IEO Analysis: DigitalBits

DigitalBits forked the Stellar protocol in 2017, and launched MainNet in March 2018.  The Toronto-based project is a protocol layer blockchain that supports asset tokenization and the seamless transfer and trade of digital assets. DigitalBits aims to address enterprise-grade solutions and is backed by well-known blockchain professionals and firms.

Core Features

  • DigitalBits Consensus Protocol, a construct of Federated Byzantine Agreement (FBA)
  • High Scalability (10 000+ TPS capacity)
  • Low Latency (2–5 second confirmation times)
  • Low transaction fees (0.00001 XDB)
  • Decentralized Trading Support
  • Multi-Asset Support
  • Network Trust Management
  • Compliance (AML/KYC) Tools
  • Enterprise Developer Support

To further support enterprise adoption and network governance, DigitalBits has introduced four key amendments to the original Stellar protocol:  

Protocol Enhancements

  1. Non-inflationary. XDB, DigitalBits’ native token, is not subject to inflation, supporting fair distribution across accounts regardless of the amount staked.
  2. Algorithmic Pool.  Contrary to Stellar’s inflation pool, that distributes tokens to accounts holding in excess of 0.05% of the circulating supply, DigitalBits has developed an algorithmic pool that disseminates reserve tokens on the basis of network and account usage.  This encourages the use of the blockchain and eliminates the distribution of tokens to large, idle accounts.
  3. Token Name Certification Service (TNCS).  The proposed TNCS provides a framework to ensure that an asset issued on the DigitalBits blockchain actually represents its real-world equivalent.  The TNCS will help prevent malicious entities from issuing tokens that attempt to falsely represent brands or companies with which they are not associated. Service providers operating on the DigitalBits network may provide services similar to SSL certificate authorities that maintain a mapping between token issuers’ blockchain account addresses and their identities.   
  4. Node Operator Program (NOP): The proposed NOP is designed to incentivize network participants to host and maintain validator nodes.  Successful applicants will be rewarded in XDB for properly operating a validator node, considering aspects such as up-time. Node incentivization encourages more entities to run validator nodes, increasing network decentralization and security. Currently, there is no direct economic incentive to run a validator node on the Stellar network.

Enterprise Go-To-Market Strategy

DigitalBits engages an enterprise go-to-market strategy, focused on integration with existing consumer applications.  Using this approach, they seek to move millions of accounts on-chain in a short period of time, within applications that users are familiar with.  

The project has provided a full suite of industry-specific API’s and SDK’s to facilitate the development of enterprise-grade solutions – with which third-party developers can easily deploy their applications.  Additionally, DigitalBits has designed grant programs to further the development of specific tool-kits relevant to enterprise requirements.

Direct integration with existing consumer applications simplifies both enterprise and consumer adoption.  By optimizing an application’s back-end infrastructure, DigitalBits brings the benefits of blockchain technology to users without altering learned behavior.

The Early Access Program (EAP) helps enterprises to engage with and use blockchain technology and provides valuable feedback as to how blockchain can better support their needs.  Ranging from a 6-12 month period, this approach allows for a more holistic integration of technology. Through the successful launch of the EAP, and feedback of initial early access clients, a first use-case was identified – loyalty and reward points.

First Use-Case: The Points Economy

DigitalBits infrastructure has various potential applications, but its first targeted use-case is the Loyalty and Rewards Points industry.  This industry is unique in that points are already considered a form of corporate currency.

DigitalBits focuses on a large amount of illiquid capital aggregated within the points economy. In the United States alone, $48 billion in points are generated across Travel and Hospitality, Financial Services and Retail. Of this more than $16 billion goes unused and will never be redeemed, exposing inherent flaws within today’s programs.  According to the DigitalBits’ whitepaper, frictions are felt across the board in the points economy:

Issues faced by consumers, according to DigitalBits:

  • Programs exist in silos and do not communicate with one another. Transferability and portability are difficult to impossible, leaving consumers with points applicable to offerings they do not want.
  • Changing rules and requirements make it frustrating to collect and redeem points.

Issues faced by producers, according to DigitalBits:

  • High cost to create and maintain loyalty programs.
  • The underlying program infrastructure is not conducive to interoperability.

The DigitalBits blockchain is designed to address frictions in the loyalty industry.  It allows value to move seamlessly between programs – allowing consumers to optimize their holdings based on preference i.e, you hold $500 worth of Starbucks points, and can say, apply that value to your airplane ticket. DigitalBits supports both the creation of new digital assets and integration of existing ones. This can be further applied to new asset classes outside of points economy:

Unanchored Assets – are created on the DigitalBits network. If a program is built on top of DigitalBits, and releases a token, this token would be considered an unanchored asset.

