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“Security token issuances could easily scale to billions of dollars in the next few years,” says skeptic turned Blockchain evangelist Syed Hussain, CEO of Liquidity Digital

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what is Liquidity Digital

You can also listen to the complete article and interview here:

Syed started out as a skeptic of blockchain technology but turned into an evangelist very quickly when he first read Satoshi’s whitepaper on Bitcoin.

At that point, “blockchain technology revolution” was just a phrase that people used without giving a forethought.

Syed set out to make that revolution a reality through an actual use case, rather than empty words.

95% of utility tokens may be securities

The hype of blockchain technology may have helped more than 2000 crypto projects to proliferate in the market; however, the utility tokens issued by these 2000 odd projects may really be securities.

According to Syed, “Utility attached around most blockchain projects is BS, I am not claiming that there is no utility – it’s just that 95% (that’s being generous) of the utility token applications do not have a real utility and are a security issued under the guise of utility tokens. We wanted to put an end to that confusion by embedding regulations by using blockchain as and when needed to make the process of raising and administering private capital more efficient.”

One of the few revenue positive companies in the blockchain space

Liquidity Digital logo

Less than a year old, Liquidity Digital also happens to be a rare find. It is a revenue positive company in the institutional blockchain space.

That means that in an industry where most companies are still struggling to identify use cases for blockchain, Liquidity has been able to monetize on them by showing the benefits to institutional clients.

While most companies are burning investor funds raised from the ICOs, Liquidity is defying the mold, and redefining the way the capital markets will work.

“While the companies in this space are struggling to identify one stream of revenue, we have been fortunate to maintain four streams of revenue.  Our platform went live 4 weeks ago and already have issuances on the platform that are being viewed by global institutions.”

“From day one, our focus has been to be a revenue focused company.  What that does is define our decision process.  Yes, we are a technology company, but we are a company first and that means for us to be in business, we have to be profitable and a business plan must be executed to make that happen.”

It is easy to talk about how projects are going to change the world while burning through someone else’s money and then abandon the project, which only leaves shattered hopes and a bitter taste for investors, ultimately leaving the world much worse than it was before.

“We want to change the world in a practical and pragmatic manner while also making our investors a healthy return on their risk capital,” Syed said.

That approach seems to be working.

Inefficiencies result in exorbitant costs, Liquidity can solve this predicament

Because of the inefficiencies in the processes and number of intermediaries involved, the customer ends up footing the bill.

Blockchain technology can simplify the processes and do away with a lot of intermediaries to bring costs down.  For instance, consider the picture below, it shows all the different pieces that are currently involved in the securities issuance and post issuance process.  Each piece represents a separate vendor and costs associated for their services.  With the Liquidity platform all of these processes can be managed through one simple platform without the intermediaries. 

Liquidity-Digital-solutions

Source: Liquidity Digital

This technology will enable access to the global investor pool

Investors

Blockchain technology presents a unique opportunity to access regulatory compliant digital assets from a global investor pool.

Syed opined that, “we will see that regulated private capital markets are going to become more accessible to a global audience. We facilitate this through our technology platform that enables capital issuers access to a much larger global capital pool represented by broker dealers, family offices, and qualified purchasers. The manner by which we accomplish this task is by incentivizing institutional counterparties to collaborate through our platform which matches their client lists with quality issuers.”

“These counterparties have historically been very worried about sharing their information and being able to prove that they own their client list and their deals. Blockchain and the Liquidity Digital technology platform provide a practical solution for this that players in the marketplace are telling us meets their regulatory scrutiny and gets them very excited. This is how we improve capital markets and make some money while doing it.

Call it what it is, a security

Regulations

Most companies in the blockchain space are racking their brains to circumvent SEC regulations by either going outside the US, or by arguing that they meet the Howey test.  The reality is that they may not be compliant with the regulations and that comes to light a little too late.

What Liquidity is doing instead is complying with the traditional equity and debt securities regulations, which are already well established and battle-tested.

“What we are doing is leveraging the existing regulations for traditional securities for digital securities.  We actually go to the broker / dealers who are registered and abide by all the rules and SEC regulations and then apply those standards and practices to our distribution platform and our digital security issuances,” Syed said.

Blockchain doesn’t transform a sh*tty idea into a viable one

“You cannot put a sh*tty idea on a blockchain to transform it into something it is not. There are a lot of platforms that facilitate that, but we are not that company,” Syed said, commenting about the companies that they have rejected partnering with, or representing as clients.

Lots of companies are cashing in on the blockchain frenzy and many have succeeded to raise millions of dollars during the ICO craze for rather stupid ideas but that is not a long-term sustainable business.

Then there were companies that simply changed their name to increase their reputation and stock prices.

Long Island Ice Tea company changed its name to Long Island Blockchain Co. and its stocks soared 200%.  Such was the craziness but things have hopefully improved in the short time since the ICO craze ran its course and pulled back.

