[DarpalRating]Wanchain Review: Connect different digital assets, unlock blockchain network value

16 min readMay 3, 2018

WanChain (WAN)

76.7 | B- investment grade
Risk: low
Popularity: high
Potential: medium(five grades: extremely low, low, medium, high, very high)
Website: decred.org

After a thorough evaluation, we have determined that WanChain belongs to the range of B- projects with high popularity and low risk. It meets our requirements for recommendation as a high-quality project. We are therefore now officially recommending WanChain to the following exchanges:

Advantages

Large team with lots of experience in blockchain circles.
Specific operations and computation of cross chain trading are completed in the WanChain network with no need for any modifications to the mechanisms of original blockchains, lowering entry barriers for other blockchains. Micro-innovations in the stamp system are also added measures of privacy protection.
Abundant resources in the industry: WanChain, together with projects of the same kind, such as ICON and AION, form an cross chain alliance in order to mutually complement each other and pool their resources and technologies.

Disadvantages

How many coins are attributed to the team and how the team’s tokens are locked are not mentioned publicly.
Fierce competition in the cross chain field requires excellent technology in order to succeed. The launch of WanChain’s major network, which is now in the early stages of WanChain 1.0, is just a start. In the middle of this year, version 2.0 will integrate with the Ethereum network, followed by the Bitcoin network at the end of this year. Integration with the networks of private blockchains will be completed at the end of 2019.

If any of the following occurs, projects may receive a higher score

WanChain 2.0 and 3.0 complete the goals of their roadmap in June 2018 and at the end of this year respectively.

If the following occur, projects may receive a lower score:

Momentous changes in partnership
Progress is behind schedule and significant bottlenecks appear in the development of core technologies.

Condensed information regarding our evaluation:

Project: a new member in the cross chain competitive field, WanChain is initialized as a financial service provider and is integrating into the cross chain field. Competition in such a field is rather high.

Strategic positioning: Project necessity: 32, Final score: 78

Team: the blockchain team of Lu Xujun, former CTO and co-founder of Factom and CEO of Wanglu Tech, designs WanChain and takes the lead in its development.

Technical team: 37, Operation team: 37, Advisors and investors: 16, final score: 90

Progress: it is now in the stage of WanChain 1.0. mainnet has been launched on schedule and functions are still under development.

Under our evaluations, it is now in the small-scale test stage, score: 50

Community Governance: financing volume is reasonable, but the disclosure of budget remains vague. The token distribution and white paper plan for distribution highly correlate.

Score of financing volume and budget disclosure: 18, Capital supervision: 23, score of appreciation logic: 30, final score: 71

Popularity: it maintains a high degree of attention, holds good interactions on social media, and the number of people in its community and their activities remain positive. Its comprehensive score of popularity is high.

Risk: risk is low in policy, team change and implementation progress, while moderate in competition and high in finance.

Lock-up plan of team position is not mentioned in the open information, so its comprehensive risk score is moderate.

Project (weight: 30% score: 78)

Brief introduction: Serving as the public blockchain for different digital assets and link connections, WanChain aims to be the underlying infrastructure of asset exchange and cross chain trading while creating connectors between different blockchains. According to demand, developers can develop distributed financial applications on WanChain (such as decentralized exchanges, digital assets management, loans, digital asset offerings, derivatives of digital assets and financial applications on the supply chain etc.)

Strategic positioning

Full score: 60 Actual score: 46

The design objectives of WanChain are as follows:

1. Cross chain assets transfer: WanChain connects to current major networks of digital currency (such as Bitcoin, Ethereum, and so on), completing the conversion of assets without changing the mechanism of original blockchains, and connecting to emerging digital currency networks with low cost.

2. Consortium blockchain can connect to WanChain so as to transfer assets from an original blockchain to WanChain and from WanChain back to that original blockchain. In addition, multiple other assets can also be traded on WanChain.

3. WanChain ensures the security of cross chain conversion of assets and the stability of cross chain trading services, and provides privacy protection during transactions.

4. Potential use cases:

To be a distributed platform for conversion of multiple digital currencies;
To provide deposits and loans business for different digital currencies;
To complete transaction of digital assets with digital currency as the intermediary
To issue and trade brand new digital financial assets.

Evaluations:

Competitive field: cross chain + finance

Challenges of WanChain and other similar projects:

How to connect to blockchains of different consensus mechanisms?
How to address the problem that settlement, liquidation, synchronization and even verification time and efficiency are different in different blockchains?

