The MITation game — Q&A with Enigma

Tuesday, August 29, 2017

Interview with the team behind Enigma about building a community, token sale best practices and how to deal with the aftermath of a security breach.

Intro

Who? : Enigma (https://www.enigma.co/)

What? : Decentralized data marketplace (Enigma) and platform to create cryptocurrency trading strategies (Enigma Catalyst)

Where?: https://token.enigma.co/

When? : September 11th 2017

Why interview? (Official reason): Because at TokenData.io we’re as obsessed with data and analytics as the Enigma team, and because the team has been transparent about how it handled a security breach.

Why interview? (Unofficial reason): Because all members of TokenData applied for MIT but were denied admission…

Part 1: The full Enigma download

Q: What are Enigma and Enigma Catalyst?

A: Enigma is building a decentralized, open, secure data marketplace using ENG, our native token. Right now the long tail of data is not being effectively captured by major data aggregators. Meanwhile other data is being hoarded and exploited by large corporations. We want to change how data is shared, aggregated and monetized in a way that maximizes collaboration.

Catalyst is Enigma’s first product built on top of this marketplace. Catalyst matches financial data consumers (quantitative traders and investors) who want to create smarter crypto investment strategies with financial data curators who license their data to the Catalyst community. The platform also provides backtesting and research tools for traders to create strategies, greatly reducing the typical time and expense of strategy creation.

Q: Rumors are that Enigma is run by a group of MIT wunderkinds who could make Will Hunting’s math look like a 5-year old’s table-scratch. Can you shed some light on the history of your team?

A: Our team has all studied at MIT. We are entrepreneurs with years of experience in the fields of finance, data science, technology, trading, and FinTech. Our co-founders are Guy Zyskind and Can Kisagun, who met at MIT.

Our advisors include Prof. Sandy Pentland of the MIT Media Lab, Justin Lent of Quantopian, Bill Barhydt of Abra, and many others with decades of experience in relevant fields. We believe our team and advisors are one of the strongest aspects of our project and will allow us to achieve our vision for the future of data.

This is what we imagine Enigma’s brainstorming sessions to look like

Q: There are at least 15,061 PhD students writing their dissertations on blockchain projects and analyzing the footnotes of Satoshi’s original whitepaper. How did Enigma evolve from an academic research project at MIT to its current form?

A: A decentralized data marketplace was one of the first things proposed in our whitepaper in 2015. The ethos of the MIT Media Lab is Deploy or Die” — meaning we are not content to keep our interest purely academic. Getting working products into the hands of our community has always been our goal. As the space has evolved, the time is finally right for products like Catalyst and Enigma to thrive.

Part 2: If you build it, they will come

“We believe creating adoption around a usable product is the right approach, and one that is often overlooked in the crypto space.”

Q: Catalyst is designed to be the application layer on top of the Enigma decentralized database protocol. Are you planning to launch Catalyst before Enigma’s database protocol is ready? If so, how do you foresee a transition as the underlying protocol gets ready to launch.

A: Yes. We believe creating adoption around a usable product is the right approach, and one that is often overlooked in the crypto space. The first iteration of Catalyst would include a centralized data marketplace for crypto data, where we will host our own data sets, as well as those contributed by members of the community, in return for ENG bounties. The transition to the data marketplace protocol would be gradual.

At first, we will release a client that allows data curators to host their data sets on their own servers, but data subscription would still be done centrally through our servers. Later on, after a sufficient period of testing, we will bootstrap the decentralized data marketplace protocol with all the existing data-sets to date, at which point, Enigma would become just another node in the network.

Only American sports fans and movie buffs will get this picture as an analog to the story

Part 3: The comps

Q: According to our dataset, there are a number of projects out there who are launching token sales to fund either a decentralized database and/or algorithmic cryptocurrency trading platforms. What differentiates Enigma?

A: The Enigma team has been researching the idea of a data marketplace for several years now, with the original Enigma whitepaper being one of the most downloaded and cited papers in the blockchain space. Very few of the current projects (if any) that work around decentralized computation and storage have worked through the required technical hurdles. In that sense, our team is well suited to address that challenge. In terms of an algorithmic cryptocurrency trading platform, our alpha has already seen thousands of sign ups in the few weeks since its launch. Our biggest strength may be the growth in our community. As a platform, we rely on having an engaged community to succeed and grow. With 9000+ users already in our Slack channel, we’re confident in our strong momentum.

Q: How does Enigma Catalyst compare to Numerai, another high-profile blockchain platform which incentivizes cryptocurrency investors to develop and implement algorithmic cryptocurrency trading strategies. Is there room for both projects and tokens?

A: The main difference is that Numerai is a fund, while we are a platform. Numerai uses predictions from the community to make their own investments. We give community the tools to allow our users make their investments and hence capture their own upside. Also, the long-term vision of Enigma is much broader than that of Numerai.

Part 4: Token Sale Best Practices

On the token sale front, we like what 0x and Civic did — ensuring access to the community, as well as a large distribution of tokens.”

Q: Your token sale is planned for Sep 11. Can you describe the team’s vesting rights and how you plan to get a wide distribution of token holders.