Companies like Liquidity Digital are the ones changing that rhetoric.  They want to facilitate digitizing security tokens for quality companies, and when these companies succeed in their efforts by efficiently raising and administering their securities via the LD platform, it will bring authenticity to the space.

Bringing all aspects of securities issuance to one platform

The securities lifecycle comprises of a lot of moving parts. KYC, AML, compliance, securities issuance, investor communication, dividend distribution, etc.…. each of these attributes can be an offering on its own, and they are for certain aspects.

Liquidity’s technology integrates all of these seamlessly onto one platform.

“We think of ourselves as a car manufacturer. We don’t have to build all the parts, and if someone else has figured out to make the tires better than we do, we absolutely leverage that from them instead of manufacturing tires.  Similarly, we have built a lot of capabilities into our platform, but if there is a company that is better at KYC and AML than us, we integrate them onto our platform,” said Syed, emphasizing the importance of simplifying the whole process of the securities lifecycle for a non-technical issuer.

Governments cannot wait around for too long

Syed talked about how the early adoption of the Internet disrupted the companies and then disrupted entire industries.

With blockchain technology, entire economies are going to be disrupted and while being cautious is warranted, governments cannot be too lethargic in moving with the times.

We have seen this recently with Facebook’s Libra rattling governments all over the world with its announcement of Libra tokens.

It is not just the financial industry that is impacted by this technology; it is the entire economic model that could be disrupted.

Syed commented, “This is technology that is coming and is being discussed in public settings at the highest levels, and we will eventually have the required framework. While this cautionary approach is great, there is not much time to wait around.

Syed jokes about work-life balance saying, “I work and my wife balances my life, so that is how we balance work-life together.”

Eyes set on Series A issuance in 2020

Having completed its seed round earlier the team is now vetting the investment offers that are coming its way based on its progress in the recent past.

With the traction that the company is gaining in the market, they are looking to issue its own Series A in 2020.

The company’s goal is to be one of the first unicorns of Web 3.0.

Institutions are not coming, they are here already

“In 2018 we used to use the phrase ‘institutions are coming’, well now, the institutions are here.  Anyone who thinks this technology is a decade out is clueless as to what’s going in the space.

Some of the brightest minds from the mainstream businesses are already working in the space.    These institutions see the value this technology has to offer.

Problem is, most people are not able to articulate the value proposition because they are stuck in the discussions of technology for the sake of technology, instead of focusing on how this technology can help the businesses.

It is no longer just financial institutions, we are talking about renewable energy, infrastructure, project financing and beyond.

It will not come as a surprise to us if we see issuances in the billions in the next few years.” Interview with Liquidity Digital

CryptoTapas: Tell us about Liquidity Digital and how you got into the Blockchain technology. What pain points are you trying to solve with your project?

Syed Hussain:
Syed-Liquid-DigitalI am a serial entrepreneur, and I started my first company when I was a senior in high school, around the time of the dotcom boom.

Being an entrepreneur, I have always been cognizant about the idea of money and its impact on society; how you can make societal changes with it.  That is where my passion for capital markets emerged. The dotcom boom was a perfect culmination of technology and money, and that peaked my interest.

Even during those times, most people were talking about technology for the sake of technology and on the what and the how of technology. I was always interested in the why of technology.

That has allowed me to think about technology from a value proposition perspective.

Fast-forward to where we are today. We are seeing the same sort of hype and volatility, all those things that existed during the early stages of the internet.

So, what got me into the technology space during the dotcom are the same things that brought me to the blockchain technology space.

I came to this space as a cynic.

When I heard about Bitcoin and cryptocurrency and how they were going to change the world and everything in it, I thought that as someone with understanding of technology and capital markets, if there was going to be anyone who was going to poke a hole in this theory, it was going to be me.

That’s what got me started on this blockchain technology journey.

You couldn’t ask anyone about it because in the beginning, there were only two types of people in the space: ardent believers or deniers.

I wanted to formulate my own opinions by going directly to the source, which at the time was Satoshi’s whitepaper.

What started out as a 15-minute read turned into 2.5 hours.

Every single concept was a ‘holy sh*t’ moment for me.  Most people did not have any idea of what the implications of this technology were.

I immediately realized that most people were focused on the digital currency aspect of the technology but there are just so many implications of this technology.

My insights from the technology, the capital market’s space and my experience in financial markets made me realize that this technology would disrupt not just the capital markets but also everything that had to do with the notion of trust and incentivization.

This was a huge deal.

And if you marry the other concepts, like artificial intelligence and the Internet of things, with blockchain technology, it would completely change the way we operate and conduct businesses.

I got started in this space with the following thought:

The impact that the Internet has had on how we interact with each other will be the impact that blockchain is going to have on how we will transact with each other.

