- A Bellevue, Washington-based startup founded in 2022 has shut down its own blockchain and migrated to the Sui network, refocusing its strategy around its core product, Trace.
- The company originally aimed to cover a broad range of intellectual property categories — including music royalties, patents, and trademarks — before narrowing its focus following a rebrand earlier this year.
- The decision to abandon its Layer 1 blockchain was driven by the high operational costs of maintaining validators, engineers, audits, and infrastructure, combined with a recognition that its primary value lay in the Trace protocol itself.
From Broad IP Ambitions to a Focused Protocol: How a Bellevue Startup Rethought Its Blockchain Strategy
When the Bellevue, Washington-based startup launched in 2022, its founding vision was sweeping in scope. The team set out to build a blockchain-based platform that would allow intellectual property owners — across categories ranging from music royalties to patents and trademarks — to register their assets on-chain and define licensing terms that others could access without needing to negotiate directly. The promise was a permissionless, decentralized marketplace for IP rights. The reality, however, proved more complicated.
According to co-founder Muttoni, two structural barriers quickly emerged. First, most of the targeted industries already had well-established rights management systems in place, making a blockchain-native alternative a harder sell. Second, and perhaps more critically, large rights holders showed little appetite for making their intellectual property available under open or permissionless licensing frameworks. The startup found itself stretched across too many verticals without sufficient traction in any of them.
“We were kind of spreading ourselves way too thin across so many different types of IP,” he said.
The Rebrand and a Deeper Strategic Rethink
Earlier this year, the company undertook a rebrand in an attempt to sharpen its identity and market positioning. But even after that pivot, a more fundamental question began to surface internally: did the startup actually need to operate its own blockchain at all? The team’s work had increasingly converged on a single, well-defined product — Trace, a data provenance registry designed to record the origins of AI training data, identify who contributed it, and specify what rights data buyers hold over its use.
Running a Layer 1 blockchain, Muttoni acknowledged, is not a lightweight undertaking. The operational burden includes maintaining a dedicated engineering team, coordinating with validators, commissioning security audits, and paying for infrastructure providers — all costs that are difficult to justify when the core value proposition lives entirely within one product layer.
“Does it still make sense to run our own L1, or should we focus most of our energy on the protocol, on the product, on Trace?” he said.
Migrating to Sui and Doubling Down on Trace
That internal reckoning led directly to the decision to shut down the company’s proprietary blockchain and migrate operations to Sui, the Layer 1 network developed by Mysten Labs. By offloading the infrastructure layer to an established chain, the startup aims to redirect its engineering and product resources toward building out Trace as a robust, scalable data provenance standard — particularly relevant as demand for transparent AI training data sourcing continues to grow across the industry.
Why This Matters
The startup’s trajectory reflects a broader tension playing out across the Web3 and AI sectors: the challenge of sustaining a custom blockchain when the real differentiation lies at the application layer. For companies building niche protocols, owning a Layer 1 can initially signal technical credibility and control, but the long-term cost structure often undermines product focus. The pivot to Sui also signals growing confidence in established, high-performance Layer 1 networks as viable homes for specialized enterprise-grade protocols. Meanwhile, the Trace registry addresses a rapidly escalating need in the AI industry — as regulators, publishers, and rights holders push for greater accountability around the data used to train large language models and other AI systems, provenance infrastructure is becoming a foundational requirement rather than an optional feature.
Frequently Asked Questions
- What is Trace, and why is it significant?
- Trace is a data provenance registry built by the Bellevue-based startup that records where AI training data originates, who contributed it, and what usage rights buyers hold. It is significant because it directly addresses growing regulatory and ethical pressure on AI developers to document and respect the sourcing of training datasets.
- Why did the company shut down its own blockchain?
- The company determined that maintaining a proprietary Layer 1 blockchain required substantial ongoing costs — including engineers, validators, security audits, and infrastructure — that could not be justified when its core product, Trace, did not fundamentally depend on running a custom chain. Migrating to Sui allows the team to concentrate resources on the protocol and product instead.
- Why did the startup’s original IP licensing model not gain traction?
- According to Muttoni, the original model faced two key obstacles: many targeted IP industries already had existing rights management systems, and large intellectual property holders were reluctant to make their assets available under permissionless licensing terms. The company also spread itself too thin by attempting to address too many different IP categories simultaneously.
