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Sector: Infrastructure

DLT platforms review 2 October 2018

A Distributed Ledger Technology (DLT) platform creates an ecosystem and sets limits for distributed applications built on the top of it. The platform parameters, such as governance model, economic characteristics and technologies used, are restraining factors for use cases and “mass-adoption” of the blockchain by large corporations. We have analyzed a few blockchain platforms to compare their parameters such as the governance system, security, protocol, economics, scalability options, and technology, along with others.

Ethereum is the largest platform so far in terms of Dapps, fees received and the size of community. The scalability issue and the lack of a regulatory layer that makes it easy to create scam schemes on the top of it are the main points of criticism.

The centralized validation became a trade off to get a regulatory compliant system in VeChain and NEO. Alternatively, the self-amend governance system, probably based on Futarchy, may be realised at Tezos.

The valuation of platforms reflects the upside investors now see in their scalability, use cases, technology and community. The scalability of EOS, IOTA and Hedera Hushgraph may still compromise trilemma (security versus scalability versus centralization). The market gives credit for new use cases, reliability and technology upgrades and criticism for regulatory issues, scalability issues or development delays.

The community of developers and users is a key determinant of the platform success. Ethereum, followed by NEO, Cardano, EOS, VeChain and Waves all have good communities which are supportive for their platform development, while Tezos needs to catch up to increase in the popularity stakes.

Date 2 October 2018

Crypto MktCap, $bn 221

Bitcoin dominance 51%

Research Analyst:

Marina Alekseenkova

Marina.Alekseenkova@nkbgroup.io

2

Summary

The distributed ledger technology (DLT) platforms provide a necessary infrastructure for the creation of

Distributed Applications (Dapps), issue of tokens, crowdfunding and other use cases in the crypto space.

The choice of a platform implies restrictions on features of an application, affecting the user experience in

the final product or service. While the existing parameters of platforms are important for Dapps launching

now, the interoperability of platforms and evolving regulatory landscape will play a major role in the

future, highlighting new raising stars. In this report we compare several decentralised platforms, in terms

of the technological solutions they offer, their development plans, their security, scalability, governance

system and some other characteristics, which are important not only for the valuation of platforms, but

also for distributed applications and their potential customers. We have based our conclusions on public

materials and our interveiws with developers, users and representatives of the platforms.

Decentralisation of a platform guarantees that no third party is involved in protocol changes and

accepted by all users. There is a degree of freedom and a security parameter for users at the same time.

The measure of the decentralisation, in our view, is the number of nodes participating in the network, the

number of nodes participating at different levels, including validators and users, determining the

network’s security level. Some platforms limit the number of validators (21 nodes at EOS, 101 at

VeChain), some have an unlimited number of nodes. Different rules and incentives are applied for nodes

to participate in block production, setting the security level and cost of transaction on the platform.

Security, the most important element for users, is a function of techological maturity, protocol,

incentives for users and thus a disadvantage (high economic cost) for malicious players.

Scalability, or a potential to increase the number of transactions per second (TXS), defines the

platform’s ability to host a large number of applications and transactions. The proof-of-stake (PoS)

protocol, currently adopted by most of the platforms, would allow the increase of the number of

transactions from below 100TXS to over 10,000TXS or even up to 1mn TXS in some cases (fully

scalable Ethereum, EOS, DEXON). The limitation of PoW by existing latency and electricity-intensive

mining, forced Ethereum to move towards PoS, despite the platform’s successful adoption by Dapps.

Incentives for block produers or validators (miners, stakers, bakers) influence the security and

going-concern basis of a platform. The higher the incentives for block producers to run blockchain, the

higher security the platform can provide for Dapps. There are different sources to fund incentives, usually

these include transaction fees and/or a monetary inflation component.

Cost per transaction is a major economic parameter that may be either an incentive or a

limitation for users. The cost of onboarding for an application may be another decision point for a Dapp.

Governance, or rules to amend a decentralised platform, becomes a crucial parameter as more

stakeholders join the platform. Among the ways to “improve” a platform or a protocol, are hard forks, soft

forks, voting and other mechanisms. Platforms’ developers are thinking more about self-amended

(automated) algorithms to create a flexible governance system.

Technological features, including the programming language, software source and library,

interoperability, as well as Big Data, AI, and others, define the platform convenience for both developers

and users. Easy-to-develop platforms are more attractive due to their flexibility of programming. Some

platforms are developed on Ethereum and then swapped for an own mainnet (EOS, ADA and TRX are

examples).

Consumer features include a number of user-friendly wallets, native token exchange trading and

liquidity, user interface and other features that contribute to a competitive angle for Dapps.

Network characteristics, such as the number of developers, users, and activity of the community

are valuable parameters, in our view. The rating of the social characteristics of the ecosystem may be

unbiased, however, as it makes it difficult to compare mature and start-up platforms.

3

Figure 1. Approach to DLT platform analysis

Source: NKB Research, Hypothesis Research

Platform tokens represent the majority group among top-30 digital assets. Several platforms, such as

EOS, VeChain and Cardano used Ethereum for the launch and then switched onto their own Mainnet.

Ethereum provided an essential technological background for most of the platforms (EVM, Twin-token

system, etc). While Ethereum is a fully open-source decentralised platform, its newer peers targeted

scalability, more use cases, a new governance system and other features which resulted in technological

and structural modifications.

Figure 2. Top-30 digital assets: classification as of Aug 2018

Source: coinmarketcap.com, NKB Research

Blockchain platform

Security

Incentives

Scalability

GovernanceTx Cost

Network

Features

Platforms

• Ethereum

• EOS

• Stellar

• Cardano

• IOTA

• TRON

• NEO

• Ethereum Classic

• NEM

• VeChain

• Tezos

• Qtum

• Zilliqa

• Lisk

• BitShares

Dapps

• OmiseGO

• 0x

• ICON

Stablecoins

• Tether

Currency

• Bitcoin

• XRP

• Bitcoin cash

• Litecoin

• Monero

• Dash

• Binance Coin

• Zcash

• Bitcoin Gold

• Bytecoin

4

Ethereum remains the largest platform by market capitalisation, carrying the majority of Dapps, and most

recognised among developers due to its ease of use and developed infrastructure. The platforms below

include IOTA, which does not “natively” support smart contracts but is provided as a layer on top; also,

some projects which are developing smart contracts. New platforms such as Hashgraph and DEXON are

coming to the market with lower latency and higher scalability solutions.

Figure 3. Platforms Market capitalisation (selected platforms among top-40 assets), $mn

Source: coinmarketcap.com

5

DLT PLATFORMS AND PROTOCOLS

The development of the crypto space infrastructure has accelerated over the last year, implementing new

concepts and features to meet the requirements of a wider range of stakeholders, such as regulators,

large corporations and retail. We look at several platforms, which use different technologies,

implementation stages, and customer benefits. Most of these platforms already have 2-4 years of

intensive development experience since the concept of implementation, however most of them are far

from completion, which may not be achievable at all. A few changes were widely discussed recently.

- The largest by market cap and the most successful platform, Ethereum, is working to implement a switch from PoW to PoS, as well as sharding and potentially a few other innovations to achieve scalability.

- PoS and its modifications became the most popular protocol, although its high throughput (1000-10000TXS) is yet to be achieved (EOS, Waves, Cardano, NEO and others)

- Modularity and multi-layers are winning popularity (Tezos, Cardano). - Regulatory requirements and importance of adoption by large corporates vote for advantages of

regulatory-compliant platforms (NEO, VeChain). - Competition among the platforms will increase once key developments are completed in 2018-

2019, with more Dapps potentially willing to switch from Ethereum (if no improvements) to its competitors.

- Decentralization, which is defined by how many computational resources each participant must control for the system to run, became a trade-off for enterprise-focused systems such as NEO, VeChain, Lisk.

Figure 4. Key characteristics of selected platforms

Name Ticker Pros Protocol Launch Working

Smart contract

Turing complete

Number of

Dapps

Number of tokens built

on the platform

Number of

nodes

Ethereum ETH Decentralized Secure Well adopted

PoW / PoS exp

2019 Jul’15 Yes Yes >1500 694 27500

EOS EOS Scalable No user fees

DPoS Jun’18 Yes Yes TBA (>3) 0 21 (68 seed)

Cardano ADA Reg compl Science intensive

PoS Oct’17 Expected

4Q18 Yes TBA (>2) 0 NA

Tezos XTZ Self-amend Security

PoS Jun’18 Expected, time TBA

Yes 0 0 NA

Waves WAVES Token launcher LPoS Jun’16 Expected 3-

4Q18 No 65 >100 210

NEO NEO Digital identity dBFT Feb’14 Yes Yes 74 25 8

NXT NXT Childchains / comb Ardor, Ignis

PoS Sept’14 No No 4 4 129

(online)

VeChain VET Reg compl. IoT

PoS Jul’18 Yes Yes >210 0 101

Lisk LSK Sidechains DPoS May’16 NA No 0 0 1

Source: companies data, NKB Research, Hypothesis Research

6

Figure 5. Comparison of platform parameters

Ticker MktCap,

$mn

MktCap/ Throughput

current

MktCap/ Throughput

potential NVT*

MktCap/ Exch

volume

MktCap/ RS**

MktCap/ GC***

Ethereum ETH 23386 52.97 0.015 26.99 34.8 62.0 90.0

EOS EOS 5129 0.82 0.163 18.68 19.8 90.7 6.5

Cardano ADA 2161 0.69 0.069 4.24 80.6 31.9 340.8

Tezos XTZ 814 0.64 0.052 84.6 1040.3

Waves WAVES 214 0.07 0.007 57.95 72.8 10.1 0.3

NEO NEO 1204 0.19 0.038 32.29 38.0 12.5 1.0

NXT NXT 65 0.01 0.000 6.9 0.2

VeChain VEN 735 0.47 0.002 103.8 94.0 14.1 305.7

Source: coinmarketcap.com, coinmetrics.io, NKB Research, Hypothesis Research. *) NVT – network value to transactions (incl.

onchain plus exchange transactions volume) ratio, **) Reddit subscribers, ***) Github commits

Figure 6. Platforms’ comparison: selected metrics*

Source: NKB Research, *) Scale 1-7, Decentralization (7-more decentralized, 1 – centralized), Security (7 – more secure, 1 – platforms with a number

of security issues), Scalability (7 – scalable, 1 – low scalability at the moment), Network (7 – bigger community on Reddit, Github, etc, 1- relatively

limited community), Adoption (7- good adoption of the platforms by Dapps and users versus other platforms, 1 – limited adoption or no adoption).

Decentralisation

Security

ScalabilityNetwork

Adoption

Ethereum

EOS

Cardano

Tezos

Waves

NEO

NXT

VeChain

Lisk

Dexon

7

SCALABILITY Scalability represents the throughput of the network in terms of the number of transactions per second

(TXS) a system can process. The limited number of transactions restrains the performance of Dapps and

diminishes the number of potential use cases on the network. The network scalability is partially

determined by the technology and algorithm used. The Ethereum PoW has a limited number of blocks

approved per period thus the peak throughput may be easily reached with high performance applications,

such as Cryptokitties or some other gaming and gambling Dapps. The PoS validator number sets the

transaction throughput and the network attractiveness for users and developers. The potential TXS

estimates for platforms vary, depending on the protocol and potential innovations the platform may

integrate in the future. Most of the platforms assume 1,000-10,000 TXS is potentially achievable. That is

compared to over 50,000 TXS at its max and around 1600-1700 TXS per day on average achieved on

VISA in 2016.