That realization immediately changed me from a skeptic to a believer to an evangelist and propelled me to think about the ways we could execute this technology to bring about the revolution that people were talking about.

However, these revolutions do not happen overnight.  Execution fuels evolution into a revolution, something I like to call “Evolutions towards revolution”

I needed to come up with a mechanism that markets would adopt, which meant the solution had to be practical, pragmatic and something that was revolutionary once you achieved its goals but evolutionary in the path towards achieving it.

That is when I looked at the Initial Coin Offerings (ICOs).  It was an interesting concept and a clear indication that the capital markets are not keeping up with the global capital formation’s needs.

I understood the problem very well because of my background in the capital markets.

ICOs made a lot of sense but lacked one major component: regulatory compliance. 

Lots of projects were trying to get around this regulatory compliance aspect by giving the tokens a utility character; however, most of the utility attached to the tokens was BS.  I am not claiming that there is no utility; it’s just that 95% (that’s being generous) of the utility token applications do not have a real utility and are a security token issued under the guise of utility tokens.

Although the regulations were not designed to keep pace with this technology, regulators did a good job in helping regulations catch up quickly.

That is when this whole notion of security tokens started to come into play.

Reading the bitcoin whitepaper converted me from a skeptic to a believer to an evangelist, and at that point I knew I wanted to be a blockchain entrepreneur.

Liquid Digital teamI was going to launch a company focusing on tokenizing assets.

That is how I met with the founder and CEO of BankEx. Their concept was to tokenize real world assets. They asked me to come onboard to help with the project.

I joined them as the Chief Commercial Officer and then ended up becoming the CEO of the Americas.

The company was focusing on the retail side of things while I wanted to focus on the institutional side of things. I believe that we need to have institutional adoption to pave the way for retail adoption.  This is especially true for financial technology.

That realization was the genesis behind Liquidity Digital, and what led me and my Co-founders, Jitin Jain and Marina Shostak to launch this new venture.  And since then we have been making strides. I am humbled to say that we are one of the few companies in the blockchain technology space to actually be revenue positive.

CryptoTapas:That is quite different from most companies in the space who are burning investor funds raised from the ICOs.

Syed Hussain:
From day one, our focus has been to be a revenue focused company.  What that does is defines our decision process.  Yes, we are a technology company, but we are a company first and that means for us to be in business, we have to be profitable and have a business plan that is executed to make that happen. Without such a plan and execution, you might as well call yourselves a technology non-profit.

That is also the biggest problem in the industry right now. Everyone is talking about pie-in-the-sky and how they are going to change the world, but no one is talking about the opportunities to make a ton of money while also changing the world.

That is where our focus is.

We want to change the world in a practical and pragmatic manner while making tons of money in the process.

CryptoTapas: Talking about revenue generating activities, what kind of services do you currently provide to your clients?

Syed Hussain:
We are building an end-to-end ecosystem for digital security offerings.

Liquidity Digital Team

Being the CEO gives me the liberty to make predictions and let time decide whether I was insane or a genius.  I will make one such bold prediction: In the future, the largest source of capital will come from private markets, as opposed to public markets.

We will see that regulatory private capital markets are going to open up to the public.  That is going to enable access to a much larger, global capital pool for institutions across the board.

I realize that this is a big statement to make and there is a lot of work to be done.

We will come to a point in the natural evolution of this technology turning into a revolutionary solution that will allow people to turn illiquid assets into liquid ones.

Going back to your question about how do we make money…what do you do during a gold rush?  You invest in the picks and shovels, equipment for the plumbing and piping. That is essentially what we are doing, in preparation of this gold rush in the blockchain space. Our focus is “how do you make it seamless for investors, issuers and the connectors of the distribution channels?”

That is what our end-to-end ecosystem for digital security offerings does.

We cover issuance and post-issuance aspects on the platform.  Right now, everything is happening in isolation in the market, but our technology connects everything together to provide a seamless experience to the clients and their investors.

We make money based on the issuance, distribution, and maintenance of the securities on the platform.

We currently have 4 separate revenue streams that provide different benefits for our clients:

1. We provide digital securities as a service where we are handling both the issuance and post issuance side of things. (DSaaS).
2. We connect issuers to a vast network of registered global broker / dealers to help distribute the issuance.
3. We provide advanced analytics and insights for broker / dealers and issuers to help them make informed decisions on offerings.
4. We provide a white-labeled enterprise solution for institutions to manage their onboarding process and to tap into a new revenue stream for post-issuance servicing of digital securities for their clients.

Deal 01

CryptoTapas: There is no definitive regulation out there. How are you able to provide services?

Syed Hussain:
That is a good question, and one where a lot of education is needed in the space.

Many people are stuck on the notion that we need to have a “security token framework” in place, and that will come eventually. But this whole notion of tokens has become so toxic because of what people have seen and the ugly debate on utility vs. security tokens.

