ICO Analysis: Enigma
Let’s be up front: Enigma’s team is more likely a problem than not. From our sister site’s Francisco Memoria:
While trying to know more about the incident and help other users know about it, redditors found out that Enigma CEO Guy Zyskind’s email had been accessed by the hacker. His email, according to reports, had been dumped on the internet in the past due to other services being compromised. After these occurrences, Zyskind reportedly never changes his password, and no two-factor authentication was enabled.
This is front-loaded for obvious reasons. Due to very simple measures that could have been taken, potential investors have already had their hopes dashed and money taken. This incident, no matter how many ICO publications or analysts give Enigma a high rating and a pass, will affect the funding for Enigma. Whosoever wishes to can simply start campaigning with the hacked information around the beginning of the sale, to remind everyone, erstwhile launching a separate implementation of the same platform.
That out of the way, what is Enigma?
Enigma is designed to connect to an existing blockchain and off-load private and intensive computations to an off-chain network. All transactions are facilitated by the blockchain, which enforces access-control based on digital signatures and programmable permissions.
Does this remind you of anything? Oh, perhaps, the Supercomputer Organized by Mining (SONM)? If so, good. Because from a high-level, the services of this kind offered are indistinguishable, but SONM lacks any of the aforementioned intrigues.
Enigma is also intended to be used as a data marketplace, which is what we’re here to talk about, really:
Off-chain nodes construct a distributed database. Each node has a distinct view of shares and encrypted data so that the computation process is guaranteed to be privacy-preserving and fault tolerant. It is also possible to store large public data (e.g., files) unencrypted and link them to the blockchain.
Okay, what about Catalyst?
Make no mistake. Things are intentionally confusing and complex in the ICO market. Often, if someone feels humbled, they will give their money over in the belief that the other party will know better what to do with it.
In any case, Catalyst is, among other things, another play in the market information space. Our upcoming review of Red Pulse will illustrate yet another example of this type of product being launched, but here is a very succinct description of Catalyst:
[…] A tool that makes it easier to make educated investment decisions in crypto-assets, based on a data-driven approach. Catalyst is a set of applications and the infrastructure to drive better investment strategies, hence increasing the adoption of crypto-assets.
It is also the “first application on the Enigma protocol.” The Enigma protocol uses the ENG token. All of this is being launched simultaneously, we understand. Assuming the Enigma data marketplace takes off, what we are being presented is a platform that will allow people to build highly-informed trading bots among other applications that rely on real-time information. The data will not be free, it will be paid for in ENG tokens. This is the idea. Not just bots, but anything. We signed up to see what it looks like. After some doing, we got the test bot running. Its algorithm is the buy and hold strategy, and it it outputs the following on the host computer:
We can see how this will come in handy, for many different applications, across industries. Financial markets may be the first to embrace and adopt, but others will follow if the snowball begins rolling. It’s not hard to imagine, if the data is available and affordable, many advanced real-time data consumption applications being developed atop the protocol.
Over-time, it is our hope that the long-tail of data-sets curated by the community would outpace our own ability to generate interesting data. Such a network effect would be highly beneficial to developers using our platform.
So the value proposition is that great applications will have immediate access to quality, verifiable data for many purposes. Financial applications will obviously be the most growth-producing. Now let’s see what we can derive about the token itself.
We won’t talk about the pre-sale that is supposed to be on-going, because we do not want anyone eager to shoot themselves in the foot to go ahead and do so. It will be difficult for anyone to trust a “new presale” announcement, so any such would be a bad metric by which to measure the performance of the funding round.
So we will talk about the actual ICO token generation event, which begins on 9/11/2017 and will yield 100 million tokens, 25 million of which the Enigma firm will retain for its own purposes, another 25 million of which will be given away, and 50 million of which will be available for purchase.
The tokens value will be in incentivizing and paying for data on the platform. Thus, we have a three-level system here – the data market is the bottom layer, Catalyst is the second, and on Catalyst other applications depend in order to provide utility. The last part is crucial to success, and the volume of projects which crop up in that category is a good way to measure the health of the project.
Competitors In The Field Are Active & Possibly Quite Superior
We will be reviewing Red Pulse very soon, but if you have a look at their website, it’s not hard to extrapolate that they could pretty easily expand their own platform to fully encompass everything that Enigma is up to. With all due respect to the actually brilliant authors of the Enigma whitepaper and the company, Enigma might not be the best play in this field. Having your e-mail hacked is potentially forgivable, but less so when it was quite avoidable. Being MIT graduates and technically-minded individuals, that this took place gives rise to the quiet suspicion of a pre-sale scam conducted from inside.
This will be one of the longer verdicts this analyst enters, so that it is fully understood why he is concluding rather divergently from others in his field. For starters, we have to consider all the angles that are introduced when a pre-sale theft/hack occurs. It’s not relevant how guilty the team are, unless they were complicit, but the perception that they are guilty of bad security is prevalent. In our own Hacked.com community, more than one regular ICO investor has already stated there is no coming back from this. We have to account for pessimism and its ability to take an in-progress funding round to an eventual refund round.
- The team were not prepared to start this project. Calling yourself “an MIT-bred team of experts, backed by top-tier investors,” MIT being the birthplace of hacking and one of the leading genius incubators in the world, was essentially daring hackers to see what they could see. They would have been targeted anyway, but some preparedness could have gone a long way. All of the above firmly in mind, we score Enigma a 0 in terms of team quality. Under the current model, this means a negative carry of 4 points. Off the top.
- Building on the above point, it will be difficult to get developers or companies excited to work with a company that already has horrible optics in the technosphere. Without these applications, you have nothing here. -2
- In the event that applications are built, they will need data. Again, the reputation is going to make this a less attractive place to collate and sell data than others. -1
- This analyst is cautious to suggest that this project will take off, however, the potential for growth is there. In the cryptocurrency world, we’ve seen companies recover from worse, but we’ve also seen companies do much worse. The thinking of many in the community will be that we should probably not enable Enigma to do much worse.
- This being the case, there is still a lot of potential in this platform. Whitelabeling the applications is a possible way to avoid the negative name recognition in the short-term, for development teams who still want to build on Catalyst. We can foresee at least a few of these doing so, and so we feel okay giving some points back: +5. (Idea can work.)
- They have some software that works. It’s very basic. It would have been preferable that they built a fully-fledged product to offer in addition, of the sort that others are expected to build down the line. We see the reason that they rushed to market as a matter of timing, so we forgive that too. +4
- Although we assert that they may not have personally been prepared to conduct the ICO phase of their project, we can say that they are motivated to achieve their milestones, and this is encouraging for a token holder. +2
Numerically, for the present time, we land on a score of 4/10 for Enigma. When the sale has begun and the market begins to speak, we can move this needle in either direction. The author welcomes feedback in this regard. Again, no change to this score will be made before the market has begun to speak on the subject.