Chronobank Project Potential

If you read my previous article you know I was waiting for the technical and economic Chronobank whitepaper publishing. It was added to the Chronobank home page on the 25th of November, exactly as the team announced.

It took some time to carefully read the whitepaper and understand the project functioning scheme. After reading the above document I had several important questions preventing me from the clear and holistic project picture imagining. I had a conversation in slack with the project team members including co-founders who were glad to answer all the questions I had in a friendly and open manner. I have to admit I was impressed with the level of transparency and professionalism of the team. However, it also took some time taking into account the team is actively working on the project now.

My current Chronobank project knowledge level enables me to analyze the project potential, its advantages and associated risks.

Market and competitors

First of all I would like to stress there will be several project stages. I will describe the system before LabourX launch. This is very important because LabourX will add many new elements and features.

The key product Chronobank offers is the Labour Hour Token (LHT), a stable crypto currency backed by the real labour hours. In a wide context all existing crypto currencies that are fighting for the largest market share and positioning themselves as a universal payment means are LHT competitors including Bitcoin. The total approximate market capitalization is USD 14 bln and is rapidly growing (from USD 4 bln in September, 2015). It’s worth mentioning the Bitcoin share is quite big and ranges from 80 to 90% in 2016. The lowest market cap from the top ten crypto currencies is about USD 30 mln for the time of writing this text.

However, at the initial stage the Chronobank system will compete with a smaller number of players. Several projects exist that can be considered the nearest LHT competitors because of their nature and characteristics. I will write about some of them only, this list is not complete.

Tether. USD and some other fiat currencies backed crypto token. Some call such tokens ‘IOU-tokens’ because of their debt nature (IOU term came from the traditional economy, its abbreviation means ‘I owe you’). The company that supports Tether claims all the tokens existing at the market are backed by the real fiat assets stored at some bank(s). I did not find any contact information on the company site (no company name, no telephone, no physical or legal address). The same I can say about the bank names where Tether assets are stored. I’m sure Tether business partners know how to contact Tether directly but this information is not public. However, the Tether tokens are successfully traded at some exchanges and are relatively popular. The Tether market cap for the time of writing is about USD 7 mln. The system is fully centralized and depends heavily on the service operator. Concerning stability, USD as a fiat currency has a certain inflation rate.

Digix. Gold-backed Ethereum token. The real gold bars are stored in a secure storage. The team and its contacts are public. The system offers two types of tokens — DGX and DGD. The former represents the gold-backed token, while the latter gives an ability to its owner to receive the system profits part. The stability of the system depends on the operator’s reliability. Centralized. The gold price is not stable and varies greatly depending on the macro economic factors. Still, the gold is considered as a good value storage instrument. The DGX tokens are not traded on the markets yet so I can’t say anything about the DGX market cap.

MakerDAO. The project is under development. An attempt to create a stable and reliable crypto currency. Has also a debt nature. The system participants can lock some real asset in a smart contract creating the new DAI tokens. So we have a truly decentralized system where all the tokens issued are backed by all the system participants. The system will use complex math algorithms to maintain the price stability.

Decentralized. Market cap unknown because the product is not ready.

The Core Project Features

Chronobank is about creating a new stable crypto currency (or IOU token, as you like). Yes, it will deal with labour power, workers, hirers, ect. but the main product it will give to the market is a stable and reliable crypto currency (before LabourX launch).

The Chronobank stable currency token is called LH (Labour Hour) or LHT (Labour Hour Token). What makes it so stable? Briefly, the fact LHT are backed by the real labour power. The companies that have big amount of labour power need cheap money often. Such companies are called labour offering companies (LOC). For example, it can be a labour hire agency. Chronobank can give money to LOC in exchange for the obligation to provide the corresponding amount of labour hours. LHT in other words is a LOC obligation to provide a certain amount of labour hours.

The average labour hour price is stable and inflation-resistant. LHT as the labour power backed currency should have the similar characteristics. The above LHT properties make them unique and demanded resource. Crypto market needs stable currencies. Some LHT use scenarios are discussed in this article, for example.