High throughput is not the ultimate target for a network. The hardware limitations and internet

connections also set limitations for the throughput. It would require a sustainable connection of a gigabit

to achieve a rate of 400,000 transactions per second. This connection is available in only a few OECD

countries now at rather high cost.

Figure 7. Blockchain comparison by number of transactions

Blockchain Number of transactions per

second Potential* number of

transactions

Ethereum 14 >50000

EOS <199 >1000

Cardano <100 >1000

Tezos 40 >500

NEO >200 >1000

NXT >400 >10000

Waves >100 >1000

VeChain 50 10000

Lisk 2.5 1000

Source: Companies data, *) data based on community discussions or platforms’ own estimates

Several scaling solutions such as Plasma, Casper and Sharding may help to reach a higher transaction

volume and a lower time of transaction confirmation for users.

The blockchain model assumes the validation of the transaction by each participant. If the number of

transactions is increasing in line with the increasing number of participants, the network will perform a

quadratic number of validations. Sharding, a technique which lets validators perform transactions on

separate sub-chains which are periodically braided together on the main chain, is one of the solutions for

the scaling problem.

8

One of ideas to improve scalability of chain validation is recursive SNARKs, proposed by Arthur

Breitman, who may use it to scale Tezos. SNARKs (succinct non-interactive zero-knowledge proofs of

knowledge) is used in Zcash technology for protecting privacy transactions. Taking a piece of a code

which validates a transaction, it is possible to generate a zero-knowledge proof. Instead of submitting a

transaction to a miner, the user can submit the change in balances alongside with the proof. The proof

might be verified by every validator, and profit of proof might be verified by any number of validators in

milliseconds, regardless of the complexity of the transaction. That eliminates the importance of gas limits

for smart contracts. The trusted setup, which is required for SNARKs, may be replaced with STARKs,

which will rely on mathematical conjections instead.

Currently, Ethereum is working to implement Casper protocol with sharding, while also working on the

Ethereum Raiden solution. Tezos discussed SNARKs as a potential scaling solution for the network.

Several projects are working to implement sidechains or get off-chain verification integrated into the

protocol. The first results of those scaling solutions may already be seen by the end 2018 (Ethereum)

and in 2019.

Figure 8. Scaling proposals

Scaling solution Description

Lightning Network A system of smart contracts built on top of the base Bitcoin blockchain that

allows fast and cheap transactions between two parties via setting a payment

channel.

Sharding An approach which lets validators perform transaction on separate sub-

chains which are periodically braided together on the main chain.

Ethereum Raiden Raiden Network (RDN) represents an off-chain scaling solution, which allows

users to make transactions through transaction channels off the main

blockchain, settling periodically accumulated transaction volume on the main

blockchain.

Plasma Plasma is an off-chain solution that allows “child chains” which may allow

interchangeability of assets on separate chains and which are branches of

the main blockchain. The child chain will use different method of consensus

allowing higher transactions throughput.

SNARKs The user can submit the change in balances alongside the proof instead of

submitting the transaction. The proof can be easily verified by every validator,

and furthermore the chain can be verified by any number of validators in

milliseconds, regardless of the complexity of transaction. Source: Ethereum, Tezos, Zcash

The new protocol DEXON, which has a blocklattice structure (hushgraph-based), claims to be one of the most scalable solutions on the market with potential throughput of over 1mn transactions a second and latency of one second.

Figure 9. Comparison of selected platforms, number of transactions per second

Source: DEXON

7 20 1500 10000100000

1000000

Bitcoin Ethereum IOTA Steem EOS DEXON

9

SECURITY Security of the blockchain is determined by the number (or percentage of total participants) of attackers a

system can tolerate and recover from failure.

There are two views implemented in already existing platforms. The first supports the view that the

security of the network is a function of independent validators (Ethereum, Tezos). The second votes for

the centralised / KYC-approved validators who are trusted to run the blockchain (VeChain, NEO). The

security of a decentralised currency requires incentives created for the participants with a reward. The

first developed algorithm, proof-of-work, provided miners with a reward per block produced. Ethereum

and Bitcoin both benefit from a developed network of miners and high security supported by high cost per

block. Miners use a computational power and receive a reward for transaction verification.The

combination of a large computational resource spent on transaction verification and a reward received by

a miner, contributes to the security of the blockchain and settles a protection mechanism against attacks

on the network.

There have been several 51% attacks on proof-of-work blockchains, including Verge and GameCredits

this year. The most successful attack ended up with the loss of $18mn after a successful double spend

executed on the Bitcoin Gold network (which uses Equihash algorithm). The attacker had gained majority

control on the network’s hashrate and used that control to reorganize the blockchain and reverse

transactions. The attacker made a deposit at crypto exchanges, traded the coins for BTC or another coin,

and then withdrew the funds. The example of a weaker network and the problem of the algorithm, when

the malicious player can gain 51% hash power to reverse transactions for its benefit, raises concerns

about the potential risks for the small networks using PoW. The larger the network, the more expensive

the effort to attack it. Bitcoin has currently the enormous cost of attack. The combination of PoW and PoS

also considered as a secure solution, however, it raises concerns about the economics behind.

In a proof-of-stake network, block validators (stakers, bakers etc) are required to stake crypto assets to

approve blocks and to validate transactions. They receive transaction fees as a reward for their

participation and network support. The cost of attack of a POS network is an equivalent of owning some

30-51% of its value, depending on the network protocol for the distributed network. The combination of

trusted nodes or partially centralised or permitted validation (required KYC, or Notary-as-a-Service) is an

example of how recently developed blockchains are going to achieve higher security.

Safety of the network is achieved when all nodes come to the same result and results of nodes are valid

in line with the protocol requirements. Liveness of the network is achieved when all nodes participating in

the consensus produce a value.

Security represents one of the parameters in the famous trilemma: security versus scalability versus

centralization, when only two parameters seem achievable in the system.

10

INCENTIVES The economic model of blockchain depends on transaction volume and links the transaction costs to the

token value and thus the value (market cap) of the network. Most of the platforms have a twin-token

system to eliminate the situation when higher token price results in increasing cost of transaction on the

platform. High transaction cost makes the blockchain less attractive for both users and developers.

Moreover, a single token system results in a conflict when the interests of investors are not aligned with

the interests of the blockchain users. This paradox created the new approach towards the blockchain

development.

Incentives for miners on the platform provide security and protection agains DdoS. Incentives on bitcoin

blockchain represent mined blocks by miners with as many valid transactions in those blocks as possible.

In most PoS systems, fees paid by users per transaction and token issue by the platform are paid to

block validators.

The comparison of fees as a percentage of the market capitalisation demonstrates that fees paid to

miners/validators on an annual basis represented below 0.15% of MktCap, with higher fees attributed to

Ethereum validators.

Figure 10. Fees on the network as % of MktCap*

Figure 11. Fees per transaction on Ethereum

blockchain, $/Tx

Source: coinmetrics.io, NKB Research, Hypothesis Research,*) 2018

est YtD as of 18/09/2018

Source: coinmetrics.io, NKB Research, Hypothesis Research

0.021%

0.068%

0.002%0.002%0.000% 0.002% 0.003%

0.091%

ETH ADA NEO+GAS Waves

2016 2017 2018 est

0

1

2

3

4

5

6

07/0

8/20

15

07/1

0/20

15

07/1

2/20

15

07/0

2/20

16

07/0

4/20

16

07/0

6/20

16

07/0

8/20

16

07/1

0/20

16

07/1

2/20

16

07/0

2/20

17

07/0

4/20

17

07/0

6/20

17

07/0

8/20

17

07/1

0/20

17

07/1

2/20

17

07/0

2/20

18

07/0

4/20

18

07/0

6/20

18

07/0

8/20

18

11

GOVERNANCE SYSTEM There are several efforts to build governance systems on the blockchain. The initial idea of distributed

ledger technology without central authority implies some restriction on how the governance would work.

However, more centralisation at the level of block validation and arbitration is a common case now.

Global scale of the blockchain technology and legal boundaries of different countries restricts the usage

of traditional legal institutes to resolve disputes on the blockchain. At the same time, the blockchain is not

sophisticated enough to automate all the possible developments. The first automated governance

systems are under construction. The only way to implement the changes or to resolve disputes is to vote

for changes whether with computation power (miners, hard and soft forks) or with token stakes.

Since the introduction of Bitcoin, only a few hard forks in nine years were used by developers to create or

amend the blockchain. The Ethereum platform used one big hard fork (Ethereum Classic was created as

a side chain) to make amendments. The regulatory requirements will likely force platforms as well as

Dapps to amend the rules making a flexible governance system crucial for long-term development.

There is an opinion that the scalability issues related to blockchain are not related to the technological

problems, but to consensus concerns of governance. The software used worldwide, for example, Bitcoin

blockchain, will conduct more upgrades over the nine to ten years, than it actually did. The blockchain

functionality will evolve by adding new features and enabling more efficient transactions. The governance

system from this point of view looks to be a key to continuing the system innovation.

There are several systems, which help to amend the protocol and make major decisions on the

blockchain development:

- Hard fork and soft fork (Ethereum); - Voting on proposals designed by community and the Foundation; - Constitution and Arbitration Forum (EOS); - Self-amended protocol (Tezos), which may use futarchy (“vote values, but bet beliefs”); - Foundation running a corporate-type governance procedure (NEO, VeChain).

There is no recipe for building up an optimal governance structure in a decentralised system, however

we may see a combination of automated procedures and arbitration forum as a solution for PoS systems.

Figure 12. Comparison of governance systems

Name Governance system

Ethereum Ethereum Foundation, EIP system, hard/soft forks

EOS Decentralised, EFAC, voting via delegates

Cardano Foundation, voting

Tezos Self-amended protocol, Foundation, voting

Waves Waves Platform (foundation), voting

NEO Foundation, centralized nodes (decentralization by 2020)

NXT Centralized development and IP registered, voting

VeChain VeChain Foundation, Steering committee, Master nodes shall be authorized and pass KYC

Lisk Core development team

Source: companies data, NKB Research, Hypothesis Research

12

COMMUNITY Ethereum is the leader among the platforms in terms of community developments, with over 370k Reddit

subscribers, then followed by NEO, Cardano, EOS and VeChain. NEO, EOS and Waves have

substantial Github activity, while Tezos has a limited presence on Github.

