SVET Reports
Aleph Zero Review and Rating
One of my duties as a public reviewer is to objectively express my opinion about DLT protocols regardless how long / closely I know people associated with its.
Nonetheless, I still find it very difficult to abstract myself from those externalities and to not let its influence my ratings. That become particularly tricky in case of my early supporters, which by their contributions (sometimes monetary) had helped svetrating.com to grow.
In many occasions I even had to restrain myself from publishing my reviews of this sort. However, sometimes I have to act otherwise even at the risk of being accused in 'softness' and 'non-objectivity' because I simply liked the direction in which a particular protocol is pulling itself since its inception and think that it would be unfair to not reflect this apparent progress in my ratings.
EXECUTION:
For starter, I intend to review Aleph Zero 'Business Whitepaper' and assign 'Execution' (Solution - Validity - Equity - Team) sub-rating to it.
This paper introduces 'A novel consensus protocol that solves the shortcomings of current distributed ledger technology solutions'. I met one of his authors - Matthew Niemerg (@matthewniemerg) - about a year ago during one of those overcrowded blockchain conferences in San Francisco analogues of which we won't be, probably, seeing many in the observable future due to the increasingly crazy state of the world.
Short after that I'd had an opportunity to read Aleph's one of the first version of technical papers and become both impressed by its content and engraved by its form.
At that time it was difficult to imagine how it might be possible for Matthew to sort himself out from so many promising business opportunities which his protocol might lead him to. Apparently, from what I'm now seeing in this 30-pages piece, Matthew didn't dare to take the middle road and chose them all, instead :)
Extract: "Aleph Zero is an ecosystem that consists of:
- Aleph Consensus (A novel DAG protocol);
- Aleph Cloud (Decentralized file storage / IPFS);
- Aleph Smart Contracts (Scalable, self-executing smart contracts);
- Aleph Common (Decentralized Exchange (DEX) with a trustless universal wallet);
- Aleph Oracle (Information bridge between the external world and the Aleph Zero ecosystem)"
Some might argue that our space doesn't need yet another DAG (btw, non of which so far were able to impress the market enough to get raised in top 20) and all we wish for now is 'the second layer adaption solutions'.
I kinda agree with that, except that we are still early infants in our market's live and restricting ourselves to several already well know protocols, under the pretext that 'we, first, have to see how it goes before investing in others' seems a bit too premature.
Besides, one of those business cases, which I found in this paper (IoT, smart contracts, supply chain management, virtual game assets, decentralized DNS and universal wallet / DEX) might, indeed, need some 'fresh blood' injected into it.
We, of course, all well aware of how much we depend on ETH in our strive for decentralization. Although, so many (but, primary, EOS, Cardano and Tezos) aim to dispute king's crown, Vitalik is still 'our only hope', which is not necessarily a good thing, specially, given the sporadicly skyrocketing gas fees and ever increasing pressure from 'everything security' apparatus.
Faced by that we might have had not only plan B,C, D and E but also F as well . Would Aleph be able to stand up for this monumental task isn't completely clear at this early moment of its life - but I intend to give them some leeway and assign 'b' instead of 'b-' for the 'Solution', which at this stage doesn't look strikingly revolutionary.
On the other side, it would be grossly myopic to not seeing the good promises of the Aleph's team, which Matthew brought together to surmount all of those seemingly unsurmountable obstacles. Delight to my eyes, it includes almost exclusively people with solid mathematical background as well as proven coding skills. Not at all those 'generalists' and 'managerial' non-senses :)
However, there's some price to be paid, when you're too heavy on PhDs. As a result, this team is, apparently, a bit short on their proven business records side. Result: "Team" is 'a-'.
Also, I have had some difficulties in obtaining information from open sources about their financial ('Equity') and ('Legal') statuses.
Certainly, it's absolutely not unheard-of situation in our growingly acidic environment, where nefarious agents of different ranks and files are more than eager to take the slightest opportunity to misuse this type of information.
Notwithstanding, I always prefer and admire 'low-shield' approach in that domain. Specially, when actors start seeking a road to our public crypto-funds (which is not, as far as I know, the case with Aleph, yet). Still, my calling, until I've, myself, seen those records, is to assign 'c' to both of those sub-ratings.
Overall, however, I'm very impressed with the progress this bright and inspired people have made so far on their difficult journey.
Result for 'Execution' (Solution - Validity - Equity - Team): b/c/c/a-
SYSTEM:
Now to the fun part - review and rating of Aleph Zero's 'System', which is based on 'Threshold ECDSA for Decentralized Asset Custody' paper by Adam Gągol, Jędrzej Kula, Damian Straszak and Michal Switek.
