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A Tale of Two Blockchain Startups

What are the limits to blockchain and how can businesses explore these to benefit them in the long run?

By CBR Staff Writer

When Facebook decided to ban cryptocurrency adverts in late January, Alex Bessonov lost his company’s page at the click of a distant, godlike button – the connection with his 30,000 followers severed, with little chance to redirect them to another platform. The founder of blockchain-based search engine BitClave, Bessonov had raised $25.5 million within 32 seconds through a token* sale in late November 2017 and was gaining momentum promoting his product across social media platforms.

Losing his Facebook page was, in a sense, predictable, he wrote.

“This is the classic response of powerful centralized entities to competition from decentralization…. no matter why they are saying they’ve banned crypto advertising, this is really because they are perceiving blockchain ecosystems as a threat to their bottom line.”

He was understandably upset. (Facebook had not responded to a request for comment as Computer Business Review went to press) and has since set up another page. But if Bessonov, a former Chief Security Officer at LG Electronics has his way, BitClave absolutely will be a threat to the social media giant’s bottom line.

It is, after all, designed to be.

The Metadata Masters

Google and Facebook were estimated last year to attract a staggering 84 percent of all global spending on digital advertising (excluding China) something many hold to be not just unhealthy, but deeply inefficient. That’s where BitClave hopes to come in.

As BitClave (not the first to object to the issue) puts it: “With sellers paying for impressions, views and clicks, there is only [currently] the loosest correlation between return on investment and conversion rates. … moreover, businesses have little to no guarantee that the traffic they generate on their promotions is genuine.”

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The startup hopes cut out these colossal middlemen from online advertising; allowing users to be compensated for their data directly from the retailers they are searching for – with customer profiles, search preferences and interests collected in an anonymized activity blockchain ledger accessible with user permission – ultimately making third party advertising unnecessary. This way, as Bessonov puts it in the company’s white paper: “Customer profiles can be elevated from shadowy privacy-invasive metadata, owned by third parties, to search metadata owned by customers and selectively revealed only when relevant to the search.”

BitClave – currently in alpha stage testing – will allow users to choose whether to reveal their identity and/or personal information to retailers as part of their search. Those that do will get rewarded with the company’s tokens; redeemable towards acquisitions made via the system.

The Latency Problem

Critics argue that there are two main problems with this vision: search power/UX – at which few can hope to compete with Google given its head start– and scalability. Blockchains, thus far, have one inherent critical characteristic: decentralization. This means that every single node on a blockchain network processes every transaction and maintains a copy.

This decentralised consensus mechanisms has many virtues. Scalability – thus far – is not among them. That’s because the number of transactions a blockchain can process can never exceed that of a single node that is participating in the network.

Image: Francisco Gomes

As fellow blockchain startup founder Preethi Kasireddy puts it: “The blockchain actually gets weaker as more nodes are added to its network because of the inter-node latency that logarithmically increases with every additional node.”

This may be where 0Chain comes in.

“Self-Forking Parameterised Chains, Anyone?”

Silicon Valley-based 0Chain thinks it has developed the answer to this problem and, like BitClave, has aroused considerable interest in the blockchain community.

The company also raised millions ($39 million) through token sales – no debt, no venture capital – in a blisteringly quick token offering earlier this year and is currently out beating the drum at blockchain conferences and trying to bring in partners.

Many, including BitClave, are paying close attention. Because if someone can fix that scalability problem, blockchain’s applications will grow exponentially.

0Chain thinks that “someone” is them – and that their technology may allow blockchain to replace both expensive third-party cloud storage – and bring the IoT to blockchain.

Chaining the Cloud

Like many of Silicon Valley’s Hottest New Things, 0Chain is the brainchild of developers with doctorates in electrical engineering, computer science and cryptography and as a result, parsing their technology (to turn it into plain English) can be hard work.

The company’s white paper describes their innovation as: “Designed to execute a smart contract within a sub-second using an n-dimensional, deterministic, Byzantine, DPOS blockchain system.”

The speed is the result of an “efficient consensus set made up of m primary miners, n secondary miners, with a bench pool to shuffle the miners every p cycle. We also have a notion of self-forking for new chains to evolve for specific verticals, applications, and geolocations”, the company says.

As co-founder Saswata Basu, an Intel and Aviat Networks veteran, told Computer Business Review: “What that essentially means is that you can customise your blockchain to your needs. For example, if it is an IoT application that demands faster transactions you can make shorter blocks, if it is for AI computation you can make longer blocks. If you are building a banking application then you can demand a higher level of consensus.”

Image: John Carlisle

He added: “This is important because Dapps – or decentralised apps – are a great way to build a secure marketplace using blockchain. The problem is that these apps are powering transactions for IoT and AI that are now pushing the limits of existing blockchain solutions like Ethereum, which become slower and more expensive as they scale. In many cases, as a result, these Dapps must rely on centralised platforms like Amazon Web Services to run their transactions. What 0Chain provides is a truly decentralised blockchain that is free, fast, customisable and scalable. There is no fee, the Dapps only need to hold tokens based on their computational and storage needs, like a deposit.”

With a founding team that includes San Jose State University professor Tom Austin, the team, is continuing to develop its product and grow its community.

Gopinath Sivalingam, the CEO of Token Garage, and programme director of the Crypto Economic Security Conference at Berkeley, told Computer Business Review: “Building blockchains is not easy. It involves expertise in many areas: cryptography, game theory, mechanism design, reward design.”

He added: “A simple way to assess a project like this is by looking at the expertise of its founders, then assessing the quality of the white paper. 0Chain’s white paper is very technically sound indeed. The consensus protocol DPOS is already being used by many blockchains like Steemit, EOS, etc. But they’ve added an extra layer of security and called it 2D-BPoS. It’s going to be great watching this develop.”

 

*Bitcoin is a distributed ledger that performs best as digital money. Ethereum by contrast is designed to accommodate the construction of complex applications; it’s more programmable. Tokens = Ethereum. Coins = Bitcoin/Altcoins.

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