Figure 13. Number of subscribers

Reddit Github,

comments Twitter,

followers Youtube,

subscribers Facebook

likes

Ethereum 377,210 subscribers, 7,062 active users, 40-300 comments/day

259,777 420,420 56,177 136,990

EOS 56,570 subscribers, 3,617 active users, 56-1567 comments/day

794,030 186,730 13,222 8,959

Cardano 67,630 subscribers, 3,087 active users, 10-82 comments/day

6,339 118,830 3,961

Tezos 9,614 subscribers, 231 active users, 14 comments/day

782 461 1,001 3,850

Waves 21,310 subscribers, 3,885 active users, 3 comments/day

783,979 131,830 6,729

NEO 96,340 subscribers, 4,223 active users, 14 comments/day

1,157,931 316,760 21,139 942

NXT 9,372 subscribers, 3,994 active users, 0.86 comments/day

347,809 87,310 NA

VeChain 52,160 subscribers, 3,036 active users, 24 comments/day

2,403 100,280 4,801 3,558

Lisk 30,290 subscribers, 12,450 active users, 9 comments/day

4,635 186,100 11,292

Source: cryptocompare.com, youtube, reddit, github, twitter (as of Aug 2018)

Figure 14. Market capitalisation per Reddit subscriber, ($mn/pers)

Source: Reddit, coinmarketcap.com, NKB Research estimates

Ethereum

EOS

Cardano

Tezos

Waves

NEO

NXT

VeChain

Lisk

13

ETHEREUM Native token ETH, gas Languages Solidity, Go, C++, Rust

MktCap, $mn 23,856 Protocol POW/ POS exp in 2019

Circulating supply 102,317,972 Number of TXS 14

Maximum supply Not capped License GPLv3, LGPLv3, MIT

Governance Ethereum Foundation Roadmap Casper/POS - 2019

Ethereum is the largest by market capitalisation and the most popular platform among developers and

ICO fundraisers. Currently, there are 573 ERC20 tokens, and 121 tokens ERC721 issued on the

platform. The number of distributed applications launched on Ethereum is c.1500. Ethereum currently

has c.40mn unique addresses and the number of transactions is c.750,000 a day.

The idea of Ethereum as a blockchain with the capability to be programmed to perform any arbitrary

complex computation was first announced in 2013. Since then, the smart contract feature has made the

Ethereum platform the most successful to run fundraising efforts on the blockchain and to create Dapps.

Governance system

The Ethereum Foundation was created to promote and support the Ethereum platform, base layer

research, development and education. The Foundation is run by the Council, which includes the creator

of Ethereum Vitalik Buterin and Patrick Storchenegger, who is an attoney at law and notary public in

Canton Zug, Switzerland. The Technical Steering Group is headed by Jeffrey Wilcke, who is the co-

founder of Ethereum.

In 2015, Ethereum introduced an Ethereum Improvement Proposal (EIP) standard to amend the

development of the platform. The core development group and community process and implement EIPs.

Most important EIPs include EIP-20, a technical standard used for smart contracts on the platform (ERC

– Ethereum Request for Comment). There were a total of 103,621 ERC-20 compatible tokens as of end

Jul 2018. Usually the proposals (EIS) are submitted by the developers, discussed, and several

development teams implement the technological innovations. Ethereum made one major hard fork after

the DAO hack in 2016, when Ethereum was split into two separate blockchains Ethereum (ETH) and

Ethereum Classic (ETC). Ethereum runs a number of meetings for the Ethereum community and

developers (devcons, hackathons, meetups).

In 2017, several blockchain startups, research groups and companies announced the creation of the

Enterprise Ethereum Alliance (EEA) with 30 founding members. Now the list of members exceeds 150,

and includes ConsenSYS, CME Group, Toyota Research Institute, Microsoft, JP Morgan, Merck, DTCC,

Accenture, BNY Mellon, National Bank of Canada, Sberbank, Cisco Systems, MasterCard, Deloittee and

others.

The criticism of the Ethereum platform is usually related to ease of Ethereum use to run Ponzi schemes

and other investment fraud. According to the University of Cagliari paper, c. 10% of 1382 smart contracts

examined were facilitating Ponzi schemes, however only 0.05% of the transactions on the network were

related to such contracts.

Token economics

The fees on the Ethereum platform are paid with native token Ether (ETH). The ETH supply is uncapped.

The current supply is c.101mn. The transfer from PoW to PoS will result in a capped supply at some

point. According to the discussed proposals, Ethereum supply may be capped at c.120mn, with some 2%

14

inflation following the implementation of Casper FFG and CBC. In 2017, mining generated 9.2mn new

Ether, which is c .10% of its total supply.

Ether is used to paying fees to miners and to paying for gas to run smart contracts. Although Ether is not

the fuel for the Ethereum Virtual Machine (EVM), which runs smart contracts using gas, another ‘fuel’

token on the Ethereum platform, the price of transaction sent to the Ethereum network costs some

discreet amount of gas depending on how many EVM instructions need to be executed. The gas price

versus Ether depends on the sender of transaction to specify the price they want to pay, and the miner to

verify transactions they like . The average gas price is c. 20Gwei (or 0.00000002ETH), but can vary

depending on market activity. Different transactions have different gas limits and the miners will stop

executing the moment the gas runs out. The Dapp shall pay for gas to make the smart contract work.

The switch to Casper from POW will change the economics for Dapps and for block validations. Apart

from a different fee structure, which is in the process of discussion, it will be a requirement that miners

(stakers) should have at least 1000ETH to mine (current proposal). The lauch of a more scalable version

with sharding will likely result in a lower limit for stakers.

Protocol

The transactions on the network are received, propagated, verified and executed by nodes or “miners” on

the network, who collect the fees for their work. Miners group transactions into blocks and add them to

the blockchain, competing with other miners for the next block to add. Miners are rewarded for each

successful block they add to the network solving a complex mathematical problem to mine a block, or

executing a “proof of work” algorithm. Ethereum has chosen a memory-hard computational problem that

eliminates the risk of centralisation due to the usage of a special hardware (ASICs), thus declaring that

Ethereum’s PoW is ASIC-resistant.

The protocol switch from PoW to PoS encounters several issues: 1) censorship, when the ETH block is

lost by one miner, it might be found and made by other miners, while POS require “coordinated game”, 2)

cost, which supports the satisfactory security in PoW, while PoS is costly for attackers. The switch from

PoW to PoS is scheduled for 2019, by which time Ethereum will gradually release two versions of

Casper, FFG (Friendly Finality Gadget) and Casper CBC (Correct by Construction) before any other

solutions. However, the plan may change to reach the targeted network scalability using Casper and

sharding together. The Ethereum team is approaching the problem with the tools of formal verification,

including verification of hypothesis around the cost of bribing validators.

Security

Users on the Ethereum blockchain must pay transaction fees to the network that protects the Ethereum

blockchain from malicious computational tasks like DDoS attacks of infinite loops. The sender of the

transaction must pay for each step of the activated program, including computation and memory storage.

Technology

The central part of the Ethereum platform is the Ethereum Virtual Machine (EVM), which can execute

code of arbitrary algorithmic complexity. Ethereum includes a peer-to-peer network protocol with many

nodes connected to the Ethereum network maintaining and updating the database. Each node on the

network runs the EVM and executes the same instructions, creating a “world computer”. This process of

computing by many nodes of the same task makes the Ethereum network slower and more expensive

compared to a task computation on a single computer. Ethereum created a twin-unit system to separate

the main token ETH from the functional unit (gas) powering transactions. The successful smart contract

execution requires gas, a unit separate from ETH designed to pay the fees on the platform.

15

Ethereum’s smart contracts were major innovation widely accepted by developers, and boosted the

Ethereum popularity. Compared to Bitcoin blockchain, which represents a list of transactions, Ethereum

blockchain tracks the state of every account and all state transactions on the Ethereum blockchain are

transfers of value and information between accounts. There are two types of accounts: externally owned

accounts (EOA), which are controlled by private keys, and contract accounts, which are controlled by

their contract code and can only be activated by an EOA. Contract accounts are governed by their

internal code. Smart contracts, which refer to code in the contract accounts, are programs executed

when a transaction is sent to that account.

The bottlenecks of the Ethereum platform became obvious in 2017, when the number of transactions

increased a few times and caused essential growth of transaction fees. Scaling solutions proposed by

Ethereum team include Raiden Network (RDN), Plasma, Sharding and Casper.

Raiden Network (RDN), which represents an off-chain scaling solution, allows users to make

transactions through transaction channels off the main blockchain, settling periodically accumulated

transaction volume on the main blockchain. The network relies on off-chain channels that create a

potential risk of misbehaviour by agents who may get control over those channels. The estimated

throughput of the RDN is 1mn TXS.

Plasma is an off-chain solution that allows “child chains” which may allow interchangeability of assets in

separate chains which are branches of the main blockchain. The child chain will use a different method of

consensus allowing higher transactions throughput. The return on the main blockchain from a child chain

may be required in the event of a dispute. The estimated throughput is 100k TXS. The Plasma project

may be launched in 2020.

Sharding is a scaling solution which may come with the Casper protocol. Sharding will allow to split the

workflow of nodes between them, thus all the data sets will be split into “shard” or micro-chains. Each

node will deal with all data and transactions responsible for a part of transaction data. Sharding will

increase the throughput of transactions, dividing them among nodes. The estimated throughput is 50k

TXS.

Casper is the most important modification on the Ethereum network, which realizes the transfer from

proof-of-work to proof-of-stake and essentially changes the economics on the blockchain. The lower

costs and faster transactions, which may be achieved using POS, are the main incentives for the

Ethereum team to complete this project as soon as possible. Casper protocol is planned to be launched

in two stages: 1) Casper Friendly Finality Gadget (FFG) and 2) Casper Correct by Construction (CBC).

Casper FFG is a transition protocol, which combines POW and POS , while CBC will include full POS

implementation. The throughput of the Ethereum network may increase to 50k TXS. The launch of CBC

may happen in mid-2019, together with Sharding, while the Ethereum team may skip the FFG phase.

Figure 15. Ethereum scaling solutions transactions throughput, TXS

Source: Ethereum

14

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16

Ethereum 2.0 will incorporate the Casper protocol and the addition of sharding. High demand for

decentralised platform services is pushing the Ethereum team to implement additional features improving

the Ethereum blockchain. Casper, the Ethereum’s proof-of-stake (POS) algorithm, will reduce the cost of

consensus thus cutting down the cost of transaction for a user. The sharding will be a solution to a

scalability problem at Ethereum. Sharding will allow the Ethereum network to cope with a greater number

of users and transactions without losing speed or becoming congested. Currently, the team is going to

implement both the Casper upgrade and sharding at the same time. Shards on the network will

communicate with each other via cross-links or checkpoints, while Casper will strengthen the checkpoints

adding security and scalability. Ethereum 2.0 will be launched in 2019, with Casper launched first in 2019

and sharding happening in two phases – the first in 2020 and the second in 2021. The version of

Ethereum 3.0 will be the network that enables systems that can withstand and support the power of

quantum computers.

Constantinople will be activated some time before October, when Ethereum will hold Devcon4. The

implementation stage continues until 13th August, followed by two months of testing and the launch of

the Constantinople-specific test network. It includes EIP-210, which reorganizes how block hashes are

stored on Ethereum, EIP-145 and which increases the speed of arithmetic in the Ethereum Virtual

Machine (EVM), EIP-1014, which focuses on the addition of Ethereum state channels, and EIP-1052

which optimizes how the contract interacts, and which aims to improve the efficiency of the blockchain.

