ICO Analysis: Dfinity

Dfinity is one of the brightest and most anticipated projects of 2018.

Dfinity can be considered a logical continuation of the development of blockchain and can be seen as the development of Ethereum, as Ethereum was a development of bitcoin in its time.

Ethereum is based on a postulate that “Code = Law”, which means there is no intellectual control regulating the use of the platform or the core network, which results in hard-forks and soft-fork when a threat arises.

Dfinity is based on a next thesis “AI = Law”. The security of such a network will be based on the votes of network participants and the traditional mechanisms of AI, which are able to instantly calculate vulnerabilities, and in case of penetration, painlessly “roll back” the network back. Such a network allows you to dynamically optimize the economic parameters of the network, update the protocols and various applications, without disrupting the system. In sucha= a blockchain, a problem of speed and scalability can be finally solved, thereby leading to adoption by numerous applications and users.

So in essence, Dfinity is a public node network that provides a “decentralized global computing cloud” where software can be installed and launched with all the usual properties and capabilities of smart contracts. It can solve two points.

The first point is to optimize the existing market of intermediary services, which is represented by such industry giants as Uber, eBay and others.

The second point is the reduction of the system maintenance costs, as blockchain brings more automatization which in turn decreases staff costs, which represents the main part of budget costs for corporate entities.

Blockchain Nervous System – core of Dfinity

Blockchain Nervous System (BNS) is distributed intelligence integrated into a network with special privileges that allow it to play the role of an impartial decentralized superuser. BNS adapts and learns to make better decisions because neurons respond to stimuli and feedback.

Any person can create and run neurons. In fact, neurons are the same nodes. A new neuron is created by freezing tokens for a period of three months (possibly in the future this timeframe will change). The relative strength of the neuron’s voice is proportional to the size of the deposit that it holds. This ensures the legitimacy of voting and the participation of the owners of the nodes in the vote because they receive a reward proportional to the number of frozen tokens.

When a neuron is created, two keys are indicated. One of them – the “delegate” – allows the neuron to vote. Another key is the “master,” which must be stored in a cold storage and can be used to freeze the neuron and receive its deposit. Users can vote independently or give their vote to an authoritative node in any field and give a command to the program. The point is that no one can track who votes for whom, thus, in principle, eliminating the possibility of an attack by 51%.

Another very promising feature of this solution is the ability to “rewind” the system. Due to these BNS properties in Dfinity there is no concept of forks, as protocol updating occurs on a regular basis, quickly implementing patches and optimizing the network, stimulating it to evolve very quickly.

Threshold Relay is a new technology that provides the organization and processing of the Dfinity network. Using Threshold Relay, members of the DFINITY network create a deterministic controlled random function that is completely random and unpredictable. Threshold Relay creates special beacons that allow you to randomly select nodes, forming a group of nodes to conduct voting. It is a random selection that allows you to ensure network security.

Dfinity decentralization cloud is an open platform for cloud computing, based on a decentralized network. This is essentially a virtual machine in cyberspace, which will support the corporate IT system, that is, the servers for websites, the personnel management system, supply chain management, and other critical business processes in the life of companies and large organizations. In addition, thanks to the self-regulating BNS system, cloud storage will be reliably protected from external threats, without the need for administration and human resources.

PHI is a credit system that will create a decentralized lending infrastructure. To eliminate the risk of volatility of the cryptocurrency, they propose to introduce local tokens PHI, which will be tied to the rate of a particular country. For example, in America it will be PHI-USD, in Russia PHI-RUB, and in the Eurozone PHI-EUR. Thus, all loans will be issued and given in one currency. In fact, they propose to make an analog of the currency in the digital currency and tie it in the block system – the credit system.

Imagine that a user A has decided to issue a loan. He passed the verification in the system, proved his identity and laid out his proposal for a loan. Creditors, or validators, as they are called in the system, consider this application and make a decision on it. By the way, any person who has made a certain deposit to the system, to secure loans, can become a validator. Here, the Threshold Relay technology enters into the play, which defines casual users – creditors who anonymously and without the possibility of collusion make a decision on the loan of user A.