For me, it is very simple.

Call it what it is, and that is a digital security.

Whether it is a security for a company, a piece of an asset, an equity or a debt instrument – it is a digital security, and the same securities regulations will apply to them. Yes, there certainly are nuances when it comes to digital assets, but the regulators are already beginning to provide clarity around this.

Just this past July, the SEC issued a joint staff statement on the custody of digital assets for broker dealers.

What we are doing is leveraging the existing regulation for traditional securities to digital securities.  

We actually go to the broker / dealers who are registered and abide by all the rules and SEC regulations for our digital security token issuance.

Remember that rules are jurisdiction specific, and if you can program these rules into a smart contract, all of a sudden, the magic of technology translates to significant cost savings across the board.

We have our ears and eyes close to the regulatory pulse, and we can update on our platform any rules that need to be updated.

For any issuance in the U.S., we follow SEC regulations for accredited investors, and for issuances outside the U.S., we follow the respective country’s regulations.

CryptoTapas: How do you choose clients you look to serve?

Syed Hussain:
We have a legal team that vets the clients before we provide any services.

Digitizing the securities is icing on the cake – that is what it really is.  However, the cake itself is the client that is looking to issue the digital securities.  So, even though our icing is excellent, it cannot make a sh*tty cake taste good.

The problem with this space right now, and the reason why we see so many issues, is that people are focusing on the icing and not on the cake.

We focus on the quality of the clients that come our way.  Do they have an understanding of the rules and regulations? Are they a quality company or just looking to cash in on this frenzy?

Based on our initial analysis, if we see quality in the company, we absolutely take them on.  If not, we pass.

That is what the industry needs:  a few good quality issuances using digital securities that can pave the way for future issuers.  That is how adoption happens.

CryptoTapas: What was the most common issue that you noticed in the clients that you rejected?

Syed Hussain:
That is an easy one. It is bull shi*t.

That is what this industry is full of: hype and bull sh*t.

We look at whether it is a viable idea: Is this just a pie-in-the-sky or an actual product?  It is easy, because you can, with just a few simple questions, distinguish a real idea from BS.

For example, I ask a simple question: What’s your revenue plan? How are you looking to make money from this business?  Who are your buyers and what are their pain points?

You will be amazed to see how many people fail to answer those basic questions.

You cannot put a sh*tty idea on a blockchain and transform it into something it is not.  There are a lot of platforms that facilitate that, but we are not that company.

CryptoTapas: Talk to us about the post-issuance module.

Syed Hussain:
We look at our solution holistically.

We don’t get to post-issuance before the issuance and you cannot think about issuance without pre-issuance review.

For the post issuance, we manage the investor communication, investor management, complying with the legal requirements of investor correspondence including shares registration. We also manage dividend distribution and securities life cycle management and everything it comprises of.

Each of the aspects of securities management including KYC, AML, Compliance, Securities issuance, investor communication, dividend distribution, etc. is itself a company service offering.

The beauty of this technology is that it can integrate all of these seamlessly onto one platform.

For example, if you have to call someone on WhatsApp, you don’t think about how that technology works, you simply press a button and the technology works, ultimately, that is what we want to do.  We want to make blockchain technology so seamless and integral part of the technology that people actually use it, not just talk about it.

CryptoTapas: Which blockchain platform are you using?

Syed Hussain:
We are agnostic to the blockchain technology platform.   We are doing that very purposefully so that we can interact and leverage across all platforms so that we can utilize the best of everything from different platforms.

CryptoTapas: Do you think the US regulations are keeping up with the times in providing the required clarifications to move this space?

Syed Hussain:
SEC has taken the position to not stand in the way of this evolution, however, they are weighing in all the aspects of this technology which is finding itself at the moment before they come up with the regulations.  I think that is the right approach.

The US has a special responsibility in that it is regarded as the market leader and everyone is watching it.  While the agility to act quick is lacking, it is not without a good reason.

We see that the general awareness and conversations are already underway.  We saw this during the congressional testimony of the bankers, a senator asked the bankers “what is your blockchain strategy?”.

So, this is a technology that is coming and is being discussed in the public settings at the highest levels and we will eventually have the required framework.

While this cautionary approach is great, there is not much time to wait around.

During the emergence of internet 1.0, lot of companies waited on the sideline waiting and they were wiped out of business because they were too late to take advantage of the technology.

With Internet 2.0, it was the industries that took a similar stance of waiting around and they too were disrupted.  Take Uber and Netflix for example.

With internet 3.0, we go from companies to industries to entire economies being disrupted.  And there is an absolute need to stay ahead in the game.

CryptoTapas: What is your vision for Liquidity Digital for the coming 5 years?

Syed Hussain:
Five years is a long time in this space.