Constantinople is the second part of the two-part upgrade after Byzantium, activated in October 2017.

Two changes to the protocol, including a difficulty bomb and new gas pricing model, are delayed.

Roadmap

The Ethereum team divided the Ethereum platform development into four stages: 1) Frontier (since June

2015, when the network was launched), 2) Homestead (since March 2016), 3) Metropolis (since October

2017), 4) Serenity (final phase, dates TBA). At the Serenity stage, the network will use the Casper proof-

of-stake algorithm.

Figure 16. Ethereum timeline

Source: Ethereum

The switch from POW to POS is the major event expected on the Ethereum platform. The Casper

transition protocol will be launched together with the Sharding solution to improve the scalability in 2019,

while the complete scalable version of the network Ethereum 3.0 is scheduled for 2022.

2013

Ethereum Whitepaper

2014

Jan 2014 Announcement

Apr 2014 Ethereum Yellow

paper

Jul-Sep 2014 Ethereum public

sale $18mn

May 2015 Olmpic POC open testnet

Apr 2015 DEVgrants announced

early 2015 Ethereum Bounty

program

2016

Jun 2016 DAO Hack, $60mn ETH

lost

Jul 2016 Hardfork

2017

Apr 2017 Ethereum Enterprise Alliance

announced

Oct 2017 Byzantium upgrade

17

Figure 17. Ethereum roadmap

Source: Ethereum

Use cases

The list of use cases already implemented on the Ethereum platform is wide and includes finance, the

IoT applications, delivery and food tracking systems, electricity sourcing and pricing, sports betting,

gaming and gambling, and predictive analytics. Some applications include digital signature algorithms,

securitized tokens, digital right management, crowdfunding, remittance, social media platforms, identity

systems and more.

Gaming and gambling applications recently became the most popular (in terms of largest number of daily

users and transactions a day), followed by Cryptokitties and other entertainment applications.

There are several permissioned blockchains created on the Ethereum platform, including those of J.P.

Morgan Chase (Quorum system for derivatives and payments) and Royal Bank of Scotland (Clearing and

Settlement Mechanism).

Team

Vitalik Buterin Ethereum creator,

Ethereum Foundation

Council

Jeffrey Wilcke Co-founder, Head of

Technical Steering

Group

Gavin Wood Co-founder, Ethereum Vlad Zamfir Lead developer of

Casper protocol

upgrade

Joseph Lubin Co-founder, Ethereum

Fundraising

The development of the Ethereum platform was funded by a crowdsale in July-August 2014. There were

11.9mn coins premined for crowdsale (c.13% of the current circulating supply). The Ethereum team

launched its ICO in 2015 raising c. $18mn of new funds. In 2016, the DAO project raised c. $160mn,

however this was hacked.

Oct 2018

Constantinople: implementations of features to improve efficiency

2019

Ethereum 2.0 launch -Serenity, changes to consensus algorithm and scalability

2019

Casper launch, transition from POW to POS

2020-21

Sharding phases 1-2

Plasma

2022

Ethereum 3.0

18

Figure 18. Ethereum transaction volume, $mn Figure 19. Ethereum transaction count

Source: coinmetrics.io Source: coinmetrics.io

Figure 20. Ethereum MarketCap, $mn Figure 21. Ethereum exchange volume, $

Source: coinmetrics.io Source: coinmetrics.io

Figure 22. Ethereum active addresses Figure 23. Ethereum difficulty

Source: coinmetrics.io Source: coinmetrics.io

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19

EOS Native token EOS Languages C++, Rust

MktCap, $mn 5,129 Protocol DPOS

Circulating supply 906,245,118 Number of TXS 199

Maximum supply 1,000,000,000 Web EOS.IO

Governance Constitution, DPOS,

EFAC

Latest release EOSIO 1.1.4 / 8 Aug

2018

The EOS blockchain (EOS.IO software) was proposed as a new blockchain architecture which enables

vertical and horizontal scaling of decentralised applications. It is achieved via creation of an operating

system (alike) upon which applications will be launched and used. The EOSIO platform was developed

by the private company Block.One and released as an open-source on 1st June 2018.

Governance system

There are three levels of participants on the EOS blockchain: 1) EOS block producers (BP) – elected by

the community and responsible for the production of blocks; 2) EOS token holders, who can vote to

choose the block producer and delegate their tokens to participate in the voting; 3) ECAF – EOS Core

Arbitration Forum, which is the forum to resolve disputes on the blockchain in accordance with EOS

Constitution.

EOS governance principles are based on EOS constituton. Everything EOS tries to implement to amend

the community rules, will be compliant with the constitution. The governance system at EOS is based on

the stake size of token holders who delegate their stakes to the block producers. The block producers

are given limited and checked authority to freeze accounts, update defective applications and propose

hard forks to the protocol, if necessary. EOS software formalised the process of freezing an account to a

15/21 vote of active producers.

The first example of freezing accounts was during a month after the launch of EOS blockchain, in June

2018. The accident of freezing 27 accounts raised concerns in the community and resulted in the

creation of the Arbitrary organisation, ECAF. EOS organised EOS Core Arbitration Forum or ECAF

(eoscorearbitration.io). The EOS Constitution now assumes that ECAF is the arbitration forum by default,

however it might change to another one, once the society decides to vote for another forum.

Token economics

The aim of the EOS platform is to offer a scalable solution and at the same time eliminate all fees for

users. There are three classes of resources, which may require the payment for the usage: bandwidth

and log storage (Disk), computation and computational backlog (CPU) and state storage (RAM). Block

producers publish their available capacity for bandwidth, computation and state. The EOS.IO software

allows each account to consume a percentage of the available capacity proportional to the amount of

tokens held in a 3-day staking contract. The amount of bandwidth available to an application is

independent of any token price. If an application owner holds a relevant number of tokens on a

blockchain adopting EOSIO, then the application can run indefinitely within a fixed state and bandwidth

usage. EOS enables the sender to pay for bandwidth, computation, and storage.

20

The EOS blockchain has a native token EOS. The funds for rewards of block producers (or stakers) are

generated from the inflation. The annual inflation is 5% or 50mn EOS, based on 1bn EOS supply. The

share of 1% will be granted to a block producers’ reward or a total of 10mn EOS. Another 4% will be put

into EOS Treasury (40mn EOS).

Figure 24. EOS reward system

Token supply 1000000000

Token price 28/09/2018 5.82

Implied network value 5820000000

Block rewards per 21 ABPs 1428571

Average vote rewards per 200 BPs 450000

Annual inflation 5% EOS Treasury 4%

New tokens, mn 50 Total EOS treasury, mn EOS tokens 40

New tokens at current price, $mn 291 Total EOS treasury, $mn 232.8

Block producer reward 1%

Total reward, mn EOS tokens 10

Total value of the reward, $mn 58.2

Including

Reward per block for APBs, % per block 0.25% Reward per block to all BPs, % per vote 0.75%

Reward, mn EOS tokens 2.50 Reward, mn EOS tokens 7.50

Reward, $mn 14.55 Reward, $mn 43.65 Source: EOS, NKB Research estimates

Protocol

EOS network is using a delegated proof of stake (BFT-DPOS) algorithm. Under this algorithm, token

holders may select block producers through a continuous approval voting system. EOS.IO enables

blocks to be produced every 0.5 second and one producer is authorized to produce a block at any given

point in time. Blocks are produced in rounds of 126 (6 blocks each, times 21 producers). At the start of

each round, 21 unique block producers are chosen by preference of votes held by token holders.

In order to eliminate the fees for users, EOS has multi-threaded or is able to run on multiple computer

cores and uses DPOS. In addition to DPOS, EOS.IO adds asynchronous Byzantine Fault Tolerance

(aBFT) for faster achievement of irreversibility (within 1 second).

There are 21 active block producers and an estimated 150-175 standby block producers to run the

network (we saw 68 active accounts). EOS block producer elections started once the EOSIO v1.0

mainnet is live. The initial election period ended when 15% of the 1bn EOS tokens (150mn) had voted.

During the initial block producer election period, 21 appointed block producers have been chosen at

random from the pool of block producer candidates. Once the initial election period ends, the appointed

block producers have to be replaced by the duly elected block producers.

The block producers are elected via a voting procedure with the top 21 block producers elected to create

blocks. EOS holders must be registered on the EOS network in order to vote. Every staked EOS token

can be used to vote for up to 30 different block producer candidates, with each token representing one

vote per BP or up to 30 different BP votes per token. Votes are weighted pro-rata based on the total

number of staked tokens. The 21 producers who receive the most stake weighted votes will be elected

as active block producers. Voting is an ongoing process. Votes are recalculated every 2 minutes. Token

holders can delegate, or proxy their voting power to any other EOS account.

21

The top 21 active block producers will earn a 0.25% per block reward on a pro-rata basis to the number

of blocks each one produces. All active and standby block producers will earn 0.75% per vote reward on

a pro-rata basis to the total number of votes they receive.

EOS is currently the only PoS network that is prohibiting block producers from engaging in a financial

relationship with token holders for the block rewards and transaction fees that are generated in exchange

for securing the network, according to the EOS constitution.

Security

EOS outlined the importance of a multi-user control, when every account may be controlled by any

weighted combination of other accounts and private keys, as a biggest contribution to security. It created

a hierarchical authority structure that reflects how permissions are organised and makes the control over

accounts easy.

The EOS.IO software enables application developers to indicate that certain actions must wait some time

after being included in a block. During this period of time they can be cancelled. That creates a time-

based security control on the platform.

Technology

EOSIO was created to adopt scalable solutions and wide use cases with zero fees for users. The used

technology also adopts a free-market approach to allocate scarce resources. The EOSIO system

contract allows users to buy RAM from the system and sell RAM back to the system, in exchange for the

blockchain native tokens (EOS). Bancor Relay algorithm allows the regulation/offer of prices for RAM

depending on its availability: the less unallocated RAM available to the market maker the higher the

market maker prices the remaining RAM.

EOS Resources renting and rent distribution is a solution for lowering the cost of using network and CPU

resources on EOSIO based blockchains.

EOS.IO storage is a decentralised file system, designed to give everyone the ability to permanently store

and host accessible by any web browser.

Roadmap

Figure 25. EOS timeline

Source: EOS

Use cases

The EOS team mentioned a high potential of the network with the number of transactions potentially able

to reach 1,000,000 per second, due to its scaling ability. That creates an opportunity for such use cases

as social networks, cryptocurrency exchanges, messenger applications, auction apps like eBay, and

service sharing applications like Uber, games and gambling, market places and others.

EOS has already had at least 2 applications developed on its platform.