Anchored Assets – are those that did not originate on the DigitalBits blockchain, and represent analog assets external to the network. Assets on the DigitalBits blockchain become usable within the DigitalBits decentralized exchange, allowing the value of the assets to be leveraged towards any offerings available within the DigitalBits ecosystem.  

Anchoring allows programs and economies not native to the DigitalBits blockchain to freely interop with other assets and benefit from enhanced liquidity and match-making options. 

DigitalBits DEX

Multi-Hop: Enhances Liquidity of Digital Assets

To bring additional value to tokenized assets, DigitalBits features a match-making service to support on-chain transfer and trading. The built-in DEX utilizes multi-hop technology to enable mass-market liquidity for digital assets. Multi-hop enables trades to be completed up to 6-intermediary hops, and assets can trade freely, even in the absence of a direct market. This would allow the DigitalBits DEX to fulfill virtually any proposed asset pairing, enhancing asset liquidity and bringing on-chain assets such as loyalty points closer to the role of “digital cash.”

XDB Token

XDB – DigitalBits’ native token, serves three main objectives:

  • Protective Security Features
      1. Anti-spam: Every account on the DigitalBits blockchain is required to stake 10 XDB. This ensures authenticity and enables the accounts sending function.
      2. Gas/Transaction Fees: Each transaction is subject to a minor transaction fee of 100 nibs (0.00001 XDB).

These features are designed to create a financial disincentive for malicious users that may look to flood the network.

  • Bridge Token: Enables transactions among non-native tokens – XDB operates as a bridge currency to facilitate trades between pairs of digital assets that may not have a large direct market.
  • Leveraged for fast and low-cost payments and remittances: up to 10k TPS, 2-5 second confirmation times.

Token Sale Details

Type: digitalbit
Symbol: XDB
Platform: Native blockchain (Stellar fork)
Crowdsale/IEO: December – May
Minimum Investment: 1 Ether
Price: 0.004 USD
Hard Cap: 10 billion XDB
Payments Accepted: BTC, ETH
Restricted from Participating: United States, China, Iran, North Korea, Bosnia & Herzegovina, Ethiopia, Iraq, Syria, Trinidad & Tobago, Tunisia, Vanuatu, and Yemen.

Partnerships

Caddle: Caddle is a customer engagement platform with over 1 million users, that offers consumers cash-back rebates.  Caddle will integrate DigitalBits with its existing rewards program to offer greater value to its customers.

Metalyfe: DigitalBits will serve as one of the primary use-cases of the Metalyfe data marketplace.  Through Metalyfe’s multi-currency wallet, users will be able to spend tokenized assets on the DigitalBits blockchain towards online purchases in a one-click pay system.  

Lobstr: The largest wallet provider in the Stellar ecosystem, Lobstr has collaborated with DigitalBits to create the XDB wallet, which will provide custody and storage solutions for assets residing within the DigitalBits ecosystem.   

Cogeco Peer 1: DigitalBits provides support to Cogeco Peer 1, and their cloud and data center clients in their consumption of distributed ledger technology.

Enterprise Clients: In addition to Cogeco Peer 1, further EAP participants will be announced in the coming months.  Total accounts suggested to integrate with the DigitalBits blockchain will exceed 20 million in 2019 alone.

Team

DigitalBits founder, Al Burgio, founded Console Connect in 2011, pioneering Interconnection 2.0, the means by which entities can bypass the public internet and interface directly with one another. Clients included the likes of Google, Microsoft and Amazon. He exited in October 2017, when Console Connect was acquired by a large multinational, PCCW Global. Key members of Console Connect are also involved in the DigitalBits Project, notably Director of Technology Thomas Madej. Additionally, Mr. Burgio has assembled an experienced team well-versed in open-source technology companies, and top tier advisors including former CMO of Wal-Mart, Julie Lyle and former VP at Red Hat, Paul Gampee.

Disposition

Prioritizing enterprise-grade solutions and holistic user experience, DigitalBits has taken definitive steps towards mass adoption and the future of blockchain.  The focus on blockchain as a use-case as opposed to simply a technological perspective has drawn the interest and support of notable crypto investment firms and backers, including: Ari Paul (BlockTower Capital), Richard Rofe (Arcadia Crypto Ventures), Anthony Coscio (TokenStack Partners), Bradley Rotter (LP at Pantera Capital), Matthew Roszak (Bloq), James Lowry (Storj), and Lars Rensing (ArkEcosystem). DigitalBits receives a 7.2/10. This circulates around a unique go to market strategy, it’s backing by a former Fortune 500 C-Suite Executive, and Matt Roszak.

Author:
Justin O'Connell is the founder of financial technology focused CryptographicAsset.com. Justin organized the launch of the largest Bitcoin ATM hardware and software provider in the world at the historical Hotel del Coronado in southern California. His works appear in the U.S.'s third largest weekly, the San Diego Reader, VICE and elsewhere.