I would not be surprised if in the next 3 years or less a much bigger player swoops in and takes us over, or maybe we take over them!

CryptoTapas: Thank you for this opportunity, it was a pleasure talking to you.

Thank you for reading the article.

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Subscribe-staying-relevantIMPORTANT DISCLAIMER

Everything in this article is an opinion, not an advice of any kind. This material has been prepared for general informational purposes only and it is not intended to be relied upon as accounting, tax, investment, legal or other professional advice. Please consult with a professional for specific advice.

We do not endorse or guarantee the accuracy of the information and claims made.

About the author

RK Reddy holds two Masters degrees, one in Accounting and another in Business Administration with over 15 years of experience in the financial services industry.

Read more about the author here.

Interview

“Coda is world’s lightest Blockchain,” an exclusive interview with Emre Tekisalp of Coda Protocol

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Coda Protocol Interview

What happens when the miners decide to pull out their support of a public network? What
happens when nodes find a project not-profitable and they abandon the project?

It makes the blockchain network weak and vulnerable to attacks. In theory, all public blockchain
networks that rely on network strength to sustain face this existential threat.

Coda Protocol “addresses blockchain’s scalability problem at its source by utilizing recursive zk-
SNARKs to ensure the blockchain never exceeds the size of a few tweets, making it the world’s
lightest blockchain.”

Coda wants to provide a viable scalable solution without sacrificing the decentralized nature of
blockchain.

We asked Emre Tekisalp, Director of Business Development at O(1) Labs, the team behind
Coda Protocol, a lot of questions about Coda Protocol and his answers are below for anyone
wanting to learn about Coda Protocol.

Emre spent two years at Coinbase’s Business Development team where he led a number of strategic programs during a period when the company grew 10x. Before Coinbase, Emre was a Product Manager at Intel’s wearable devices group. Originally from Istanbul, Turkey, Emre has an MBA degree from Columbia University.

Q&A with CryptoTapas

In a world of 1000’s of blockchain projects and protocols, how do you envision Coda
making its mark?

Coda addresses blockchain’s scalability problem at its source by utilizing recursive zk-SNARKs
to ensure the blockchain never exceeds the size of a few tweets, making it the world’s lightest
blockchain.

Legacy blockchains like Bitcoin and Ethereum are incredibly heavy chains from a data
perspective. The heavier the chain, the greater the data processing requirements placed on
nodes, which limits the number of nodes eligible to participate. As the pool of potential nodes
diminishes, decentralization declines, jeopardizing the strength of the network.

Decentralization is not a sacrifice blockchains should be willing to make, yet this is
precisely the danger facing blockchains that focus solely on scalability. Coda confronts this
problem by using recursive zk-SNARKs to encapsulate the entire history of the chain in a single,
lightweight zero-knowledge proof.

To ensure sufficient decentralization upon mainnet launch this summer, we launched Genesis, a
token program to prepare members of our community to be block producers. With more than
500 users joining our testnet, Coda is now one of the largest layer 1 testnets by peer count. It’s
the strength of our technology and commitment to our community that differentiates us from
other protocols.

What would you say to convince the team of a project that is already on another protocol,
say Ethereum or Tron, to move to Coda?

Coda is designed for developers and for projects to use it as an easy tool to enable value
exchange in their existing apps. It is incredibly lightweight and prioritizes decentralization and
security. Already more than half of all web traffic can be attributed to mobile, and so it is
absurd to believe any blockchain system that does not work on mobile will be able to meet
the needs of the increasingly mobile digital economy. Coda’s inclusive and lightweight approach
will allow the protocol to be useful for the existing mobile internet ecosystem.

Who is behind o1Labs.org? How big of a team is working on Coda?

Emre Tekisalp founder of coda protocolCo-founders Izaak Meckler and Evan Shapiro created Coda with the goal of solving the
scalability problems that have plagued blockchain since its inception. We now have 28 full-time employees and hundreds of dedicated community members. The first cohort of validator teams participating in our Genesis program includes Bison Trails, Figment Networks, dsrv labs, and Sparkpool.

Coda Protocol Team

[CryptoTapas Side note: Bison Trails is a Libra Network member]

How does SNARKs make Coda better than other projects, can you explain in a way that a
non-blockchainer can understand?

The basic idea of zk-SNARKs is that they allow one to verify the result of any computation
without having to redo or acquire any detailed information about said computation. For example
you can prove “you are who you say you are” to a website without sharing any sensitive
information like a password. Coda uses zk-SNARKs to enable anyone to easily connect to the
blockchain from any device just by downloading a couple kilobytes of data. In contrast,
traditional blockchains like Bitcoin require expensive desktop machines to download hundreds
of gigabytes over many hours.

In the whitepaper, we read “The resulting consensus protocol is consistent and
responsive as long as at most 1/2 of the mining power is malicious,” can you elaborate
what this means?