Summer 2017

Minimal Viable Testing

Environment

Fall 2017

P2P network code and

minimal viable test network

Winter 2017 -Spring 2018

Testing and security Audits

bounties for successful

attacks

Summer/ Fall 2018

v1.0 product release

Parallel Optimization

Cluster Implementation

22

Team

Daniel Larimer Block.One CTO Ian Grigg Block.One Partner

Brendan Blumer Block.One CEO Brock Pierce Block.One Partner

ICO/Fundraising

The EOS project raised $4,198mn in ICO, which took 340 days from June 26th 2017. The ICO was

running for almost a year in order to create the most distributed network and the community which will

develop the platform and build applications on it. Block.One, the developer of EOS software, has got a

10% stake in EOS tokens. The total supply amounted 1bn EOS. The pricing structure included 340

consecutive 23-hour periods of 2mn tokens each. Tokens were distributed pro rata at the end of each

period. Price was set by market demand.

EOS developer Block.One announced plans to invest at least $1bn into funds focused on the growth of

the EOS ecosystem.

Figure 26. EOS transaction volume, $mn Figure 27. EOS exchange volume, $

Source: coinmetrics.io Source: coinmetrics.io

Figure 28. EOS MarketCap, $mn Figure 29. EOS active addresses

Source: coinmetrics.io Source: coinmetrics.io

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23

CARDANO Native token ADA Languages Haskell

MktCap, $mn 2,161 Protocol PoS

Circulating supply 25,927,070,538 Number of TXS 100

Total supply 45,000,000,000 Web Cardano.org

Governance The Cardano

Foundation

Roadmap Smart contracts and

reward era - 2H2018

The Cardano decentralised blockchain is an open source platform which uses a proof-of-stake algorithm

called Ouroboros. The project is made in collaboration with researchers and universities representing a

scientifically intensive approach to the blockchain design. The Cardano blockchain was released on 29th

September 2017. The team is located in Japan, USA, and Hong Kong.

Governance system

The Cardano blockchain is supported by three entities. The Cardano Foundation is a promoter, educator

and standard body for the blockchain and its apps. The Foundation provides a formal specification and

standardization process. Input Output Hong Kong (IOHK) is the founder and the engineering company

which designs the platform. IOHK has a strong team including Charles Hoskinson , a former CEO of the

Ethereum project in Dec 2013 – May 2014, the founder of Invictus Innovations and IOHK, and Jeremy

Wood, who was managing operations in Ethereum at the end of 2013.

As a PoS protocol, Cardano can be upgraded via soft forks, according to the team. During a bootstrap

era, the network is run by trusted nodes, however Cardano plans to achieve a full decentralisation once

the reward era arrives.

Token economics

The Cardano blockchain has a native token ADA, which is capped at an arbitrary 45,000,000,000 ADA.

At the launch of Cardano, 31,112,484,646 ADA was distributed. There are 13,887,515,354 ADA to be

issued after the launch through mining.

Cardano is at the bootstrapping phase when fees are not collected and no ADA is being minted. Fees

from this phase will be collected in the future and they will be destroyed. In the future, Cardano will have

treasury funded with newly-minted ADA and transaction fees. The treasury will be governed by ADA

holders.

The minimal fee at the Cardano blockchain is defined as 0.155381 ADA plus 0.000043946 ADA/Byte

multiplied by the size of the transaction. The formula for the fee calculation is not final as the team is

researching this area and some amendments might be implemented.

There are two sources to fund incentives on the Cardano platform:

1) Transaction fees. Transaction fees will include a minimum fee of 0.155381ADA and a component which is proportional to the transaction size and calculated as 0.000043946ADA/byte or A+B*size. For 200 bytes transaction the fee will amount to 0.1641ADA.

2) Money expansion. Current number of ADA amounts to c.31bn ADA and it will increase to 45bn ADA at maximum. The annual increase of ADA will change, decreasing exponentially similar to bitcoin.

The reward mechanism on the Cardano blockchain includes incentives distributed among stake holders

and slot leaders each epoch. The timeline on Cardano includes slots which last c. 20 seconds, and

epochs which include 21,600 slots and run c. 5 days. The reward will be proportional to the stake which

24

participated in staking in each epoch. The reward is capped for each pool.There is no competition among

pools.

Protocol

Cardano decentralised blockchain is an open source platform which uses a proof-of-stake algorithm

called Ouroboros. The algorithm has consensus generated by coin-holder voting. Slot leaders, who hold

a native platform coin ADA, generate new blocks in the blockchain and confirm the transactions. Cardano

blockchain has two main layers: 1) ADA cryptocurrency operates on the Cardano Settlement Layer

(CSL), which is a ledger supporting transactions; 2) Cardano Computation Layer (CCL) supports smart

contracts and decentralised applications. The Cardano blockchain maybe more easily updated via soft

forks compared to Ethereum, which has those two layers intertwined.

The Cardano protocol is aiming to provide a superior processing capacity of the network in terms of the

number of transactions. Scalability and security, as well as low cost, make this blockchain a good option

for decentralised apps as well as a payment system. Compared to other PoS-based blockchains,

Cardano also has an additional layer which allows implementation of regulatory requirements.

Security

The design of the Omniboros POS protocol also assumes high security compared to other PoS

protocols. Cardano uses the Haskell programming language with a high degree of fault tolerance.

Technology

The multi-layer architecture makes Cardano flexible and more accessible potentially, for financial

applications as well as for identity-required Dapps. Two of Cardano’s layers, CSL and CCL, are

connected by side chains. The ADA cryptocurrency is developed around a Recursive InterNetwork

architecture (RINA).

Cardano SL is expanded with a Control Layer to evaluate a special kind of proof to ensure that a certain

computation was carried out correctly. Such systems are used in identity management, credit systems,

gaming and gambling, and more.

The team is aiming to evolve Daedalus, the Cardano SL wallet application, into a universal

cryptocurrency wallet featuring automated cryptocurrency trading and cryptocurrency-to-fiat transactions.

Roadmap

The Cardano timeline is divided in three periods:

Testnet era: all functionality, including the reward mechanism, is activated, all participants are testing the

network to download software and provide feedback. Following two years of research, IOHK has

designed a cryptocurrency technology, which is now in the Byron phase (bootstrap era). The main

purpose of this phase is to make Cardano SL completely decentralised. The main focus was on the

networking layer, on making Ouroboros more robust, on multisignature addresses, light clients, quantum

resistant signatures and other add-offs.

Byron phase or Bootstrap era. The network operates in “bootstrap mode”. ADA holders redeemed their

coins, the stake will automatically get delegated to a pool of trusted nodes that will maintain a network.

During this period no block rewards will be issued. The network operates currently in Bootstrap mode;

25

Shelley phase or Reward era: a normal operation mode of the network. Shelley features shall be

released in 2H 2018. The list of features includes delegation and stake pool testnets.

There are a few milestones promised by the team in 2018, including the release of the IELE virtual

machine in the summer 2018, and the Goguen project with smart contracts release in 4Q18, and a

general update and Shelley releases in 2H2018.

Use cases

The Cardano platform allows a wide range of applications to be run on the platform. The essential

infrastructure is under development, however, the sustainable research-driven approach by IOHK will

allow the essential part of the infrastructure to be ready as soon as 2018.

There are several use cases under development on the Cardano platform:

- Proof of university diplomas in Greece, the joint project with the National Research and Education Network of Greece GRNET is the first use case for Cardano.

- Cardano planned initial smart contract applications such as a casino and an integration with the mobile gaming market in its ICO documentation.

- Cardano debit cards are planned in the Roadmap to provide users with ADA available everywhere.

- The first ICO which potentially can use Cardano has been launched in March 2018. Traxia is creating a decentralized global trade finance system where invoices are converted into smart contracts and traded as short-term assets. The Traxia project is currently built on Ethereum technology but will be migrating to Cardano in 4Q18, when Cardano’s Goguen goes live.

Team

Charles Hoskinson Co-founder of IOHK

Jeremy Wood Co-founder IOHK

ICO / Fundraising

The Cardano ICO took place between September 2015 and January 2017 with KYC requirements

applied. The investment base of the Cardano ICO includes primarily Japanese investors (95%), Korean

(2.56%), Chinese (2.39%). The amount of sold tokens was 26,000,000,000 out of 45,000,000,000 ADA.

The project raised c $63mn, which translates to an average price of $0.00242 per ADA, and a market

capitalisation of $109mn after the ICO.

26

Figure 30. ADA transaction volume, $ Figure 31. ADA exchange volume, $

Source: coinmetrics.io Source: coinmetrics.io

Figure 32. ADA MktCap, $ Figure 33. ADA active addresses

Source: coinmetrics.io Source: coinmetrics.io

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27

TEZOS Native tokens XTZ Languages Michelson

MktCap, $mn 814 Protocol PoS

Circulating supply 607,489,041 Number of TXS 40

Maximum supply 763,306,930 Web Tezos.com

Governance Tezos Foundation Betanet launch 30 Jun 2018

Tezos is a decentralized network, which uses proof-of-stake consensus, and also attempts to come to a

consensus about how the protocol and the nodes should adapt and upgrade. The Tezos Alpha network

(testnet) has been live since February 2017. The Tezos Beta network (experimental) was released in

June 2018.

Governance system

Tezos is the distributed peer-to-peer permissionless network. Tezos designed a formal process through

which stakeholders govern and implement innovations on the platform without hardforks. This approach

potentially resolves many governance issues around the nework development and upgrade.The

ecosystem includes developers, scientists, network validators (“bakers”), the Tezos Froundation and

enthusiasts.

The Tezos Foundation focuses on the promotion and development of the Tezos protocol and related

technologies, as well as the promotion and support of applications using the Tezos protocol. The Tezos

Foundation has 7 Board members providing their expertise and support to the platform.

Token economics

Tezos has a native token, XTZ. The Tezos token is used on the blockchain to pay transaction fees,

reward the miners (bakers) and endorsers, and to pay deposits (bonds) by miners and endorsers. The

reward model assumes a 5% inflation rate or c. 5.4% based on an increasing number of tokens. If the

mining rate is one block per minute, the share of c. 8% of the initial money mass should be held in the

form of safety bonds after the first year. Depending on how many tokens will be used for baking, the

reward received by a baker may increase to 7-10% depending on the level of token holders’ participation.

To start baking the owner must have at least 10,000 Tezos tokens.

The cost associated with running contracts is the gas, which measures how long a program takes to

compute. There is no cost per gas unit. A baker is likely to include a low gas transaction because it is

cheap to validate and will give priority to high fee transactions. The contract saves its data on the public

blockchain that every node stores, so the network charges a fee per byte to avoid abuse and encourage

lean programs.

Protocol

Tezos uses a proof-of-stake consensus algorithm. That provides each stakeholder with the opportunity to

participate in the validation of transactions on the network and be rewarded by the protocol for that.

28

The node validates an operation before submitting it to the network by simulating the application of the

operation to the current context. Validation also determines gas and storage limits. The node simulates

the execution of a Michelson program and takes a trace of the amount of gas and storage. Then the

client sends the transaction with the right limits for gas and storage based on that indicated by the node.

Thus limits are computed for a user. The client communicates with the node through RPC.

There are two kinds of accounts in Tezos: implicit and originated. The implicit account tz1 is easily

created with a pair of keys and after the transfer of some funds to the public key hash. Originated

accounts KT1 are created through an origination operation. The reason to originate an account is to

delegate tokens, and it is called a contract.