Token

Dfinity has introduced a very promising token utility case.

Dfinities are system tokens that will be used in almost all network activities. The developers identified four main roles of dfinities:

  • Fuel for installing and launching smart contracts.
  • Deposits to create nodes that can participate in the management of the system through BNS.
  • Contributions for making their proposals and joining the network infrastructure.
  • Deposits that will allow cloud networks Dfinity to connect to a common network.

As you can see, all the basic functions and capabilities of Dfinity will be possible only through payment or freezing of tokens. Inflation in the system is possible, but the decision to issue new coins will be accepted by the participants and AI BNS together, thus ensuring the maximum value of the tokens.

It is worth adding here about the aforementioned local PHI tokens, which are likely to become additional tokens of the ecosystem. While the developers described only one possible function of these tokens – the currency of decentralized lending.

At network launch, the breakdown of the distribution is expected to be:

  • 9.5% Early Contributor Tokens
    • Allocated to numerous parties with respect to earlier works and investments made before the foundation was formed.
  • 24.72% Seed fundraise contributors
    • Allocated to a large number of contributors in the Seed round.
  • 6.85% Strategic fundraise contributors
    • Allocated to strategic contributors in the Strategic round.
  • 4.75% Presale fundraise contributors
    • These will be allocated to contributors to the forthcoming Presale round.
  • 1.25% Community airdrop
    • These will be allocated to select community members with a preference for longtime supporters of the project.
  • 52.93% Foundation Endowment, Team and Partnership Tokens
    • Tokens held or already deployed by the foundation in pursuit of its competitive goals (for funding R&D and operations, offices, technology acquisitions, community programs, employee incentives, partner incentives and other long-term needs).
  • Pre-sale for 4.75% is considered to be the last fundraising event for a maximum raise of 90 million Swiss Francs.

There won’t be any Public sale at this point.

Currently, Dfinity plans to issue an airdrop for individual community members will be able to collect dfinity tokens worth between 500 and 2,500 CHF (depending on their personal airdrop cap, which will be derived from a duration of community tenure and other inputs). They are planning to give away tokens worth up to 25,000,000 CHF. In order to participate in the airdrop, one must go to their Telegram group (see general details below).

The main problem lies in that there is no exact information on prices, bonuses and vesting periods. The project states: “Consequently by network launch, hardly more than 10% of the network will have been distributed to accredited investors who participated in private rounds (including the tokens disbursed by the Strategic round, which came with a three year vesting schedule and tied contributors to commitments including contributions of funding and management support for the DFINITY Ecosystem Venture Fund).”

Such strange token sales structure is explained by two points:

  1. Team has already connected enough funding during seed round in February 2017, when its collected funds turned into 40 million; with VC that came during the summer, their funding became more than a $100 million USD.
  2. They do not want to go to public round in order to avoid possible regulatory risks, thus opting to finalize everything during a pre-sale available to professional investors and probably pools.

Team

All-star team. Ideological guys who are trying to develop blockchain as a system itself. Almost everyone is from top universities. Coders, cryptographers, specialists on abstract calculations. The greater part of the team is from String Labs, an incubator-studio.

Dominic Williams is the Chief Scientist and main creator. Dominic is a crypto theoretician and entrepreneur. His recent math includes Threshold Relay and PSC chains, Validation Towers and Trees, and USCIDs, and he proposes new ideas such as “The 3 E’s of Sybil Resistance”. Previously he ran a venture-backed MMO game using his own distributed systems that hosted millions of users.

Timo Hanke is the Head of Engineering. He was once a Professor of Mathematics and Cryptography at Aachen University in Germany but got into bitcoin. In 2013 he created AsicBoost to reduce the gate count on bitcoin mining chips and increase the efficiency of bitcoin mining by 20-30%, which has since become a standard in large-scale mining.

Ben Lynn is a Senior Staff Scientist and Engineer. Ben Lynn is the “L” from the “BLS” cryptography applied by “Threshold Relay” to generate randomness and achieve incredible security, speed and scale in public networks. Once a Stanford PhD under Dan Boneh, Ben joined the DFINITY team after 10 years in senior engineering roles at Google. Ben writes many papers.

