TR 02.03

// DEEP-DIVE-DL-TANGLE

First in our promised series “Deep-dive-DLT” is IOTA & Tangle - head to the bottom of this email for the synopsis.

Otherwise, the speed of innovation in the sector continues to impress. Before 2018 is out, utility tokens will be all but over, with security tokens being the standard instrument of issue.

The infrastructure for this is rapidly being laid, and as governments lag, financial institutions - such as stock exchanges (CSE/GSX) and sponsors (like Blockchain Reserve) - are filling the gap, adding rules and enforcing existing regulation for crypto and offerings. For example, the Gibraltar Stock Exchange has drawn up listing and sponsor rules for tokens, whilst the Canadian Stock Exchange also now supports security tokens.

The global competition for talent, innovation and capital will ensure that this continues and potential obstacles to progress - like rife unscrupulous unregulated - are being cleared before they become critical. Make no mistake, DLTs impact on finance is here to stay.

Potentially even to flourish; for the sector to thrive, the costs of offering tokens need to fall drastically - and that will be the true fundraising innovation here. Not just instruments being issued and registered on DLTs, but of the costs of reaching liquidity - the IPO - being reduced by a magnitude in order.

// MUST READS

// DISASTER OF THE WEEK

  • An epidemic of malicious software mining cryptocurrency Monero has been discovered last weekend on more than 4,000 ‘hacked’ sites, including the U.S. court system, the governments of Australia and Britain, and City University of New York.

// TRACTION

  • Western Union is testing Ripple for processing settlement, working capital optimization, regulation and compliance to incorporate into its transactions.

  • Saudi Arabia’s Central Bank has signed a deal with Ripple to help local banks to settle payments.

  • Small European banks start giving investors access to crypto and advise on ICOs.

  • The world’s top NGOs and IGOs, including the UN are to incorporate blockchain technology into their humanitarian projects.

  • More than 20 US credit unions will deploy the new DLT Hashgraph by year-end.

  • The World Food Programme (UN) expects to cut millions in bank transfer fees by switching to Ethereum-based digital wallets.

  • Government-backed cryptocurrencies could undercut international sanctions. Venezuela and Russia could be the pioneers.

  • Spanish government is considering tax rebates to attract companies using blockchain technology.

// ROAD TO REGULATION

// ICOS

Last week highlights:

  • Software development company focused on supply chain applications EximChain has raised $20m

  • Gibraltar-based cryptocurrency exchange GBX has raised $27m

Upcoming:

  • Dock.io - February 21, 2018 - Decentralized data exchange powered by Ethereum

  • TE-FOOD - February 22, 2018 - Farm-to-table fresh food traceability solution for emerging markets

  • Havven - February 28, 2018 - Decentralized payment network and stablecoin

// OTHER

A US media outlet Salon is offering its readers a choice: allow it to display advertisements, or instead lend their computers’ processing power so it can mine cryptocurrencies. How lighting could solve Bitcoin’s scaling problem. Bitcoin will someday be worth as much as 40 times its current value according to Cameron Winklevoss.

// EVENTS

D10E - Seoul - March 3 - 6, 2018

Blockchain and Bitcoin Conference - Geneva, Switzerland - February 21, 2018

EnHack 2018 - Essen, Germany - February 23-24, 2018

NAC3 New York City - New York, USA - February 25-26, 2018

Gibraltar International Fintech Forum - Gibraltar - February 28 - March 1, 2018

Energy: Unblocked - Blockchain applications in energy - London, UK - March 27, 2018

// DEEP DIVE DLT //  IOTA // Tangle

Brief: Tangle is IOTA’s implementation of a distributed ledger, focused on allowing localised scalable consensus for the Internet of Things.

Proven TPS: ~1000 TPS, though the network appears to run nearer <10 TPS more normally.

Theory: Unlike Blockchain, Tangle is not based on a chain of blocks, but is a directed acyclic graph (DAG) whereby transactions are sequential, and a transaction can never appear twice in any given path through the network; in this respect all transactions on the network are ordered and double spending is avoided.

Consensus mechanism: There are no miners. Transactions validate themselves by verifying 2 previous transactions in the network. Currently, due to the nascency of the network, a ‘coordinator’ node is used to validate transactions as a centralised form of trust to help the network scale.

Scalability: Theoretically scalable by design - the more transactions are created, the more are verified.

Status: Still in early stages of development, proving the concept and removing flaws. CEO roadmap from December, 2017 is here. Companies such as ElaadNL (Smart Charging for Electric Cars) have partnered with IOTA to experiment using Tangle for cryptocurrency transactions, storage of electricity, and data transfer.

Advantages: Free transactions (makes micropayments possible), higher speed (nodes can operate without being connected to the main tangle with the ability to reconnect to the network afterwords), fairer supply (no need for ‘mining’), theoretically safer (based on quantum resistant cryptographic algorithm).

Issues: DAGs are currently unproven - no one knows how they will actually operate at scale. There are cryptographic vulnerabilities as unearthed by the MIT Media Lab. IOTA is built on ternary computing, and the hardware it relies on to validate transactions does not support this - potentially critically flawed design decisions have been made.