Figure 34. Tezos blockchain structure

Source: Tezos

The node has two functions: running the gossip network and updating the context. The gossip network is

the network where all Tezos nodes exchange blocks and operations with each other.

In Tezos, blocks are created by bakers, which may use the right to bake a block when they own a Tezos

token, or a token is delegated to them. The token owners who do not want to bake a block, may delegate

their token, but that does not mean they do not control it. The right to vote will belong to the delegate.

Tezos does not download blocks all at once, but considers lists of blocks. A maximum size in bytes is

applied to the list of transactions 500kB or 5MB every 10 min at most. Other lists of operations, including

endorsements, denunciations and reveals, are limited in terms of the number of operations.

In Tezos, tokens are controlled through a private key called the manager key. The key may be controlled

by the manager themselves or by another party. There are active and passive delegates. A passive

delegate cannot be selected for baking or endorsement. A delegate becomes passive for a cycle when

they fail to create any of the blocks or endorsements in the last 5 cycles or to change their security

deposit. Blocks in Tezos are grouped into cycles of 4,096 blocks. Since blocks are at least one minute

apart, this means a cycle lasts at least 2 days, 20 hours, and 16 minutes.

A baker becomes aware of its right to bake blocks a few weeks in advance. He is expected to create a

safety deposit, which will be held for a few weeks. This deposit is referred to as a “bond”. This deposit

changes dynamically depending on the number of blocks a delegate is set to create. This block ensures

the right behaviors of the baker – he will lose the deposit if he cheats and attempts to propagate blocks

on different branches. If the baker successfully creates and propagates a valid block, it is rewarded with

a block reward as well as some fees paid for by the transactions included in the block. The Tezos

network keeps track of groups of tokens called “rolls”, which are aggregated at the delegate level, and a

baker’s baking power is proportional to the number of tokens delegated to them rounded to the nearest

OCaml

Compiler

Restricted STRLIB

Protocol Interface

Network

Economic Protocol

Validator

P2P

RPC layer

Client

Baker

Explorer

29

roll. Rolls are set at 10,000 tezzies. Endorsing is to witness that bakers saw a block and checked that it

was valid. Each block has many randomly selected endorsers. Every baker participates in endorsing and

vice versa.

Bakers and endorsers earn rewards for their job, getting new tokens emitted by the protocol. Those

rewards are calibrated so the total number of Tezos tokens grows at roughly 5.5% per year and the

safety deposits required for baking represent c. 8.25% of the tokens delegated to a baker. A baker needs

to own at least 8.25% of total tokens delegated to them at any time, divided by the fraction of the network

that is actively baking or delegating to an active baker.

Baking in Tezos means the action of signing and publishing a block. The right to publish a block in cycle

n is assigned to a randomly selected roll in a randomly selected roll snapshot from cycle “n-preserved

cycles-2”. In each time point, there is a priority list of delegates, which is drawn randomly from a set of

active rolls. The delegate with the highest priority can base a block with a timestamp greater than one

minute. Baking a block provides a block reward of 16 XTZ plus all fees paid by transaction inside the

block. In each baking slot, there are 32 endorsers, which are drawn from the set of delegates by

randomly selected 32 rolls.

The cost of a security deposit is 512XRZ per block created and 64XTZ per endorsement. Each delegate

has an associated security deposit account. When a delegate bakes or endorses a block the security

deposit is automatically moved to the deposit account where it is frozen for cycles. Since deposits are

locked for a period of preserved cycles, 8.25% of all tokens should be held as security deposits.

Inflation from block rewards and endorsement reward is at most 80 XTZ, which means 5.51% annual

inflation. Denunciation happens when two endorsements are made for the same slot or two blocks at the

same height by a delegate. It is made by a baker which includes it as a special operation.

Security

Tezos uses the combination of reward and bond to create incentives for miners achieving higher security.

Bonds are one cycle token deposits purchased by miners and endorsers. Bonds are forfeited in the event

of a double signing. After a cycle, miners (bakers) and endorsers receive a reward along with their bonds

to compensate their opportunity cost. The security is provided by the value of the bond and the reward.

Technology

Tezos is developing the blockchain using its own programming language Michelson. The blockchain will

use a proof-of-stake algorithm, and its major features will be the following: emphasis on security, an

automated built-in governance system, and a self-updating protocol.

Tezos uses functional programming to create a formal verification, a process of proving that a program

complies with a particular specification. Tezos is written in OCaml, which allow parts of the protocol to be

formally verified. It makes easier to find bugs. Tezos is defined through a reference client.

Tezos created a new virtual machine (VM) that operates a stack-based, functional language, Michelson.

Michelson can help avoid bugs, such as re-entry attack (caused the DAO hack) and the explicit inputs

which could have helped avoid the EBI-bug (affected GNT and ERC-20 tokens).

Tezos has c.40 TXS current throughput. There are several scaling proposals for Tezos: 1) having fat

blocks; 2) using off-chain scaling solutions like payment channels; 3) using computationally demanding

computation; 4) working on improving zero-knowledge proof technology.

30

Self-amended protocol in Tezos is achieved via modularity. The blockchain protocol may be split into

three network layers: the network layer, the consensus layer, and the transaction layer. The Tendermint

ABCI platform provides the network and consensus layers and remains agnostic to the transaction

processor, which is defined by the blockchain creator. Tezos allows the protocol be agnostic to the

consensus layer. Tezos has the network layer agree on the hash of an OCaml file that contains the rest

of the protocol. Each node can verify it and apply.

The built-in governance is an innovative but challenging element of the Tezos network. The interests of

token holders and users on the platform might be not aligned. For example, high transaction fees are

desirable for token holders but undesirable for users. However, it is possible to create incentives for both

groups to align them. The interests of token holders might change over time thus the system should

evolve respectively. Futarchy is a form of governance proposed by R.Hanson (vote values, but bet

beliefs), in which elected officials define measures of national wellbeing, and prediction markets are used

to determine which policies will have the most positive effect. The Tezos blockchain considers futarchy

as a possible development with the predictions market approach to the governance. There are several

specific measures and approaches Tezos may choose to make it work: 1) choose specific measures to

maximise; 2) define the time when the market resolves – resolving markets before the adoption of the

proposal prevents gaming of the mechanism through proposals that change the market resolution code

but resolving them later gives more time for the policy to make an impact on the value being measured;

3) define the size of the market subsidy; 4) do or do not subsidise the market for all proposals; 5) vote or

do not vote to decide which market should be subsidized; 6) use/do not use auctions for proposal slots

on the network.

Roadmap

The Tezos white paper was first published back in 2014. The team implementing the technology received

financing in 2017 and launched the Alpha version of the protocol in January 2018. The betanet was

released on 30th June 2018 with block validation (baking) launched in July 2018. The key concepts of

the network are yet to come, with the team focusing on security and in-built governance system, which is

yet to take shape.

Use cases

The focus on security and self-amended governance make the Tezos platform feasible for financial

applications and for storage of assets. Once the high throughput is achieved, more consumer-focused

cases like market places and others, may find their place on the platform.

Team

Arthur Breitman Co-founder, Tezos Ryan Jesperson Tezos Foundation

Kathleen Breithman Co-founder, Tezos

ICO / Fundraising

Tezos raised $230.53mn during its token sale which ended on 14th July 2017. The project was widely

known as the “crypto world’s biggest scandal” because of an internal conflict between the founders and

the head of the Foundation, Johann Gevers, around the funds raised. Tezos ran KYC/AML checks for the

contributors.

31

WAVES Native tokens WAVES Languages Scala

MktCap, $mn 214 Protocol LPos

Circulating supply 100,000,000 Number of TXS >100

Maximum supply 100,000,000 Active accounts 250,000

Governance Waves Platform Roadmap Smart contracts: 2H2018

Waves is an open-source blockchain platform founded in 2016, incorporated in Switzerland and

headquartered in Russia. Waves has a well-developed international community, with large communities

in Brazil and Turkey.

Governance system

The Waves governance system includes the Waves Platform AG incorporated in Switzerland, which is

responsible for the Waves platform development and private blockchain services for large enterprise and

government bodies (Vostok). The blockchain is run by nodes, which may vote for the changes on the

blockchain. Once the threshold of 80% of blocks within the voting period is achieved, the amendments

are implemented.

Token economics

The Waves token is used on the platform to approve blocks and to get a voting right, to pay transaction

fees, to pay to token holders for leasing of Waves to miners, to reward users on the platform, and to

launch tokens. The miners’ reward for leasing depends on the amount of Waves they use to mine. Token

holders can lease their Waves to miners from the lite client and share rewards with miners.

The Waves token is also used to trade pairs versus other tokens on the platform. The Atomic Swap will

make the swap between the tokens easier. Miners require a minimum balance of 1,000 WAVES to

become a full node and maintain this status.

There are two types of reward tokens distributed on the platform: 1) the Miners Reward Token (MRT)

distributed with every block created and supplementary reward for miners, whilst the volume of

transaction fees grows. MRT serves as a token for voting on key network parameters; 2) the Waves

Community Token (WCT) distributed to WAVES holders on a monthly basis in proportion to their average

balance over the course of the previous month. WCT is used as a form of collective due diligence for new

token projects.

Protocol

The Waves platform uses a variation on PoS mining. Leased proof-of-stake (LPoS) allows Waves

holders to earn by using their balances to secure the network, providing Waves for miners. Waves

believes that due to a very low cost of mining (block production) there is no need to incentivise miners

with new block rewards and Waves can have a static coin supply.

The Waves network implemented the protocol Waves NG in 2017, which allows the processing of

hundreds of transactions per second and up to 1000TXS at maximum. In the NG model, the next miner is

selected in advance. The miner creates a key block, filled with microblocks containing transactions which

require no further proof-of-work. That allows an increase in the speed of transactions.

The network has more than 200 unique nodes, including nodes run by the Canadian mobile gaming

company RewardMob.

32

Security

The Waves team considers the 51% attack as less risky for a PoS platform, compared to a PoW

platform. The block approval process is low cost and the platform maintains a zero inflation rate.

Kudelsky Security did a Waves audit in 2017.

The Waves’ practice of having users enter their recovery seeds – strings of words that act like passwords

for crypto wallets – into a website to use its software wallet, has received a lot of criticism after the

phising attack.

Technology

The platform developed a range of client-focused tools, available through its Client toolbox. It includes

decentralised exchange, wallet, token launcher, which allows it to “issue blockchain tokens in less than a

minute”, and leasing. The leasing tool allows token holders to lease any amount of Waves to miners and

receive rewards for that.

Waves is planning to release its smart contracts in a few phases. The first release of a smart contract will

be a non-Turing complete implementation. That will enable several forms of account controls but exclude

vulnerabilities of Turing complete contracts. The smart contract will make the following operations

possible: multi-sig accounts, token freezing, balance sweeping. The fully functional smart contract will be

available later in 2018 or at the beginning of 2019.

Figure 35. Waves platform

Source: Waves

Waves launched a decentralised cryptocurrency exchange in July 2018. The DEX supports fiat tokens

and connects banks and makes customer identification optional. The trading volumes on Waves DEX

reached $6mn of crypto transactions a day at the end of its beta testing in June 2018. According to

CoinDesk, Waves’ DEX had 90,000 traders using 330,000 wallets ahead of its full launch in July 2018.

