As a future underpinned by decentralised finance comes gradually into focus, the importance of sophisticated and properly-aligned security for building trust and trustlessness is becoming increasingly clear.

Security sits at the core of everything we do. karpatkey is proud to have facilitated over 10,000 non-custodial transactions for our DAOs whilst maintaining a pristine record of zero funds lost. To stay ahead of threats, we integrate sophisticated technical solutions from industry-leading security experts, like Hypernative.

However, technical integrations are only the tip of the iceberg. To achieve systemic security across our entire network of DAOs, we need strong alignment with long-term interests, and end-to-end support across our entire operation. With the impending launch of our KPK token, we’re excited to change the way that we align with our partners through a brand-new financial service: token-for-equity swaps.

Today, we’re pleased to share the details of the very first token-for-equity deal, together with Hypernative, which promises to unlock new depths in this vital relationship. This deal is not just a landmark for karpatkey, but also a category-defining example of the power of onchain finance. By setting precedent for the industry, we aim to show how novel solutions for strategic investments can deliver significant value to DAOs, and accelerate mass adoption. In this article, we invite you to come along with us.

Hypernative

Hypernative is the leading provider of real-time monitoring and response solutions for Web 3.0. Their pioneering machine learning technology analyses the calldata of each transaction in every block for patterns of known or expected malicious behaviour. Hypernative provides a comprehensive risk assessment and ongoing monitoring where concerns are identified, while facilitating custom response patterns like detailed notifications and automated response transactions. Through Hypernative, we — on behalf of our DAOs — are able to automate key processes, like pausing operations and exiting positions should any serious risk arise.

Since 2023, karpatkey and Hypernative have been constructing a comprehensive suite of custom agents and response tooling, to secure and inform the hundreds of treasury positions that we preside over for our DAOs. Through that process, the Hypernative team has proven time and time again that they leave no stone unturned in their pursuit of security. We’ve witnessed firsthand how close alignment between our teams has helped to propel forward best practices both for ourselves and the industry at large.

By deepening our partnership with Hypernative through mutual investment, we aim to achieve not only a stronger foothold in the security sector but also expanded capabilities for deploying cutting-edge treasury management solutions on behalf of our network of DAOs.

Token-for-equity Swap

In this first-of-its-kind transaction, karpatkey will exchange an agreed value of KPK tokens for the equivalent amount of equity in Hypernative. The valuation of the deal was based on recent funding rounds for both organisations, ensuring a fair and balanced exchange.

Head of Mergers and Acquisitions (M&A) at karpatkey, Simo, led the deal through weeks of due diligence and exhaustive assessment of each side’s organisational, financial and commercial positioning:

“This token-for-equity deal represents a landmark step in aligning DAOs and corporations. By exchanging KPK tokens for Hypernative equity, we are diversifying our treasury, deepening our security expertise, and setting a new standard for strategic investments in DeFi.”

Gal Sagie, co-founder of Hypernative, commented:

“We deeply value our longstanding partnership with karpatkey. This unique investment empowers Hypernative to align with our partner’s success and further strengthen our collaboration. We are proud to work alongside many industry leaders, united in our commitment to keeping our space secure.”

The deal will simultaneously begin to diversify karpatkey’s own native token treasury, whilst bringing top-tier security experts from Hypernative directly into discussions about how karpatkey should operate.

Pioneering Financial Structure

The impact of this deal extends well beyond security: it’s a proof of concept for a new category of strategic investments… a first-of-its-kind example of exchanging traditional equity for onchain tokens.

Though token or equity exchanges by themselves are each well understood, bridging between the two involves breaking new ground for legal ownership, execution and custody. This deal provides a standard for others to follow in grappling with these issues, and positions karpatkey as an industry leader in both our approach and experience with these novel strategic investments.

Even more exciting is the prospect of closer alignment between token and equity structures opening up new business models, as the two have become increasingly interoperable. It’s an area that’s ripe for pioneers and experimentation, and one that we are committed to leading. That’s why we have allocated a full 20% of the KPK token supply to M&A activities like this, so we can continue pushing the boundaries of what strategic token investments can achieve.

While in this case karpatkey acts as both experimenter and the subject, we look forward to championing token-for-equity as a new M&A service at the disposal of our DAOs. And we’d encourage any decentralised organisations with an interest in this area to reach out to us for assistance and insight.

Conclusion

The importance of security—and a deep level of coordination in security efforts—cannot be overstated.

Security is not a zero-sum game… when one decentralised organisation fails, the credibility of our whole industry is undermined. DeFi only succeeds if we collectively match or exceed the assurances of traditional organisations, but across far broader and more open systems. We at karpatkey believe that all DAOs of any significance will eventually need to embed a continual process of threat monitoring, detection, evaluation and improvement, if they’re going to thrive and reach mass adoption.

By working closely with industry experts like Hypernative, karpatkey helps to offload the stresses and burden of treasury security for our DAOs, and achieve a higher level of collective protection. In integrating each DAO’s efforts and resources into our broader mesh of defensive measures, we make security a positive sum game that’s a win-win for us all.

With this novel token-for-equity deal now signed, we and Hypernative will set our sights firmly on unlocking the value that deeper integrations offer us. There are few more powerful economic forces than incentive alignment, and this mutual exchange provides new space for coordination at the heart of each organisation. We look forward to delivering the fruits of our labours in the coming months.