Andreas Rosserberg is Senior Staff Scientist and Engineer, Andreas was previously a Staff Engineer at Google, where he co-designed the WebAssembly virtual machine, now continuing as lead editor of the language specification, and led the JavaScript language team for the Chrome V8 engine. Andreas was formerly a postdoctoral researcher at the Max Planck Institute.

Mahnush Movahedi is Senior Researcher and Engineer. Mahnush joined DFINITY from a postdoctoral position at Yale University working on scalable and fault-tolerant distributed algorithms for consensus and secure multi-party computation, secret sharing and interactive communication over noisy channels.

Martin Becze, works in Virtual Machine Research. He is a hacker and researcher interested in building open decentralized networks. His current work for DFINITY focuses on re-purposing the Wasm virtual machine for blockchain computer networks. As an active and well known contributor within the Ethereum community, he brings deep experience, insights and expertise.

Disposition

Dfinity offers one of the most innovative solutions in the blockchain space, which in conjunction with their competent team and strong funding, makes a strong case for investment.

Risks

  • The token sale structure is not transparent. There very several private rounds, each of them may have different price, bonus and vesting structure. But Dfinity won’t have any public sale anyway, thus price of a is really hard to predict. (-1)
  • A potential hard cap is more than 100 million. (-2)
  • No details on team token vesting. (-1)
  • Competition is fierce in this sector. There are several new blockchains in this field, which have had or are in the process of having ICOs this year like Wanchain, Edenchain, Eos and Icon. The Dfinity difference is that although it will be released on the market later, it already had funding in early 2017 and had some time for doing their work on the blockchain, thus when they will be listed on the exchanges, they will have a working net ready. (-1)

Growth Factors

  • All-star team with knowledge and expertise in related fields of mathematics, development cryptography and blockchain. (+3)
  • A product is a new type of a unique blockchain, which is a potential next development of Ethereum, which will operate on the completely new paradigm (“AI=Law”) and can solve earlier blockchains security, governance and scalability issues. (+3)
  • Token/Coin represents a real value in the project as all operations are done in Dfinities and there are numerous token use cases. (+3)
  • Potential market cap is similar to top blockchain projects like Eos, Ethereum and bitcoin itself. (+1)
  • MVP is available. (+1)
  • Team is legally conscious and even decided no to run a public sale due to unclear regulatory landscape public sales. (+1)

Disposition

Dfinity has strong fundamentals in terms of product, team and token. The main concern is token sale structure, but as it does not have a public sale anyway, it can be bought after listing when trade analysis will provide a good entry option. This project has a strong 7 out of 10.

Investment Details

  • Type: Utility
  • Symbol: Dfinities
  • Platform: Ethereum/Own platform
  • Crowdsale: Replaced by airdrop/only pre-sale available
  • Minimum Investment:
  • Price: N/A
  • Hard Cap: 90 million
  • Payments Accepted: N/A
  • Restrictions Barred from Participating: N/A as there is no public sale

General Details

  • DFINITY Website : https://dfinity.org/
  • DFINITY White Paper : http://bit.ly/DFINITY_WP1
  • Mission Control : https://t.me/DFINITY_Devs
  • DFINITY FAQs : https://dfinity.org/faq
  • Explainer Video : http://bit.ly/DFNINTRO
  • The DFINITY Testnet Video : http://bit.ly/DFN_TestNet
  • Twitter : https://twitter.com/dfinity
  • Medium Blog : https://medium.com/dfinity
  • Latest Newsletter : http://bit.ly/DFN_NEWS2
  • Community Run Telegram : https://t.me/dfinity_community
  • Community Run Reddit : https://www.reddit.com/r/dfntrader/
  • Telegram Group : https://t.me/dfinity
  • DFINITY Announcements Channel : https://t.me/dfinity_announcements

Featured image courtesy of Shutterstock.

Author:
Vladislav Semjonov has a legal and financial background. He has been involved in crypto space since early 2017 in both ICO advising positions in several ICO consultancy firms, and as an ICO analyst for VC. He began contributing for Hacked.com in April 2017.