There were two success factors mentioned in media for Waves’ DEX: 1) speed, courtesy of the

platform’s centralised matchmaking service, 2) any trader can issue a token on Waves’ blockchain and

instantly trade it for bitcoin on the exchange. Waves had a year and a half long beta period before it

• Waves-NG

• Smart contracts (coming soon)

• Dapps (coming soon) - open-source P2P apps running smart contracts

• Voting (coming soon) - voting mechanism

• Atomic Swap (coming soon) - exchange crypto-crypto

Waves blockchain

• Wallet

• DEX

• Token Launcher

• Gateways

Waves Client

• Services for businesses

• Launch tokensales for corporates

• Crowdinvestment

• AML/KYC

Tokenomica

• Business accelerator for new projects on blockchain

• Startup support (marketing, expertise, resources)Waves Lab

33

launched the full DEX. Hackers hijacked both the exchange website and the company’s main site to

phish for users’ personal wallet information. Users need Waves’ tokens to transact on the DEX.

The Waves blockchain plans to introduce Atomic Swap technology in 2018, to exchange Waves tokens

for tokens on other blockchain platforms.

Tokenomica, a financial service vehicle being developed by Waves, is going to provide a 100% compliant

legal framework for different types of token crowdsales, including legal framework, tech support,

business due diligence, and a fully compliant ICO process.

Roadmap

The Waves blockchain was released in 2016. The platform added NG protocol, explorer, decentralised

exchange, and some other features in 2017.

In 2018, the Waves team plans to introduce the blockchain messenger, Multi-sig wallets, Waves Mobile

major update, hardware wallets integrations, Atomic Swap, and smart contracts. There are two major

milestones expected this year: the launch of smart contacts “bullet/diamond” in 3Q2018 and the launch of

the Turing complete smart contract by the end 2018 or in 1H2019.

Waves supports fiat including EUR, USD and TRY, and is planning to add CNY, JPY, KRW, CHF, AUD,

GBP, RUB. The supported digital asset list includes USD, EUR, TRY, BTC, ETH, ZEC, LTC, BCH,

DASH, MONERO, with upcoming ERC-20, Ripple and NEM.

Use cases

The Waves platform is used mostly by projects for crowdfunding and to launch tokens which might be

used as utility tokens.

There are 100 projects which have either used or are going to use the Waves platform to issue tokens

between April 2016 and March 2018. There were 65 projects which completed crowdsales, including

20% cryptocurrency projects, 16% platforms, 13% investments, and others representing infrastructure,

health, sports, production, communications, entertainment, software and other sectors. The list of the five

largest token sales included MobileGo ($53mn), PeerBanks ($42.6mn), Wagerr ($10mn), Primalbase

($7.6mn), ZrCoin ($7mn). The total amount of raised funds on Waves exceeded $200mn.

Burger King has launched its own cryptocurrency on the Waves platform in Russia called WhopperCoin,

to be used as a loyalty scheme.

The Russian National Settlement Depository (NSD), a part of the Moscow Exchange, is developing a

blockchain platform in partnership with the Waves platform. Another partnership is with Gazprombank,

setting up GPB Digital.

The introduction of smart contracts will expand the number of use cases for Dapps on the Waves

platform. The developed community and cost-efficient way to issue tokens is a competitive advantage of

the Waves platform. The platform also has the LiquidWave fund, which may guarantee liquidity for

cryptotokens providing market making services.

Team

Sasha Ivanov CEO, Waves Platform Artem Kalikhov CTO, Waves Platform

Maxim Pertsovskiy COO, Waves Mariya Borovikova CFO, Waves Platform

ICO/Fundraising

The Waves Platform completed its Initial Coin Offering in June 2016 garnering over $16mn (30,000BTC).

34

Figure 36. Waves transaction volume, $ Figure 37. Waves exchange volume, $

Source: coinmetrics.io Source: coinmetrics.io

Figure 38. Waves MarketCap, $ Figure 39. Waves active addresses

Source: coinmetrics.io Source: coinmetrics.io

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35

NEO Native tokens NEO (formerly Antshares, ANS),

GAS (formerly Antcoins, ANC)

Languages C#, VB.Net, F#, Java,

Kotlin, Go, Python

MktCap, $mn 1,204 Protocol dBFT

Circulating supply 65,000,000 Number of trx/sec 200

Maximum supply 100,000,000 Wallet addresses 252,622

Governance NEO Foundation Roadmap v.3.0

NEO is the open source blockchain project founded in 2014 and formerly known as Antshares as of June

2015, when it went live. NEO declares and develops “Smart economy”, which uses blockchain

technology and digital identity to digitize assets and to automate the management of digital assets using

smart contracts. Frequently called “Chinese Ethereum”, NEO has several major differences from

Ethereum.

NEO has no decentralised mining, taking the view that it is impossible to provide a scalability and

decentralisation at the same time. NEO claims it has 1000tx/sec currently compared to 14-15tx/sec on

the Ethereum network. The NEO smart contract is fee-free for users, while Ethereum users pay a fee.

However, NEO Dapps need to pay and the payment may be essential on the Mainnet, according to one

of the NEO developers. NEO states that compliance is a serious topic to connect the blockchain with the

real world. NEO wants to be compliant and that is one angle which makes NEO attractive for Dapps.

Governance system

The current governance system of NEO includes three organisations: The NEO Foundation, which is

responsible for the strategy and vision of NEO; NEO Global Development, which is in charge of the

operational management of the NEO project; NEO Global Capital, which is responsible for the

investments of NEO. NEO Global Capital runs two funds – the NEO eco fund investing into Dapps on the

NEO platform, and the NEO global fund, which invests in Dapps on any blockchain. The NEO main fund

size reached $1bn at the top of the market, and selects projects mostly focused on protocols and which

are R&D intensive.

The NEO team is spread globally, with two representative offices in Shanghai and Zurich.

The chain governance assumes that NEO token holders are the network owners and managers,

managing the network through voting in the network. They use GAS to power operations on the network.

The off-chain governance is delegated to the NEO Council, which consists of the founding members of

the NEO project, under which the management committee is responsible for strategic decision making.

The technical committee is responsible for technical decision-making and the secretariat is responsible

for the specific implementation. The NEO Council is responsible for the promotion and development of

the NEO ecosystem.

NEO introduced the system of NEO Enhancement Proposals (NEPs) in order to create the ecosystem for

the protocol specifications and upgrades, as well as to improve client APIs and contract standards.

Token economics

NEO has two native tokens, NEO and NeoGas (GAS). The NEO token represents the right to manage

the network, including voting for bookkeeping, NEO network parameter changes and more. GAS is the

fuel token. NeoGas helps to realise NEO network resource control. The network charges for the

operation and storage of tokens and smart contracts, creating incentives for book-keepers.

36

Both NEO and GAS have a 100mn limit. The minimum unit of NEO is 1, while the minimum unit of GAS

is 0.00000001. NEO’s 100mn tokens are divided into two portions: 50mn is distributed proportionally to

supporters of NEO during the crowdfunding. The second portion of the 50mn NEO is managed by the

NEO Council to finance NEO’s long-term development, operation and maintenance ecosystem. GAS is

generated with each new block and the initial generation is 8GAS per block. There is an annual reduction

of 1 GAS per block per year, to coincide with the passing of every 2mn blocks. The share of 16% of the

GAS is created in the first year, 52% of the GAS is created in the first four years, and 80% of the GAS is

created in the first 12 years.

In the genesis block, 100mn NEO tokens were generated, while GAS has not been generated. The

amount of 100mn GAS, corresponding to 100mn of NEO, will be generated through a decay algorithm in

22 years’ time.

NEO has 100% pre-mined tokens and a proof of stake model, which allows users to derive additional

coins or GAS by holding them in a wallet.

There are currently no mandatory transaction fees (limited to 21 transactions per block), however

transaction fees are recommended on the network for priority. The fee for smart contracts are structured

depending on the type of transaction. The initial 10GAS during each execution of every smart contract is

always free. All smart contracts fees are considered as service fee to be put in a pool for re-distribution to

all NEO holders. The distribution is proportional to the amount of NEO. The cost of creating or migrating

a smart contract is the basic 100 GAS plus fees of functions the contract requires. The fee for storage

area is 400 GAS, and the fee for dynamics call is 500 GAS.

Protocol

NEO uses the Delegated Byzantine Fault Tolerant (dBFT) algorithm as a consensus mechanism. The

mechanism enables the large-scale participation in consensus via proxy voting. Token holders chose the

book-keeper by voting. The selected group of bookkeepers through the BFT algorithm reaches a

consensus and generates new blocks. It takes 15-20 seconds to generate a block. The transaction

throughput is measured up to 1,000 TXS. It is possible to achieve up to 10,000TSX through an

optimization, according to NEO WP. The consensus combines digital identity technology, which means

the book-keepers can be a real name or an individual or an institution. It is possible to freeze, revoke,

inherit, retrieve and transfer ownership due to judicial decisions on bookkeepers. The digital identity

facilitates the use of the network for financial services.

The next level of the governance of the NEO protocol is the consensus nodes. Being centralised, NEO

takes care of the consensus nodes selection process. All potential nodes will work on the Testnet first,

then are elected to run as an official consensus node on the Mainnet. There are currently 8 consensus

nodes, and the plan is to switch from centralisation to decentralisation by 2020. Nodes share fees

received from transactions. The process of choosing consensus nodes looks to be sufficiently cautious

as candidates will be a part of NEO ecosystem, know NEO well, and support NEO.

Security

The dBFT algorithm provides fault tolerance of f=(n-1)/3 for the consensus consisting of n nodes. The

fault tolerance includes security and resistant to general and Byzantine failures. The block once

confirmed cannot be bifurcated and the transaction will not be rolled back.

In August 2018, a DoS (Denial-of-Service) vulnerability was identified on the NEO smart economy

platform by the Quihoo 360 core security team. The NEO team, headed up by Erik Zhang, tested and

confirmed vulnerability in 7 minutes and fixed a bug in 56 minutes. The NEO team have partnered with a

code auditor Red4Sec and a formal verification service platform CertiK, since 2016. Additionally, the

NEO has a reward policy for contributors who identify vulnerabilities.

37

Technology

There are several elements of the NEO ecosystem including:

NeoX – the system which creates the ability to execute and operate across various blockchains. The

NEO network implements cross-chain interoperability via the NeoX protocol, which is divided into two

parts cross-chain assets exchange protocol and cross-chain distributed transaction protocol. NeoX

enables smart contracts for cross-chain when a smart contract can perform different parts on multiple

chains.

NEOContract – the mechanism for creating smart contracts that integrates pre-existing codebases. The

NEO smart contract system includes NeoVM – universal blockchain virtual machine, interoperable

services to load the blockchain ledger, digital assets, digital identity, persistent storage area, NeoFS and

other services, DevPack compilers and IDE plugin.