In order to function, blockchains require all nodes connected to the network to periodically come
to consensus regarding the latest state of the world. The way this consensus is achieved varies
from blockchain to blockchain.

Coda Consensus

Bitcoin, for example, also requires at least half of the nodes participating in consensus to stay
honest. Unlike Bitcoin, which is a Proof-of-Work network, most Proof-of-Stake networks like
Cosmos or EOS require at least two-thirds of the nodes to stay honest. This higher requirement
makes such networks less resistant to attacks. The specific consensus mechanism we use in
Coda, a variant of Ouroboros, allows Coda to stay secure as long as half of the nodes are
honest, similar to Bitcoin. This is one of the factors that allows Coda to be more decentralized
than other blockchains out there.

Will there be a token sale? What will be the maximum supply of Coda?

We have not disclosed any plans for a token sale before the mainnet release of Coda. Coda will
not have a maximum supply, as it will have ongoing inflation per our Economic Whitepaper. At
mainnet launch, Coda will have an initial supply of 1 billion tokens.

Can non-technical members become Genesis Founding members? How many of your
1000 slots are still available?

Absolutely! We see Coda as a decentralized network and currency built by its participants, and
this includes users with many different sets of skills. The majority of the 1,000 Genesis
Founding Member slots are still open, so hop on over to our website to start getting active on
our testnet.

If you were to meet all of your goals, what would Coda look like in 5 years? What kind of
clients would it have on board and what kind of social impact does Coda have in the
blockchain space?

Coda is built first and foremost for developers.

In 5 years we see Coda enabling internet users to exchange value from any app. This will allow
any developer and business owner to easily accept money and new novel types of tokens from
anyone around the world from any device. We recognize that such a future is not built just by
one company. This is why we emphasize inclusivity above all else and are encouraging people
of all backgrounds to participate at this early stage through our Genesis program. Only by
supporting diverse participation today can we be sure the system will be equipped to serve the
diverse, global population of internet users.

CryptoTapas wishes all the best to Coda Protocol.

Thank you for reading and sharing this article and if you have spare satoshis lying around – consider donating.

CryptoTapas BTC Donation Address

IMPORTANT DISCLAIMER

Everything in this article is an opinion, not an advice of any kind. This material has been prepared for general informational purposes only and it is not intended to be relied upon as accounting, tax, investment, legal or other professional advice. Please consult with a professional for specific advice.

We do not endorse or guarantee the accuracy of the information and claims made.

All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them.

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Interview

“The Asensys system delivers 1,000 times the throughput and 2,000 times the capacity of the Bitcoin and Ethereum networks” Says Dr. Brendon Wang, founder of Asensys

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Asensys AMA with CryptoTapas

There are over 5100 crypto projects that are listed on CoinMarketCap. This is not a complete list though, there are 1000s of other blockchain/crypto projects that are out there that are not listed on CMC yet for various reasons (one big one is they may not have their own cryptocurrency to trade). 

With 1000s of Crypto projects already existing – it is difficult to get excited about new projects.  However, when you hear about a project that is conceived and built by a Lead Researcher who lead the team at Microsoft on Distributed Systems, you want to learn more.  

Brendon WangDr. Brendon (JiaPing) Wang, along with Co-Founders Minghao Pan and David (Xiaobing) Zhang, has conceived of an idea that could increase the current transaction speeds by 1000s of times that of Bitcoin or Ethereum. The exciting part about Asensys is its performance increases with the user base. The more users who use the network the faster the network becomes.

This counterintuitive novelty could give Asensys the edge in the blockchain space.  But, is it all hype or is there mettle in this project?

We wanted to find out directly from the founder.  This exclusive Q&A with Dr. Brendon Wang is geared to provide great insight to the reader about Asensys.

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CryptoTapas Q&A

1) How would you describe Asensys to an already confused novice with 2000 odd projects in the market?  What sets it apart?

To understand Asensys, you first need to understand the problem we are solving. Bitcoin revolutionized finance by introducing the first peer-to-peer electronic cash system. Its brilliance lies in the fact that two individuals can exchange value without verification from a third party intermediary, upending the system we’ve relied on for centuries that gave undue power to trusted, centralized entities like banks and governments to validate transactions and provide legitimacy to currency itself. The way Bitcoin circumvents the need for trusted, centralized validators is by outsourcing verification to a decentralized web of computers, called nodes. This means that every transaction and action on the network needs to be broadcast and replicated by all nodes, a process that takes time—too much time to meet the needs of the fast-paced digital economy. This issue of how Bitcoin and all blockchain networks can scale has been one of the biggest roadblocks to adoption of cryptocurrency and blockchain systems to-date.