In the overall architecture of WanChain, the upper part refers to different public blockchains and the lower part refers to consortium blockchains and private blockchains etc. See the figure below:

WanChain’s major characteristics are privacy protection + cross chain technology + smart contract, and its biggest characteristic is the low entry barrier for original blockchains. Implementation steps are as follows:

Bidirectional anchor is not adopted in account lock mechanism;
No need to add script extensions on original blockchains for recognition and verification of SPV;
Transaction data are first reconstructed and composed at verification nodes on WanChain and are then uploaded to the node network of original blockchains.

As specific operations and the computation of cross chain trading are completed on the WanChain network, there’s no need to modify the mechanisms of original blockchains.

In conclusion, a new member in cross chain competitive field, WanChain is initialized as a finance service provider and is integrating into the cross chain field, aiming to solve the new challenges facing this young industry.

Innovations

1、In terms of privacy protection, ring signatures and disposable address technology are used in the trading process of anonymous tokens. On top of that, solutions via stamp system are also added.

2、WanChain uses many technologies such as secure multiparty computation, threshold key sharing, and so forth. Cross chain verification nodes are at the core of this cross chain trading.

Verification nodes are classified under 3 types:

Normal verification nodes;
Verification nodes for cross chain trading;
Management nodes for locked accounts;

WanChain mainly relies on scheme innovations involving micro-innovations in technical optimizations.

Competitors of WanChain

Most competitors in the cross chain field are still under development according to the different approaches they take — such as notary mode, side chains, relay-chains, and Hashlock — as well as different characteristics in their implementation approaches. Generally, proposed designs are still concepts from a conservative perspective and are hard to realize. At the current stage it is not appropriate to compare them only by their designs. Development progress and speed over the long-term should be also taken into account.

Reference of this figure: A performance comparison of Pallet and other cross chain projects (Zhongguancun Blockchain Industry Alliance)

Given the above, WanChain receives these scores in the dimension of strategic positioning:

Project necessity

Full score: 40 Actual score: 32

1. Connection with blockchain: Strong

Encryption layer:

Secure multiparty computation technology and threshold key sharing technology
Scheme of lock account creation
Privacy protection mechanism in token trading is based on ring signature and disposable accounts

2. Consensus layer

Consensus mechanism for verification nodes

Verification nodes of three types perform their own functions respectively, separating verification authorities in cross chain trading. Nodes of each type should reach an internal consensus; nodes of one single type cannot forge cross chain transactions even in collusion. The goal of this separation mechanism is to reduce the possibility of corruption or conspiracy as much as possible.

1. Normal verification nodes (Validator)

Informing Storeman to mount operations to lock accounts and complete accounting on WanChain ledger when a unanimous trading certificate is received.

2. Verification nodes for cross chain trading (Voucher)

Voucher should offer certificate for trading between accounts on original blockchain and lock accounts during cross chain transactions.

3. Management nodes for lock account (Storeman)

Storeman should calculate his share of the signature via the key share held by him, and make a complete signature for the lock account when the information is received.

3. Incentive layer

Incentive mechanism for verification nodes
Consensus mechanism for normal nodes

4. Network layer

According to different functions, the cross chain communication protocol of WanChain includes mainly three modules:

Register module
Data transmission module for cross chain trading
Module for trading status query

5. Application layer

Loan of digital currency
Payment and settlement of digital currency
Transaction and conversion of digital currency
Investment and financing of digital currency

To conclude, WanChain has a strong connection with blockchain on encryption layer, consensus layer, incentive layer, network layer and application layer.

Market scale: Large

Demand of cross chain competitive field

Difficult but significant

The Internet Age has progressed from intranet, local area network (interconnecting a small number of computers), to the internet (large-scale interconnection) and mobile internet (display is changed, but underlying logic remains the same). Following one generation’s hard work, information networking is finally achieved; the situation is the same in the domain of blockchain. If the technology allows for it, cross chain trading is endowed with long-term demand in a large theoretical space. With polarization (a great number of speculative tokens fall to zero while high-quality digital assets ascend to the top), the demand for the industry to build a linkage between isolated high-quality digital assets will become more and more prominent.

Without such linkage, the whole industry would be inefficient. Based on independent ecology of different blockchain networks, building bridges among them means a possibility to create interconnected blockchains. This would enrich the system on the basis of independent ecology, creating new industries or business modes. Despite great difficulties and numerous failures, the expectation of people in this industry remains consistent.

2. Sufficient technical content

By nature, cross chain trading at present should first tackle the problem of asset exchange accounting on two consensus ledgers. Since different public blockchains have different technologies, it is rather difficult to realize the interconnection of assets. Unlike trading parties in centralized exchanges (IOU pattern on centralized ledgers), in the transfer process of decentralized digital assets and values, users can hold their own private key and control their assets.

Therefore, the cross chain + public blockchain competitive field that WanChain is in boasts both a large-scale market and significant growth potential.

