Cobinhood Founders Raises $20 Million for New Blockchain That Can Process 1 Million Transactions/s

The founders of Cobinhood, (the zero-fee cryptocurrency exchange that riffed on popular stock trading app Robinhood for its name and branding), have successfully raised $20,000,000 from venture capitalist firm IDG and angel investors to launch the Dexon Blockchain.

Dexon is offered as an ultimate solution to the scalability issues plaguing many larger and more recognized blockchains, such as Bitcoin & Ethereum.
The founders claim that this is achieved through the use of a Blocklattice, as opposed to a blockchain.

According to the Dexon whitepaper, “On the Dexon network, blocks are grown by all nodes individually in parallel to each other and in a non-blocking fashion, creating a blocklattice structure.

No node has to wait for any other node as it extends its own blockchain, enabling unprecedented scalability. In order to achieve consensus in a blocklattice, there must be a mechanism to identify the validity and order in which all of these blocks are being produced.

This is accomplished by having each node broadcast the existence of the new blocks to all other nodes on the network once they have been produced. As other blocks receive the broadcast, they can perform an “​ack” or “acknowledgment​” that serves as a validation and timestamping for the creation of the new block.”

In Dexon, the consensus of the network is achieved by taking the median time that all nodes recognized a given block solved by a single node. By fragmenting this validation, the founders of Dexon posit that it is basically impossible to game the system.

After all, you would basically have to fool each node in the network into thinking they recognized a block from another node at a different time than they actually did.

But is this really the silver bullet to every blockchain’s woes?

Unlikely.

Vitalik Buterin originally coined the phrase, “The Scalability Trilemma.”

In this Trilemma, Buterin posited that blockchains can only have two of the following three properties:

1. Decentralization (defined as a system where each user accesses network resources more or less equally)

2. Scalability (defined as being able to process X number of transactions in a given amount of time for insignificant fees)

3. Security (defined as ensuring security against network attackers due to the inherent amount of computing resources needed to attack successfully)

After conducting deep research on the project, this analyst remains unconvinced that Dexon has solved this trilemma. That said, it remains a promising project worthy of attention.

To provide some context on the project, Dexon is laser-focused on blockchain mass adoption within the banking industry and for real-world application requirements. They believe that blocklattices will work together to form an infinitely scalable, low-latency, and decentralized transaction processing engine.

The Dexon team also timed the announcement of securing funding with the release of results from the network’s first transaction speed test, which clocked in at 50 blocks per second. This figure is estimated one million transactions per second.

To put that number into perspective, Bitcoin has a transaction time of 1-6 hours, while Ethereum takes 1-5 minutes.

According to Dexon cofounder and Cobinhood founder Popo Chen, “Clearly, investors believe in Dexons’ ‘blocklattice’ protocol, which is underpinned by consensus algorithms that allow for transaction speeds competitive with major credit card companies.

In fact, we hope to partner with these institutions, as we’re now able to offer the same processing power without a need for centralization. Other than Dexon, current blockchain protocols can only process a few secure transactions per second, leaving them unable to keep pace with traditional solutions.”

Another critical feature of Dexon is its native interoperability protocol so that other blockchains can easily interface with it. In its white paper, the Dexon team is highly critical of other interoperability solutions, such as Polkadot.

They describe the flaws in Polkadot’s model as, “The way Polkadot bridges transactions is by a c​ollator, which is nominated by n​ominators. A nominator’s voting right to elect a collator is bonded to Polkadot’s native token, making the collators among different blockchain systems stake-coupled. We argue that the stake-coupled model will not work in the practical world.

Taking one case as an example, if Polkadot’s market cap is 1B USD and the bridged total amount of Bitcoin amounts to 10B, then theoretically, any malicious party’s best strategy is to purchase enough Polkadot tokens to break the Bitcoin collator system and steal all funds stored in the collator-managed multi-signature Bitcoin wallet.

In reality, the value of bridged assets tends to exceed the bridging network’s total assets value, thus we conclude that for a practically feasible blockchain bridging protocol to work, the bridging protocol collator must be stake-decoupled from the bridging network’s token value.”

Dexon’s interoperability approach meanwhile uses a so-called PoA (or proof-of-authority) model.

According to the Dexon whitepaper, “the goal of the PoA model is to achieve stake-decoupled and fully decentralized bridging operations. To this end, there is a special type of contract called inter-chain bridging contract,​ which can be used to bridge transactions between different blockchain systems.

The inter-chain bridging contract is operated by an inter-chain ​bridging committee ​which acts as an ​authority​ to ​two-way peg the transactions in other blockchain systems. We call the members of the bridging committee bridging operators​.”

It’s important to note that the whitepaper gave no explanation of how these bridging operators are elected. This could be an important point of contention to watch if their blockchain truly will be the interoperability tool of choice. This is also the focus of this analyst’s contention that Dexon has not solved the “scalability trilemma.”

That said, the project is intriguing, and the focus on mainstream adoption is sorely needed in an ecosystem in which scalability is treated as a long-term problem to solve instead of a necessary roadblock to everyday use.

According to another Dexon co-founder Wei-Ning Huang, “With its fundamentally new architecture, the DEXON network is poised to become the world’s first mainstream blockchain.

Investors are recognizing that there is a problem with current blockchain technology and that the protocol most focused on throughput and scalability will form the basis of Blockchain 4.0. These tests prove that the blocklattice works and this funding are proof that investors trust Dexon’s strategy over the long term.”

Whether this network can truly scale efficiently remains to be seen. Although these early speed tests are promising, only the existence of large numbers of nodes will definitively prove if the network efficiency is sustainable.

The fact that the founders of Cobinhood are behind the project could also be a positive thing or a liability depending on your perspective. Cobinhood after all pretty shamelessly ripped off Robinhood’s name and branding in launching their crypto exchange.

This resulted in Robinhood sending them a cease and desist letter and releasing a public statement stating, “Robinhood has no affiliation with Cobinhood, which is confusingly similar in name and branding. In order to protect our brand, Robinhood sent a cease and desist letter requesting that Cobinhood cease its use of the Cobinhood name and branding.”

Cobinhood responded publically by issuing a statement saying “Cobinhood is not associated with Robinhood in any way, but are as legitimate as them.” Now, this claim is essentially laughable.

Although it is not necessarily fair to judge the technology of the project by the co-founders, it is important if only to remember that it will be a project strongly influenced by founders who have no issue ripping off other projects and lying to gain user adoption.

Although Cobinhood has since become a fairly useful exchange to use for the limited number of coins they support, it’s still not necessarily the cryptocurrency equivalent of a gold star to have their endorsement on a given project.

In conclusion, Dexos appears promising. If the networks’ speed test figures can maintain themselves as more nodes are added, they could be a real contender for a mass adopted blockchain. If.

Featured image courtesy of Shutterstock. 

Leave a Reply