A: The team’s ENG tokens vest over multiple years, with all of the team committed to holding their tokens through the first year. Since we are a platform that depends on its users to be successful, we are committed to a broad crowd sale with a focus on our core community. We also have a significant portion of our created ENG tokens allocated to our community through incentives.

Q: You recently announced and started the Catalyst Contests in which people can test strategies and earn ENG tokens. Can you tell us more about some of the results you’ve seen so far and the feedback from early users?

A: Catalyst Contests are our newest creation, with our first content currently running right now, so it’s a bit early to remark on results. The best strategies are eligible to win ENG tokens for beating the crypto markets. So far our early users have been essential in helping us refine the Catalyst product and make more accessible to our community. We’re working closely with professional quants to ensure we’re building a powerful product that is still usable by anyone.

Q: What are cryptocurrency projects/ICOs/token sales that Enigma looks at as a good example for running a project and token sale?

A: On the token sale front, we like what 0x and Civic did — ensuring access to the community, as well as a large distribution of tokens. We believe communities are what wins the game. On the project side, we like Ethereum and Filecoin — both have done a tremendous job in popularizing complicated tech and making it accessible for developers.

Q: What is your view on the recent SEC ruling, and if/how it affects your project and more specifically, the ENG token and the statement that “Catalyst allows anyone to build their own crypto hedge fund.”

A: According to the legal advice from our excellent lawyers, ENG is a utility token and it does not constitute a security. We have complied and intend to comply with all guidance from regulatory bodies. For more information refer to our lawyer Marco Santori’s tweets on utility tokens.

Part 5: Phishing Attack Aftermath

“First and foremost, always educate your community.”

Q: Last Sunday, there was a security breach of the Enigma website and Slack channel that resulted in a phishing attack and fake pre-sale announcement. How long did it take the team to notice that something was wrong, and what were your first actions?

A: The Slack community first brought the attack to our attention almost immediately. Our first action was to take the website down and change all passwords to any critical systems. That is likely what mitigated most of the attack, as at that point people in the community were aware that this was a phishing attempt. All e-mails were sent from a fake account that didn’t belong to the company. Our community was instrumental in handling Slack and warning people of the phishing attack, and we are grateful for their help in containing the impact.

Q: What actions and security measures have you taken in response to the hack?

A: Enigma announced that it has taken responsibility and will restore funds to everyone that lost money in this recent scam attempt after the token sale concludes. We are deeply sorry for the pain experienced by those who lost funds to the scam attempt, and we want to make sure that no one in our community that was a victim to this well-coordinated phishing attack is financially hurt. We’re very thankful that our community has stood by us and continues to support our project.

Here are the announced measures we’ve taken:

  1. Strong, different, random passwords for each account — whether held by an employee or official communication channels for the company
  2. 2FA for all such accounts
  3. Weekly password rotation, and daily rotation in the week leading to the token sale
  4. Proper access control management and compartmentalization

We are taking additional security steps that we are not making public at this time. We’re also working with law enforcement, exchanges, token sale companies, and our community to continue to pursue the lost funds and the scammers. We hope to have more announcements on this matter soon.

Q: Given the amount of token sales that are slated to take place after yours, how can other token sales learn from your mistakes and what would you recommend them to do?

A: First and foremost, always educate your community. We made multiple announcements prior to the scam attempt that no money should be sent to anyone for any reason prior to our crowdsale date, and we provided guidance for identifying phishing attempts. Token sales should take every security precaution from day 1, including those we mentioned here, and you should ask that your community do the same. We’re currently working with other token sales, both previous and upcoming, to establish clear best practices and share our learnings.

— — — —

Special thanks to Tor Bair from the Enigma team for co-ordinating the interview. Any comments & questions are welcome at info@tokendata.io.

DISCLAIMER: The interview with Enigma is not sponsored content and TokenData.io is not getting compensated by the Enigma team in any form whatsoever. This interview is for informational purposes only and does not constitute any solicitation or endorsement of investment. Any token purchases you make are at your own risk and discretion. The contents of this interview are the property of TokenData.io — All rights reserved.

The Crypto Startup with No ICO

Wednesday, August 23, 2017

Why blockchain startup Balance chooses to raise $1M through equity crowdfunding instead of tenfold in an ICO

Last week, the TokenData.io team was sent an e-mail to list the ICO for a personal finance application called Balance. When we visited the site, we found out that their “ICO” was wordplay for a ‘traditional’ equity crowdfunding campaign. Always appreciative of puns and slight sarcasm, we did some further research and found out that Balance was founded by cryptogeek-meets-kitesurfer-meets-British-bloke Richard Burton. This led us to DM him one simple message: “You’re a crypto die-hard, and in a world in which every single crypto related startup seeks funding through an ICO, why not you?”

Why no ICO?!?