Demands: Very high

Cross chain assets interconnection: quite necessary

Privacy protection: necessary

WanChain’s privacy protection includes the protection of their original token WAN and the tokens in the contract. It aims to solve the problem of privacy in interactions between WanChain and other public blockchains. It is like a combination of the Ethereum network, ring signature and technical integration of Monero, which replaces a single lock with multiple locks. In the meantime, the disposable address will create a random account on the basis of the original account.

With its project positioning, the core of WanChain is the realization of cross chain trading and circulation of digital assets. Privacy protection is more like icing on the cake rather than a necessity.

In this dimension, we hold that WanChain is “very necessary” with a score of 32.

To sum up, we hold that in the “Project dimension”, Wanchain gets scores as following:

Team (weight: 30% score: 90)

Technology team

Full score: 40 Actual score: 37

The blockchain team of Lu Xujun, former CTO and co-founder of Factom and CEO of Wanglu Tech, designs WanChain and takes the lead in its development

Factom utilizes blockchain technology to reform methods of data management and

recording in commercial society and government. It helps the development of various applications in relation to auditing systems, medical information recording, supply chain management, voting systems, property deeds, applications of the law, financial systems, etc. As of April 2017, Factom has already gathered 4.2 million dollars in their A round of financing, and another 8 million dollars in the additional financing of the same round. Wanglu Tech also completed angel rounds of financing at 10 million dollars in September 2016. Wanglu Tech’s financing was led by River Venture Capital Investment, joined by Wanxiang Group Corporation and Fenbushi Capital.

Its core technical team is comprised of Chinese and American senior engineers who are highly experienced in the development of underlying platforms and blockchains. Notably, there are several team members holding doctorate degree in cryptography who are in charge of the mathematical algorithm and the design and argumentation of the cryptography application. The number of team members is relatively large.

Given the above, the team’s academic strength in cryptography as well as their blockchain development capability, here are our evaluations:

Operation team

Full score: 40 Actual score: 37

WanChain’s director of global investment&BD is Dustin Byington, founder of Stokens Venture Capital and co-founder of a blockchain company called Tendermint (Tendermint is the initiator of the Cosmos project).

Dustin Byington is also the founder of Bitcoin College.

Benn Godenzi, marketing advisor of WanChain, is an expert in sales structure and fundraising. He’s also the strategic partner of projects such as Wepower, ICON and Xtrade, as well as the marketing advisor for Signal Network, AION, and Stack projects.

According to Factom and Wanglu Tech’s experience in the blockchain industry along with the cross chain coalition of WanChain, AION and ICON, it is understood that WanChain boasts abundant resources in this industry. See the figure below:

Our evaluation of the WanChain operation team in this dimension:

Investors(and advisors)

Full score: 20 Actual score: 16

One member of WanChain’s team of advisors is a lifetime member of Bitcoin Foundation and former director of Tsinghua University’s major project ‘Evaluation and Selection of Creative Talents Based on Network (Big Data)’ for the Tenth Five-Year Plan. A Chinese partner of Oracle Education Foundation, one of China’s earliest Bitcoin operators along with Wu Gang and Han Feng, founders of Bixin are also members of WanChain’s team of advisors. See details in the figure below:

According to public information, Wanglu Tech completed A round of financing at 10 million degree in 2016. The investors were River Venture Capital Investment, Wangxiang Group Corporation and Fenbushi Capital. See figure below:

Here are our evaluations on the investors (advisors) of WanChain:

Implementation (weight: 20% score: 85)

The roadmap released on WanChain’s official website is as follows:

According to the roadmap, the WanChain team plans to bring WanChain 1.0 online in January 2018. From WanChain’s official account, we can see released information regarding WanChain 1.0. See figure below:

At present, the wallet is already available for download from WanChain’s official website. If releases on Giuhub count, 6 versions have been released in WanChain’s wallet library.

Given the above, we determine that the project is still in the small-scale test stage.

To sum up its performance in the team dimention:

Community governance (weight: 30%, actual score: 71)

Founding volume and budget disclosure

Full score: 30, actual score: 18

Aggregate token: 210,000,000 WAN

Exchange ratio: 1 WAN=0.34 USD

Sales ratio: 51%

Sales volume: 107,100,000 WAN

Fundraising volume: approximately 36,414,000 USD (about 229,408,200 RMB)

Distribution of token:

Public sales: 51% (107,100,000)

Team: 20% (42,000,000)

Foundation: 19% (39,000,000)

Miners: 10% (21,000,000)

Compared with Aion, a project with similar business goals that raised 35 million dollars in two rounds of fundraising in 2017, WanChain’s financing volume is relatively reasonable, considering the scope of the project.

