gnosis, Moloch, The LAO, OpenLaw, Bio.xyz, etc., and then transformed into the decentralized Molecule Protocol, gradually incubated VitaDAO, and subsequently obtained financing.
Although there is no news about the Molecule Protocol token economy, it is foreseeable that after the progressive decentralization transformation to Molecule Protocol, the positioning of the Molecule AG corporate entity will change to a core contributor to the Molecule Protocol rather than an actual operator, and it may receive a corresponding 15%-20% token incentive in the subsequent token distribution.
3.2 VitaDAO - a decentralized organization initiated by the community
In contrast, VitaDAO, which is advocated and initiated by Molecule, plays more of a role as a sponsor rather than an actual operator. The actual operation is undertaken by working groups elected by the community, relying on the structure that Molecule has already built.
It can be said that VitaDAO is a decentralized organization built on the basis of the Molecule community. The initial funds are provided by the community, and the subsequent operation is carried out through community autonomy.
Due to the decentralized nature of the VitaDAO community, its token distribution lacks the part of centralized institutions as initiators and investors (compared to the simulated Molecule token distribution plan), and the token distribution plan is more community-oriented.
3.3 Viable Paths for Biotech Projects to Enter Web3
Since the intellectual property IP and data assets of Biotech projects still need to be held and maintained by off-chain legal entities, and the token economic system also needs the support of the participant ecosystem, it is not realistic for Biotech projects to achieve decentralization as soon as they enter Web3, even for companies like Molecule.
Biotech projects need to first operate in a centralized manner, establish their own participant ecosystem, and design a token distribution plan to incentivize ecosystem participants.
Token design needs to be clear: What can Web3 bring to Biotech projects?
Simply put, Web3 can incentivize community contributing members in the form of tokens at low cost, quickly forming an ecological network effect.
In Web2, this can only be achieved by subsidizing users after the company has raised large-scale financing from VC/PE, and this To VC rather than To User operating mode may not necessarily be applicable to the current market environment.
For example, communities such as VitaDAO that focus on the development of “life longevity” research can quickly launch projects through the design of token economy, incentivize participants in various ecological links, and quickly form network effects: (1) Incentives for investors and liquidity providers in scientific research projects; (2) Incentives for patients who provide their own data; (3) Incentives for members who help scientific research projects through various stages such as basic research, clinical trials, and product commercialization.
After completing the ecological construction and designing a clear token economic plan, we can gradually switch to the decentralized DAO governance and operation mode. Therefore, we see that after the centralized Molecule AG builds the participant ecosystem, it gradually enters the decentralized Molecule Protocol or the decentralized organization VitaDAO, which are both feasible paths for Biotech to enter Web3.
After that, the RWA model can be referred to, with DAO setting up a foundation/SPV to independently operate intellectual property IP and data to meet off-chain regulatory compliance requirements.
4. Final Thoughts
DeSci may not be the only solution to current problems in scientific research, but it can provide a possible solution.
Although there are many risks in the DeSci field, like any technological innovation, such as the legal characterization of DAO organizations, the ownership of intellectual property IP data, the protection of the rights and interests of on-chain investors and off-chain researchers, etc., it is important to know:
DeSci is still in its infancy, with only a handful of scientific research projects and scientific DAOs launched on the blockchain. With the attention of crypto leaders like Vitalik Buterin, Coinbase’s Brain, Balaji, and the recognition of traditional pharmaceutical giant Pfizer, huge room for development in this field is opening up.
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This article is for learning and reference only. We hope it is helpful to you. It does not constitute any legal or investment advice. Not your lawyer, DYOR.