What followed was a much longer discussion which we’ve transcribed below:

Q: What is your background in cryptocurrencies?
A: Three years ago I was jogging around San Francisco listening to podcasts about Bitcoin and I heard Vitalik talk about Ethereum. It sounded meaningfully different to all of the other alt-coins that had forked Bitcoin and I remembered the name of the project. Later that week, I spoke to a fellow kitesurfer Bill Tai and he told me to look into Ethereum. Then a few days later Gavin Wood, the CTO of Ethereum, walked into our dingy hacker house and talked about building a global super computer. My mind was primed for the ideas he was sharing and, I asked him if I could help our by designing things for the team. He introduced me to Vitalik and we worked together in England for about a month on some concepts for a distributed app store and an Ethereum browser. These ideas were used to help Gavin pitch Ethereum to people before the sale.

The cradle of token life

Q: Ok, enough about the early days of Ethereum, you make us feel manically depressed for not participating in the token sale despite our buddies telling us about it. Tell us more about Balance and how it’s related to cryptocurrencies and the blockchain sector.

A: Our first product, Balance, is a MacOS menubar app that connects to banks and shows your personal finances. Balance began as a side project a couple of years ago while I was interviewing for jobs in the FinTech industry. I showed an early version to my friends Christian and Ben and we spent the next year building out the app and we launched it in February 2017. As ETH went up 100x, we ended up doing some design work for the Filecoin team and Juan Benet told us about a future where protocols ran everything. We started to realise that Balance could become a company that builds products not only for ‘traditional’ financial institutions and fiat money, but could also serve as a bridge to digital currencies.

Our second product, Balance Open, connects to digital currency exchanges through their APIs. Our plan is to just have one version of Balance that works with all of the world’s currencies, digital currencies and blockchain tokens. We want people to be able to see all of their traditional and digital assets side by side. One single interface for both banking and blockchain data. One place for all balances.

The Balance team

Q: Time for the money question: In an era of tokens and ICOs, and as someone who’s been involved in two significant token sales, what made you choose a traditional equity crowdfunding campaign instead of potentially raising multiples of that in an ICO?!?

A: Our team has worked and participated in the best and the biggest ICOs: Ethereum and Filecoin. Ethereum raised around $17 million and delivered a multi billion dollar protocol. I think that speaks to the power of a network-based project. Balance is not building a protocol, we are building a product.

Moreover, the huge sums of capital that are flowing into the average ICO are actually damaging to a young company. It shields the team from the market. The reason we are only raising a million dollars is because we have a lot to prove. If Balance fails to find product-market fit, we deserve to go out of business, we deserve to die, because we still need to make something people want.

I wish more of the people doing ICOs realized that you cannot defy gravity forever. If a sh*tcoin protocol raise goes well but you never ship useful software, you will fail. You will be forgotten. If you steal that money and disappear to another jurisdiction, you will be noted. You will be digitally hunted by a well financed group of crypto-sherriffs who see it as their duty to police this space. It is already happening. There is a huge cost to being dishonest in the crypto community and there is a huge benefit to being trustworthy.

Q: Do you see a place for a token sale later in your company’s life? In other words, what’s your view on ICOs as post-seed startup funding?

A: I am paying close attention to teams who are putting equity/shares on the blockchain. The fancy wording for this is the “securitization” of tokens. For example: the company behind the Lykke exchange issued equity tokens.

We would love to issue “BAL” tokens for Balance that represented shares in the company, but only when we have a underlying business that warrants a larger fundraise and when the regulatory environment is more clear than it is right now. It would effectively be a mini-IPO and fall squarely within the remit of the Securities and Exchange Commission. There are so many benefits and risks to this approach. On the positive side, we could easily remunerate team members and outside contributors with shares in the company. The risk is that lots of sh&tty companies start issuing equity tokens and regular investors get scammed.

Q: What are your thoughts and concerns about the current crypto landscape?

A: There are two kinds of people flooding into this space: Creators and extractors. The creators are the engineers, designers, cryptographers, academics, marketers and operations people. They want to help build the open financial system. I love all of them. The extractors are the scammers, skimmers, liars, idiots, and greedy people. They want to enrich themselves and steal money from others.

I find that meetups and conferences are emotional rollercoasters of wonder and disgust. You meet the most inspiring minds in the world who are trying to solve the major issues in the chain space. Then the next person will be some scum-of-the-earth scam artist just crawling through to sell their sh*tty coin. What I want people in the space to understand is this: there is a huge difference between holding a few cryptographic keys and actually making something people want. Just because you are rich does not mean that you are good.

Another area that I find most infuriating is the lack of great execution and design. So many cryptographers and early engineers completely dismiss the user interface as an easy part of the process — it is not.

If blockchain protocols are going to have any real world value, we need them to be easy for people and companies to actually use them. The products are just as important as the protocols. Great products take a lot of time and energy to get right. When the people pumping these sh*tty ICOs talk about “throwing together an iPhone app” I know they haven’t got a clue about product design. 99% of iPhone apps are relegated to the back of the phone and are never used. If you think your darling little uncapped ICO with a sh*tload of hype is going to be front and center for people in their daily lives, you are wrong.

Blockchains are built on digital trust and great people. I wish there were more trustworthy people in the space. The ICO world has a lot of capital, cryptography and hype. What it lacks is a lot of great execution, design, integrity and genuinely useful software. That is what worries me.