Before we proceed I need to make some preliminary remarks on how this work is presented, which I would point out as to be almost exemplary if not for its 'indigestibility' for almost all of its potential consumers :)
Among other things it contains not only sometimes repetitive but still very comprehensive disclosure of main innovative ideas upon which the proposed protocol (ECDSA or, better say, PECDSA - Practical Elliptic Curve Digital Signature) is built, but also reveals in details its general outline, exhaustively discusses its certain security vulnerabilities, presents / analyzes the results of a 'real-life' test scenario, and, importantly, points out to a large number of its predecessors (such a rarity in our 'me-me-me first' industry).
Overall, I would love to see more DLT teams following this blue-print. However, getting through all of its 48 pages, despite its very clear forms (both linguistic and mathematical ones), is not a recommended pass-time for a none-prepared reader.
So, what is 'Threshold'? How it gets in context of 'ECDSA' and why it's so urgently needed for a 'Decentralized Asset Custody'?
As we all know the 'interoperability' has lately become almost the inevitable next stage in our space evolution as we are starting to see a gradual 'industrial compartmentalization' of our major protocols (specially, of course, those of Bitcoin and Ethereum).
We also know that both of them use ECDSA for its public-key cryptography. However, due to its scripts 'nature', Bitcoin is not compatible at all with the smart contracts 'universe'. The solution, though, is to provide a 'custody' (or an intermediary account) where all corresponding to a particular source transactions are aggregated before being deposited on a different blockchain. That presents a serious security challenge as it forms a centralized authority highly exposed to multiple attack vectors.
To solve this known issue, so-called, 'threshold cryptosystems' are used. What they do, simply saying, is to distribute already encrypted data among many computational stations / points making it impossible for one or for a set of malicious actors (if not exceeding 1/3 of all nodes) to breach it.
However, the catch is that, although, bad guy(s) can't get to the content of the message they still can stall the consensus by, for example, refusing to sign the transaction, those preventing the system to reach a needed 'threshold' of signing parties ('t'), which allows this transaction to proceed.
The innovative solution, proposed by authors (staying on the 'giants shoulders', of course), is that this 'threshold' 't' is made equal to 'N' or a total number of signatures. That, basically, 'buffers' attackers, preventing them from subverting this new, 'dishonest majority threshold'.
At the same time, as authors, themselves, pointed out: " … it is still possible that a large enough fraction of the committee members collude and take control of the funds. … This possibility however is supposed to be countered on a different level, for instance by providing suitable incentives to committee members."
Authors claim that their contribution to this already well known protocol also includes the following: "fault attributability in the signing phase" (attackers can be identified); "presignatures", which is based on Zero Knowledge Proofs and introduces the, so-called, 'setup phase' which allows to increase threshold algorithm's throughput by localizing all linear calculations; and an implementation on 60 geographically distributed nodes.
Extract: "WAN experiments use m5.xlarge instances evenly distributed across four regions: Ohio, Virginia, California and Oregon. For each of these settings we have run the protocol with N = 10, 20, 30, 40, 50 and 60 parties.
As a result authors claim 40th TPS achieved for their protocol.
On this dramatic note let me interrupt myself and get to my business of Aleph Zero ranking, leaving the rest of this worthy paper to your own explorations.
Well, it's not in my nature to grant 'a' to any new protocols based just on their paper and even preliminary test, which would put Aleph in the firm 'b' category if not for this nugging issue of a custody account, which, citing authors themselves, can't be completely shielded from attackers if only because of the low-probability but still practically very feasible 'collusion on all of N'.
Moreover, as we all well know true for all existing chain (specially, DAGs), the security- throughput- decentralization trilemma can't be solved without sacrifices (otherwise, as DAG stateless networks grow, the probability of double-spent increases dramatically), which has already manifested itself in that Byteball has 12 'Witnesses' and IOTA - 'The Coordinator'.
Which way will Aleph take while reaching the same crossroad is not clear and, as a result, I'm facing the hard choice myself.
Well, let me venture that if I'm not allowing the 'Security' for Aleph fell lower than 'b-' (see 'custody' issue) then I have to reduce their 'Transparency' (decentralization) to 'c+' without, actually, any guilt evidence what so ever on their part (you can consider it as a 'precrime', if you wish).
At the same time, even at this early stage and without a test evidence (btw, I can't remember seeing results of 1000+ nodes tests for any of known DAGs), I'm willing to deliberately propel the 'Velocity' to 'a-' just because I can't find a contradictory data.
As to 'Engineering' - there are too many giants on which shoulders Aleph is standing, so it puts 'a' out of their reach, imho, but I can't see why don't make it 'b+' (even if for the sake of authors' good style, excellent researches and overall thoroughness).
Result for System (Security - Velocity - Engineering - Transparency): b-/a-/b+/c+
VISION:
We are now getting to Aleph Zero's 'Vision', which is, I would say, a very Napoleonic.
