ICO Analysis: CommerceBlock

Modern commerce is built around centralized intermediaries, who route value and maintain databases for accountability in centrally managed infrastructures. The intermediaries bring in the necessary trust when two unknown parties are interacting with each other. These intermediaries, however, are expensive, inefficient and cannot be trusted entirely, especially in over the counter (OTC) transactions which ironically form the most significant chunk of global trade.

“Trustlessness” is one of the most significant value additions of blockchain technology, wherein two parties can transfer value amongst themselves without requiring central intermediaries.
Despite its apparent benefits, hardly any part of the global trade is conducted over blockchain. Bitcoin and other public blockchains are seen more as speculative instruments rather than facilitators for efficient commerce.

Public blockchains bring in their own set of limitations like data privacy, latency, scalability; which has prevented mainstream organizations from adopting the technology.

CommerceBlock is developing a network layer which uses Lightning network and federated sidechains to connect with public blockchains. On top of this network, any financial infrastructure and instruments can be built like payment channels, derivative contracts, invoicing, asset-backed tokens amongst others.

Connecting commerce to public blockchains by routing it via sidechains and lightning network removes the latency and scalability issues around transactions.

One of the of the key offerings of CommerceBlock network is the implementation of the pay-to-contract protocol. This protocol lets only the customer and the merchant to know the details of the trade rather than the entire public blockchain. All sensitive trade details and businesses logic are managed on the client side and cryptographically stored on public blockchains. This will remove inhibitions of institutions like banks and hedge funds who value privacy and will allow them to conduct commerce via blockchain.

As quoted in the Whitepaper,

“CommerceBlock has a suite of tools for both end users and engineers to construct and manage smart contracts with escrow and complex trade flows. CommerceBlock’s product offerings provide a suite of tools that enables anyone to build and use services that construct contracts, manage trade flows, engage in multiparty dispute management, issue assets, and hedge currency risk.”

When asked about the development status of the project, the CEO stated that the software is in a production-ready stage. They are already working on a couple of use cases, one of them is in the real estate space called hip property. CommerceBlock has partnered with CG blockchain which is a supplier of blockchain solutions in the hedge fund industry.

CommerceBlock’s offering is based on BIP 175(Bitcoin Improvement Proposal) which is a formal way of presenting code which you can use on the Bitcoin blockchain. The CommerceBlock team has drafted BIP 175. Less than 200 BIPs have been written for Bitcoin network and having written one of them is a huge credibility boost.

Token

CommerceBlock will issue ERC-20 CBT tokens in the ICO. Customers will have to pay CBTs to access the services of the CommerceBlock ecosystem and execute smart contracts. As an open source system, anyone can develop new or improve upon existing services. As more valuable services recreated on top of the network, more users will use the system which increases the value of CBTs.

The ICO begins on 28th November, with a total supply of 1,000,000,000 CBTs. There is a hard cap of USD 25 million and 1 CBT = 0.0624 USD.

40% of the tokens will be distributed in the ICO, and 30% will be reserved for the team and advisors. The remaining 30% tokens are kept for the Enterprise integration partners.

There is an early bird bonus for participants on the 28th; please check for more details.

A majority of the funds raised will be used for software development and as incentives for the open source development community.

One key point to note is that a private presale was conducted in October for 11 BTC+ contributors. Details about pricing and funds raised of this sale have been kept confidential.

Team

The CEO and the CTO have been working on creating solutions for OTC transactions for the past one and half years. They are well known amongst the Bitcoin core developer community.

CEO Nicholas Gregory has a background in technology and finance and had senior roles at Merrill Lynch and JPMorgan. He has been involved in bitcoin since 2012 and working in crypto space since 2015. He has worked closely with CTO Omar Shibli since 2015 who is a technology start-up veteran, and opensource contributor to crypto projects on GitHub.

The website lists six members of the team and five advisors. The team members are based out of London and the Middle East.

Overall, the team scores well on credibility.

Verdict

I got some interesting insights while working on this report. “Are the new blockchain protocols that come up almost every month the actual solution for scaling blockchain technology, when we have solid existing networks like Bitcoin and Litecoin? Why not create scalable off chain solutions on these blockchains which fundamentally can solve any existing problem with them while using their solid underlying technology.” This makes sense for me, and this is what CommerceBlock is doing. CommerceBlock holds immense potential for solving some real-world problems with the ultimate goal of replacing banks or any intermediaries in financial transactions.

The project is as good as the underlying code, which has been kept the open source for peer review. Overall, I have a very positive view of this project.

Risks

  • The financial solutions that larger enterprises seek can be incredibly niche. CommerceBlock’s templates may not be useful for all the organizations, which requires CommerceBlock to depend on a large developer community to work on the project. -2
  • The private presale details and token pricing have not been disclosed. There might be some selling once the tokens are listed. -2

Growth Potential

  • CommerceBlock is the first project with a BIP; they have some solid collaborations and a couple of existing clients. This itself adds a +5 to the score. +5
  • The longer-term growth potential is very high, as the project is being designed to remove all the intermediaries in financial transactions. Any number of financial use cases and templates can be created on the network. +3
  • The software is production ready, with the final roadmap milestone being as early as April 2018.
    This itself will be viewed very positively by the investor community. +3

Disposition

We arrive at a solid +7 for CommerceBlock. The market cap based on the circulating supply would be $25 million after the ICO. The top 100 list on coinmarketcap.com ends with a market cap of $58 million. This makes a strong case for both short term and long term holding potential.

Investment Details

The ICO begins on 28th November. You can join the whitelist here.

Featured image courtesy of Shutterstock. 

Author:
Aakash Kawale is a financial analyst based out of Mumbai, India. He is the lead analyst at a Singapore based organization and has extensive experience of analyzing US and Indian equities. Aakash is a strong advocate of the Blockchain technology and has been analyzing cryptocurrencies since 2015.

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