One obvious way to improve the speed at which blockchain networks can process transactions is to decrease decentralization. The more centralized a system, the fewer nodes need to be communicated with to replicate the action. However, decreasing decentralization compromises the security of the network, making it more vulnerable to a 51% attack—when a majority of nodes collude against the whole to update the chain of transactions in their own interests (AKA: cheating). Incentives are designed to deter nodes from weakening the network, as they stand to benefit from a fully-functioning blockchain, but most members of the crypto community believe weakening security is a bad idea. Furthermore, decreasing decentralization is contrary to the spirit of cryptocurrency that drew so many of us to cryptocurrency in the first place. 

What we’ve done with Asensys is introduce a way to dramatically reduce over-redundant actions across the network (the main culprit contributing to blockchain latency). Our novel solution utilizes Asynchronous Consensus Zones to essentially “divide and conquer” all intra-network tasks into “mini” networks, which are independent and parallel zones.

Dividing workload produces substantial performance lift for the entire network, but it raises two problems: cross-zone transaction handling, which is when a user in one zone transacts with a user in a different zone, and mining power dilution. Asensys addresses the efficiency issue of cross-zone transactions with eventual atomicity and the security threat of mining power dilution with Chu-ko-nu mining.

Eventual atomicity enables transactions to be verified and executed in the zone where the transaction’s first state was initiated. Groups of operations are then conveyed to other zones in relay transactions, but the data pertaining to the transaction remains in the zone in which the initial state resided.

Chu-ko-nu mining protects each zone and the entire network against a 51% attack by incentivizing miners to create multiple blocks for different zones with a single nonce, which enforces even distribution of mining power across zones.

2) Most projects do well in a test environment but fail miserably when it comes to real world application – what factors contribute to this variance and how is Asensys going to circumvent these very issues?

We have conducted an in-house experiment to simulate how Asensys will scale as more users are added to the network and greater capacity and throughput are required. The results demonstrated that performance by the Asensys protocol increases proportionately to the community size. This means that as the user base grows, Asensys becomes even more efficient at processing transactions. In a test including 1,200 virtual machines worldwide to support 48,000 nodes, the Asensys system delivers 1,000 times the throughput and 2,000 times the capacity of the Bitcoin and Ethereum networks. The below graphs are from our whitepaper.”

Linear scaling

cross zone transactions

3) Your claims are in line with companies like Credits, Hedera Hashgraph, etc., all of which have raised substantial capital to fund their projects.  How big is your team to gain traction for Asensys and how are you going to fund it?

I lead a global team working from the United States, China, and Germany. Co-Founders Minghao Pan and David (Xiaobing) Zhang are based in Frankfurt and Shanghai, respectively. Michelle Chuang leads Audience Engagement and Customer Experience for Asensys. She comes to us with over 20 years of experience in marketing and customer engagement and has led key initiatives for companies such as Starbucks, Chevron and Staples Inc. We have funding from angel investors who are also high-profile leaders in technology, news that we will be [releasing] very soon.

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4) Will you have your native currency on Asensys?

Asensys will have its own currency just like Bitcoin and Ethereum to incentivize miners to add blocks of transactions to the chain. Ultimately, however, Asensys intends to be the underlying system powering a decentralized web of applications, each capable of issuing their own tokens.

5) Is your network designed to support micro transactions, and will it be blockchain platform (bitcoin/ethereum/ripple/etc.,) agnostic? 

Asensys is its own infrastructure layer, distinct from Bitcoin, Ehtereum, Ripple, etc.

6) How does Asensys’s unlimited scalability translate to a real world business use case, can you give an example that can be understood by a non-technical business person?

Asensys will be the system powering the decentralized web, which will be comprised of dapps for entertainment, finance, healthcare, e-commerce, education, and more. Just as developers can build on Ethereum, they will be able to build on Asensys without concern for its capacity to scale as the number of users grows. Asensys has a programming language, Parallel Relayed Execution Architecture Language (PREAL), specifically designed for blockchain systems and based on asynchronous consensus zones (just like nVidia has CUDA language to GPU programming). PREAL is based on a functional programming model that allows developers to describe transaction logic without concerning themselves with the underlying parallel blockchain system. 

7) We only saw Academy research reference on your site, is there a white-paper or document that describes Asensys and contrasts it with existing projects?

If you’d like to learn more, please refer to our whitepaper, which describes the details of our system in great detail. This research was also presented at the prestigious NSDI’19 conference. We are continuing to add to our website and build our community. Feel free to follow us on LinkedIN and Twitter channels for updates on news and developments:

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IMPORTANT DISCLAIMER

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We do not endorse or guarantee the accuracy of the information and claims made.

All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them.

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Interview

A Crypto Crimes Database Is Here, and It’s On to Something

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Crypto Crimes regulations

If you have ever seen crime shows from the 90s or early 2000s, you inevitably saw a frustrated detective wring his hands and say, “there is no record of the crimes from the other state.”