There's this idiosyncratic theses, popularized among Bitcoin early adapters, stating that in our days all value accumulates at the base layer protocols as opposed to early years of Internet, when only those building apps upon it became ungainly rich - not the creators of TSPIP, FTP or DNS.
In this regards, Aleph Zero underlying protocol supporting file storage, DEX, Oracles and, of course, smart contracts allows it to capture consumers and investors bucks at maximum, at least in theory. Would it happen in reality - difficult to say at this moment, of course.
On the one hand, as DeFi grows insanely ETH continues to be our sole reserve currency in this domain, which creates a monopoly. Many of us do not like monopolies - even the most benevolent ones - as they make our small crypto-kingdom too vulnerable for sate aggressors.
On the other hand, the number of lurking 'Ethereum killers' increases as well, which gives us hope. At the same time, it rises even higher the barrier for entry into this lucrative market for all newcomers.
How Aleph Zero would be able to navigate this narrowing and increasingly populated strait in its new, small boat is not clear at the moment. However, the yarning to see a big blue ocean ahead crisscrossed by millions of yachts full of new protocols' hungry users is just to strong to resist.
Btw, how really big is this ocean? With Ethereum market cap fluctuating around $20 billions and another $10 billion or so added by its nearest competitors might it still 10x, 100x or even 1000x in the foreseeable future (allowing, at the same time, plenty of room for new riders)?
Let's us be moderately hopeful and envision, say, $300 billion cumulative market cap for smart contracts platforms in 3–5 years with Aleph Zero's taking 1% of it ($3 bln).
If you ask me why 1% and not, for example, 0.1%, I might say that there are currently about 900 independent blockchain platforms and to be in the first 100 in the world is not unimaginable at all for the Aleph Zero team (btw, even 0.1% gives them $300 mio cap, which is not a peanut and I did not even mention their other two declared big markets - DEXs and storages).
Now to the rating.
Taking into consideration all of the above-said, it feels fair to me that the 'Volume' (potential market size) goes to 'a'. However, 'Singularity' (absence of competition) is, imho, already below 'b' and has to be set at 'c+'. At the same time, 'Empathy' (consumers perception / preference) might be only as high as 'b' with a tendency to 'c' (most users are confused and even frustrated by the multiplicity of choices they already have). Let's make it 'b-' then.
What is left is 'Timing' (how late / early entrant to the market is the proejct?). Year 2020 would put 'a' out of context but the strong 'b' is a possibility as the tide only starts rising for DeFi.
Result for 'Vision' (Singularity - Volume - Empathy - Timing): c+/a/b-/b
TRUST:
Fourth, T-part of the SVET rating stands for the 'Trust', which aims to reflect the 'amount of trust' both groups (those of contributors and users) invest into a company / project. It's only very natural for humans to measure this 'trust' in various currencies, so do I.
However, it makes it a bit tricky when a project / company in consideration doesn't issue any coins / tokens / shares / other vehicles or it does but information about that is not currently available to me from public or private sources for whatever reason. That is where we stand now with Aleph Zero.
It leaves me with two choices - whether to set all related sub-ratings to 'c' until further clarification received from company's management (my preferred choice) or to enter into the realm of non-substantiated speculations imagining what would have happened if those coins / tokens / shares have been already issued.
At this stage, although I've been notified trough a third party that Aleph Zero is looking for investors, I didn't have a confirmation from a company's representatives yet (which, btw, is totally due to my own oversight of this matter - not theirs).
Still, in this situation, when that type of information about Aleph Zero is unavailable from open sources (which, as a public auditor, I believe shall not happen) it would be more reasonable if I stick to my guns and preliminary assign 'c' to all of Aleph Zero T-rating sub-categories: 'Sustainability' (project's financial longevity); 'Value' (long-term value of an investment vehicle); 'Engagement' (a vehicle's availability); Transactions (a vehicle's liquidity).
To alter T-rating I'm, ideally, looking for what is, sometimes, called a 'Tekenomics Paper', which contains company's econometric models and substantiates its vehicle's present and future values as well as company / project's micro-economic long-term growth (or, at least, stability).
In an absence of such (as, progressively, more DLT companies either delay its token / coin issuance or revert to traditional sources of financing, like VC/PE) an investment memorandum or something of this sort would also be helpful.
Otherwise, as a significant part of my posts and news letters readers are private individuals, which, usually, do not possess enough means and time to do in-depth researches, I'm obliged to take an over-cautious stance on T-rating and continue to hold it on 'c' level although it might not fairly reflect the current situation with a company / project.
[DISCLAIMER: My rating is analytical - not investment one. It must be considered as a company's review statement and is not intended to be an investment advice. Seek a duly licensed professional for that.]
Result for Aleph Zero 'Trust' (Sustainability - Value - Engagement - Transactions): c/c/c/c