NeoFS is a service which allows decentralised storage. It utilises Distributed Hash Table (DHT)

technology, when large files are divided into fixed-size data blocks that are distributed and stored in

many different nodes.

NeoQ is a cryptographic mechanism which creates problems that cannot be solved by quantum

computers.

Roadmap

The NEO roadmap for 2018 includes NEO Quantum Safe (NeoQS) and the NEO File Storage (NeoFS)

research update in 2Q2018, NEO Global Development + City of Zion joint development sprints, NEO

Enhancement proposal -9 (NEP-9) URI scheme, NEP-8 stack isolation for NEO Virtual Machine (NeoVM)

in 3Q2018, NEP-10 composite smart contracts (4Q2018) and NeoX initial tests (4Q2018).

Use cases

There are 74 Dapps running on the NEO blockchain, including the innovative community Zeepin, P2P wi-

fi sharing Qlink, decentralised Ad exchange AdEx, the decentralised ecosystem of identity verification

THEKEY, sentiment analysis platform SENNO, mobile mesh networking platform Orbis, and others.

NEO’s digital identity, which may provide full compliance with regulatory requirements, is a competitive

advantage for Dapps, according to one of developers we spoke to. Identity verification services, trading

platforms, content network, and financial applications and others, have chosen the NEO platform.

Team

NEO was developed by Shanghai-based blockchain company “OnChain”. OnChain was founded by CEO

Da Hongfei and CTO Erik Zhang. In 2016, OnChain was included into the Top 50 FinTech Companies in

China by KPMG.

Da Hongfei CEO, OnChain, co-

chair NEO Foundation

Tony Tao Founding Partner, NEO

Global Capital

Erik Zhang CTO, OnChain, Co-

chair NEO Foundation

Johnson Zhao General Manager,

NGD

Funding

The NEO project was funded via two crowdsales. The initial fundraising happened in October 2015,

when 17.5mn NEO tokens were sold for $0.55mn. During the second crowdsale, 22.5mn NEO tokens

were sold at a price of $0.036/token for $4.5mn.

38

Figure 40. NEO transaction volume, $ Figure 41. NEO exchange volume

Source: coinmetrics.io Source: coinmetrics.io

Figure 42. NEO MktCap, $ Figure 43. NEO active addresses

Source: coinmetrics.io Source: coinmetrics.io

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39

VECHAIN

Native tokens VEN Languages Solidity

MktCap, $mn 715 Protocol POA

Circulating supply 56,600,371,953 Number of trx/sec 50

Maximum supply

on the VeChain

Thor

86,712,634,466 Active addresses 211

Governance VeChain Foundation Roadmap Crosschain/sidechain

2019

VeChain is an enterprise level blockchain stating a new approach to a governance system, economic

model, regulation and compliance capabilities, and infrastructure. VeChain created the VeChainThor

Blockchain (so-called Blockchain X or next generation blockchain).

Governance system

The VeChain Foundation is the centralised organisation founded by the decentralised VeChain

community to carry out operations for developing and maintaining the VeChain Thor Blockchain. The

VeChain Foundation has the steering committee with seven seats representing the entire community.

The VeChain community is formed by all entities participating in the blockchain and categorised by

different levels of token holding: Mjolnir (15mn VET) and Mjolnir X Node (15.6mn VET); Thunder (5mn

VET) and Thunder X Node (5.6mn VET), Strength (1mn VET) and Strength X Node (1.6mn VET),

VeThor X Node (600k VET). The VeChain Foundation has distributed more than 70% of VeChain tokens

(132,837,655.34 ERC20 VET). The Foundation is going to distribute tokens via different activation in the

coming years.

The VeChain Foundation is a non-profit organisation supervising the development, governance and

advancement of the VeChain Platform ecosystem. Shareholders with voting authority elect the Board of

Steering Committee, which oversees five committees: technical, operational, public relations, regulation,

and compensation and nominations.

Stakeholders on the VeChain platform are the VET holders, including Smart Contract Owners and

Authority Masternode holders. There is a minimum required VET to participate in voting, such as VET

holders without KYC (VEOK, 20% voting authority), VET holders with KYC (VEK) with 30% voting

authority, individual and enterprise smart contract owner (SO-I and SO-E respectively, together 20%) and

individual and enterprise authority masternode holders (AN-I and AN-E, together 30% of voting

authority).

Token economics

VeChain has a twin-token system, including VET as a value-transfer medium and VTHO (VeThor) as an

underlying cost of using VeChain. VET provide a right to use the blockchain. VTHO is generated

automatically via holding VET (every holder of VET will get VTHO for free) and after it performs certain

blockchain operations it will be destroyed. VTHO tokens can be transferred and traded.

The supply of VTHO is set at 4.32VTHO per 10k VET per day, in total making 37,459,858 VTHO

generated from holding VET per day plus 30% of VTHO usage on that day rewarded to Authority

Masternodes. The demand for VTHO includes smart contracts deployed on the VeChain Thor Blockchain

and individual transaction payments.

40

The design of a twin-token model aims to provide a sustainable cost model for users on the blockchain.

VeChain proposed a VET token price model, similar to a share price model, which depends on the

market VTHO price, the growth rate of velocity of VTHO generation, discount rate related to the rate of

return by holding VeChain token (VET) and PV of present and anticipated future use of VET as a

cryptocurrency and as smart money.

As of 10 September 2018, c93.5% of the ERC20 VEN tokens have been swapped for VET on the

VeChainThor Mainnet. The total VET supply on the VeChainThor blockchain is 86,712,634,466. The

circulating supply was 56,600,371,953 as of 31 July 2018 (65% of total supply). The share 35% of VET is

held by the Foundation and will be allocated to remaining enterprise investors (8.5bn VEN tokens),

cofounder and the development team (3bn), ongoing operation and technological development (10bn)

and business development (8.3bn).

Protocol

VeChainThor Blockchain developed a Proof-of-Authority (PoA) consensus protocol which suits the

needed governance system. VeChain will not have anonymous block producers, but 101 known

validators (Authority Masternodes) authorised by the VeChain Foundation and VeChain community.

VeChain considers POW, POS, DPOS as unsuitable for the governance system it plans to run. The

individual or entity shall disclose their identity and reputation by extension and pass KYC to become an

AM. The PoA protocol includes a pseudo-random process and the concept of active/inactive status of AM

to decide on a particular AM is legitimate for producing a block. VeChain allows the POW to be

conducted for every transaction so that transaction senders are given the choice to mine extra gas price

or to utilise their computational power to increase the gas price of their transactions, rather than being

restricted to paying a higher transaction fee. VeChainThor Blockchain uses the SHA 256 Hash algorithm

to generate VIDs, which can be written into the IoT tags and devices such as NFC, RFID and QR codes

with the VeChain proprietary VID generator. The blockchain accepts any type of data, including strings,

numbers, Booleans, etc. The data is identified by its hash (SHA256).

Security

The PoA protocol is vulnerable to 51% attack, but that means that half of the current available Authority

Masternodes collude. The long-range attack, when the attacker goes back to an old block to generate a

new blockchain branch and broadcast the branch to try to override the existing trunk, cannot be used to

attack the proposed PoA protocol.

Technology

VeChain Thor covers several technologies, including blockchain, Internet of Things, Artificial Intelligence

and others:

- Blockchain Core to carry transactions and storing the data. - The connection stack and the sensor stack to provide a connectivity and form the IoT technology

portfolio; - VeChain uses NFC and RFID chips to digitalize products and sensors to capture environmental,

inertial, gas and location information through sensors. - Application and services include VeVID for KYC, VeVOT for voting, VeSCC for smart contract

certification, VeSCL for smart contract library, technical protocols such as side-chains, cross-chains, data feeds, oracles etc.

41

Figure 44. VeChain Thor Blockchain structure

The Smart Contract Library (SCL) is part of the infrastructure service suite of VeChainThor, and includes

smart contracts for various industries, enterprises and use cases including VID registration, data binding,

status data integration, digital ownership, ownership transfer, authorisation declaration, authorization

transfer, multiple authorisation and others.

Roadmap

The VeChain technology has been developed for over two years since 2015. The blockchain was

launched on Ethereum in January 2016, and added functional smart contracts in September 2016. It

added several functional modules in 2016-2017. VeChain v3.0 was launched in May 2017 with more

commercial use cases implemented, including luxury goods, automotive, agriculture, third party services

etc. VeChain launched a chipset v4.0 in 2017 and launched the BaaS platform. In 2018, the blockchain

added the VeChain Thor wallet, explorer, governance structure and economic model support, as well as

VeChainThor Public Services, cross-chain and sidechain solutions and more.

VeChain plans to launch cross-chain and sidechain technology in 4Q2018, and to expand the

VeChainThor Ecosystem in 2019.

Use cases

VeChain has developed the business engagement for use cases since 2016, when the first generation of

smart contracts were designed. Currently, the blockchain states over 210 opportunities in the pipeline.

Business Layer

• Use case 1

• Use case 2

• Use case 3

VeChain Business Abstract Layer

• HSS / Hashed Storage Service

• URS / Universal Registry Service

• others

VeChain Basis Service Layer

VeChainThor Blockchain Abstract Layer

• Data Engine

• Key Store

• Access Policy

VeChain Technical Layer

• VeChainThor Blockchain LayerBlockchain Layer

42

In the luxury industry, VeChain offers a traceability solution covering the life-cycle of products from

manufacturing, logistics, and supply chain, retail and wholesale, and after service.

The food safety solution relies mostly on process control. The Oversea Liquor tracking platform for D.I.G.

on the VeChain, can track wine from the overseas winery to the final customers, who are able to check

the product information.

MyStory is the blockchain based assurance solution for the food and beverage industry. Italian wine

producers will use MyStory partnered with VeChain and DNV GL to feature the MyStore label on their

bottles in stores using the VeChainThor Blockchain solution and hardware tags.

VeChain partners with Viseo and Microsoft France to initialize the vehicle passport project for the

automotive industry. BMW is building a blockchain solution on VeChain.

VeChain provides BaaS (Blockchain-as-a-Service) to Kuehne+Nagel, one of the biggest freight

forwarders to track and manage all the products from reputable enterprises.

VeChain will undertake a project for the Chinese government aiming to track all the vaccines from

producers to final customers.

The list of potential use cases, which focus on products’ traceability using IoT, is expanding and the client

base of VeChain currently includes a number of famous brands and corporates.

Team

Sunny Lu, Co-founder and CEO Jay Zhang, Co-founder and CFO

Bin Qian, Chief Blockchain Developer Peter Zhou, Chief Scientist

Jianliang Gu, CTO Scott Brisbin, General Counsel

ICO/Fundraising

VeChain development was financed via funding rounds. The list of investors include DNV GL and PWC,

according to Crunchbase. The company has Draper Dragon, Fenbushi Capital, FutureCap, and

breyercapital among its supporters.

43

Figure 45. VEN transaction volume, $ Figure 46. VEN exchange volume, $

Source: coinmetrics.io Source: coinmetrics.io

Figure 47. VEN MktCap, $ Figure 48. VEN active addresses

Source: coinmetrics.io Source: coinmetrics.io

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44

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