Even to this day, a national crime database is not a thing in many countries.

In the United States, there is no simple search system to scoop records from national, state, county, and federal databases. These databases operate on a different search parameter.

However, blockchain and crypto space may be able to circumvent the painful lessons from this lack of a single-source reference.

Murphy & McGonigle, a financial services law firm with a focus on blockchain and crypto litigation, has built a database to act as a single-source reference for specific case laws, verdicts, and fact patterns.

Blockchain Litigations Expected to Rise

Daniel Payne, Murphy & McGonigle

              Daniel Payne

As more and more companies are now venturing into the blockchain space, Daniel Payne, a shareholder in Murphy & McGonigle’s FinTech & Blockchain Practice expects an uptick in the number of cases in the space and for the relevance of the database to be more prominent. “As the economy drives toward a blockchain future, we think the litigations in the space will follow,” Daniel said.

The database tracks the trend line of litigations in the space. For instance, the 2017 and 2018 trend line shows a massive increase in blockchain litigations, which has subdued in 2019 as illegal and unauthorized ICO’s died down.

According to a report by Murphy & McGonigle, securities-related fraud lead the litigation list, while Texas leads the charts for the most number of blockchain-related litigations in the US. The report also notes that “the SEC issued a warning that it has put market participants on notice and is now focusing on non-fraud violations.”


Comprehensive Search Functionality

CryptoTapas had the opportunity to preview the Blockchain Litigation Database with Daniel Payne. The search criteria are quite comprehensive, with options to search for a specific case by plaintiff, lawyer, code, verdict, or any number of parameters. All the charts and statistics on the database are hyperlinked, helping to take the users straight to the details of whatever information interests them, depending on their search.

The database lets users narrow down their searches to the minutiae of a specific type of complaint. For example, if you want to see only criminal cases within a broad category, you can do that. You can further narrow down the search to a particular jurisdiction. You can even find cases by law firm or attorney. “One interesting aspect of the database is it helps you find the law firms that dealt with specific case types,” said Daniel. “One of the interesting aspects is that a particular attorney in Florida has been very active in finding plaintiffs to file a specific type of litigations.”

“Our database helps tie the incidents together that lead to a case,” Daniel said. “A case is otherwise just a case; however, learning about the incidents helps us advise our clients so that they don’t fall into the same pitfalls.”

Bitcoin and the Blockchain Litigation Database Have Common Roots

The idea behind the database came from the mortgage litigations the firm dealt with during the 2008 financial crisis. To help the clients they represented, Murphy & McGonigle started tracking all the mortgage litigation cases, whether their clients were involved or not. This database gave them the edge in terms of finding case laws and rulings to leverage in their cases.

The utility that the firm drew from tracking mortgage litigations sowed the seeds for the Blockchain Litigation Database. Bitcoin was also born during the recession, which was primarily caused by the subprime mortgage crisis.



Smart Contracts Are Legally Binding

“Smart contracts can absolutely be legally binding, and because of that, parties entering into smart contracts need to be careful,” Daniel said. “They should consider getting the legal advice they need before entering the contract.”

All the aspects of a legally binding contract are present in a smart contract. For instance, an offer, conditions, an acceptance, and an execution are all part of the smart contract’s protocol, and as such, they can be just as binding as any other contract.

“Parties should be aware of the ramifications of entering into a smart contract before they enter into them,” warned Daniel.

Education Is Needed in the Space

“I do not think that the attorneys or the courts have the full understanding of this new technology necessary to get questions right that are being presented to them in every case,” Daniel said. “However, we have seen that many of the verdicts on the cases we are tracking are absolutely correct.”

Daniel said that there is a need to educate the individuals working in the blockchain space, especially in terms of the law. “We have seen instances where failure to really understand the technology has led to the decisions that we question,” Daniel clarified.

There is no one to blame here because this technology is so new that many people do not have the required understanding. This lack of understanding is part of the growing pains that any new industry goes through. It is part of the evolution.

“Many of the undertakings of the companies within this space fall within the purview of the existing laws, while few specific aspects need some updates,” Daniel said.

Talking about the efforts made in the space by the blockchain community, Daniel said, “I am happy with the efforts by the blockchain communities in educating the Congress so that they have the background necessary for dealing with the issues that come before them.”

The database is not available for public viewing, but they do offer subscriptions for those who want access.




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IMPORTANT DISCLAIMER

Everything in this article is an opinion, not an advice of any kind. This material has been prepared for general informational purposes only and it is not intended to be relied upon as accounting, tax, investment, legal or other professional advice. Please consult with a professional for specific advice.

We do not endorse or guarantee the accuracy of the information and claims made.

About the author

RK Reddy holds two Masters degrees, one in Accounting and another in Business Administration with over 15 years of experience in the financial services industry.

Read more about the author here.



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