In terms of budget disclosure, on the eleventh page of the Commercial White Paper, WanChain specifies that 60% of its financing volume will be used for research and development, 10% for community development, 10% for marketing, 10% for infrastructure and 10% for daily operation.

Therefore, we conclude that WanChain’s financing volume is relatively reasonable, but its budget disclosure is vague. Full score: 30, actual score: 18.

Capital supervision and token distribution

Full score: 30, actual score: 23

A foundation is mentioned both on the official website and in the white paper. The existence of a foundation and the proportion of tokens it holds can be spotted right away in the distribution of tokens.

From the Commercial White Paper on the official website, the duties of foundation are divided into:

Raising working capital for the WanChain community
Supporting enterprises, organizations and individuals who join in and promote WanChain’s open source project
Cooperating with professional auditing institutions and regularly declaring the distribution of funds.

The foundation will develop appropriate programs for utilizing funds and make plans for operation and use of capital in order to promote the development of the WanChain community.

Concentration ratio of token holders:

According to the data of token holders on etherscan.io, we can see that addresses holding the lion’s share of Wan hold respectively 20%, 18.52% and 10%. This matches with the description of token distribution in the white paper, which states that the team owns 20%, the foundation owns 19%, and the miners own 10%. Excluding these 3 parts, we obtained a reasonable concentration ratio of 281.4589 by applying HHI to the remaining part (a higher index means a higher concentration ratio, this figure generally fluctuating between 0 and 10000).

In this dimension we believe WanChain’s foundation supervision is effective and that the distribution of tokens highly matches the description in their white paper with a reasonable concentration ratio. Full score: 30, actual score: 23.

Token Appreciation Logic

Full score: 40, actual score: 30

From the token design provided in their white paper, WanCoin is WanChain’s original token. Any intra-chain or cross chain trading will consume a certain amount of WanCoin which at the same time is also used as margin for verification nodes in cross chain trading.

Efficiency of economic incentive mechanism: WanCoin is WanChain’s original token. Any inner-chain or cross chain trading will consume a certain amount of WanCoin which at the same time is also used as a margin for verification nodes in cross chain trading. We therefore conclude that WanCoin’s all-purpose certificate system is clear, direct and efficient.
Connection of project and token: WanChain is a smart contracts platform endowed with privacy protection and cross chain functions. In the iteration of future versions, WanChain will gradually realize cross chain trading on Ethereum and Bitcoin blockchains. Cross chain technology will be an indispensable function of the future blockchain world. Spurring on miners and developers with tokens helps to create a more effective payment method for users of cross chain technology. It boosts the overall efficiency. We therefore conclude that the connection of project and token is strong.
Buy-back mechanism: not mentioned at official website nor in white paper
Additional offerings and token supply plan: not mentioned on the official website nor in the white paper

Given the above, we determine in this dimension WanChain’s token incentive mechanism is effective and that the connection of its project and token is strong. However, buy-back mechanism, additional offerings, and rapid desterilization are not mentioned. Therefore, its score in this dimension is 30.

Independent dimension: risk

As for upgraded projects, we focus on these several aspects while evaluating risks:

According to our evaluations, WanChain faces the following risks:

Policy risk: low

Team change risk: low

According to our research, WanChain’s team has been through a long initial period together. It has plenty of team members with no change occurring. In November 2017, WanChain again beefed up its staff.

Contract fulfilment risk: low

The promotion of research and development, as well as the construction of overseas communities, we found to be stable. No extension of key nodes occurs. Information of cooperation fulfillment and weekly reports are regularly finished on official channels.

Competition risk: medium

WanChain, together with AION and ICON, form an cross chain coalition in order to mutually complement each other and pool their resources and technologies. However, such technology in this competitive field is rather hard to realize. If strong rivals such as Polkadot and Cosmos were to see dramatic breakthroughs, the success of WanChain could be jeopardized.

Financial risk: high

Token distribution matches with stated plans, but the lock position plan of the team is not mentioned in any open information.

We therefore determine that WanChain’s possesses midlevel risk in this independent dimension.

Independent dimension: popularity

When evaluating WanChain’s popularity, we mainly looked at its official social media, such as the activity of its Telegram group and Slack group. At the same time, we also took into account the number of followers it has on Twitter and Facebook.

Up to 18:00 on April 2nd

1. Facebook

17886 followers, 15838 likes, 36 tweets in March, 280 likes in total (140 on average), 30 reposts in total (15 on average), 38 comments (19 on average).

2. Twitter

938,000 followers, 11 tweets in March, 466 messages in total (42.36 on average), 1337 reposts in total (121.55 on average), 3953 likes in total (359.36 on average).