This way we have a mutually beneficial cooperation. One side (LOC) receives financing and another side (crypto market) receives a stable and reliable currency.

Competitive Advantages

Idea. The idea is great and revolutionary. The project functioning scheme is well thought and is viable. The major participating sides gain additional advantages comparing to the current situation.

Market. The product (LHT) market exists and is growing. The LHT market capitalization during the first year can be estimated as about AUD 40 mln, in case of the faster growing rates it can reach AUD 120 mln (according to the team). There will be enough LHT to satisfy the demand from the start. The demand will exist, and it should be much more than USD 7 mln of Tether total capitalization. After DGX tokens appear on the market I can give a better estimation. There will be another market for LHT except crypto because of LHT debit cards existence. Many workers will receive their payments in LHT to their debit cards and will be able to spend them. So LHT has a chance to enter the top ten crypto tokens by capitalization soon.

LHT will be the only currency that is backed by the real labour power. It will also have two important characteristics at the same time: stability and inflation resistance. The system will be centralized. But the more LOC will participate in the system the more reliable it will be (more decentralization). It is still better than any other existing real asset-backed currency. Yes, there will be a market maker and controlling entity but most of its functions will be transparent and automated. Even more reliability can be reached after LH tokens implementation at different blockchains: Ethereum, Waves, NEM, ETC.

Team. The team is professional, its members have good reputation in their fields. I can confirm the team members I had conversation with are open and passionate people with a strong belief in a project success.

Escrow. The escrow agents are well-known reputable people.

Legal. In Australia (the starting jurisdiction for Chronobank) it is legal to pay salaries in BTC or another tokens. The ICO terms and conditions are published. There will be legal entities supporting Chronobank activities in Australia and Singapore from the start. The project has a legal team. Co-founders have a wide experience of doing a large scale business in Australia.

Team members LH tokens. It is a good tradition to ‘lock’ the ICO tokens owned by the project team members. It helps to avoid any significant price drops at the initial stages. Chronobank supports this tradition. I was informed that the team members won’t be able to sell their tokens during a certain period of time.

Risks

Business model failure. It is possible the product will not be demanded by the market. However I estimate the risk as low because a stable crypto currency will definitely find its customers. There are risks associated with the new stable crypto currencies appearance. From another point of view, the more stable currencies, the better. A trader or investor will be able to diversify his portfolio with a bigger number of instruments. On a growing market there will be enough space for all stable currencies I suppose.

More detailed specific risks associated with the system functioning structure are covered in the whitepaper. I don’t list them because they can’t be understood without the whitepaper reading.

Bad development quality. The development quality depends heavily on the developers team experience and skills. The team is good enough to successfully accomplish the tasks.

Dishonest team behavior. As far as I can see reputation is very important for the project team. I estimate this risk as extremely low. The escrow mechanism provides additional security.

Legal and regulation. The starting jurisdiction is Australia. I don’t expect any legal problems implementing the project model in Australia taking into account the team experience. However, entering new markets and regions is always a challenge, especially when it comes to crypto. We can’t exclude any crypto unfriendly laws that may appear in future.

When the project reaches a certain large turnover and come to the global arena the whole governments can take their actions to interrupt the further project growth. Governments won’t like losing their hidden ‘inflation tax’ through the wide new currency use. Sometimes a low local currency popularity can harm the national security from the authorities point of view.

But the progress is unstoppable and countries that are crypto friendly will get the huge benefits and additional economic growth comparing the crypto-hostile jurisdictions.

Centralization. Chronobank has several structural levels. The highest level is CBE — The Chronobank Entity which acts as a market maker and a controlling part responsible for the system stability. This is the center of the system and in this sense the system is centralized. The lower level consists of many LOC (Labour Offering Companies)— their number can grow with time. The more LOC participate in the system, the more stable the system is. In this sense the system is decentralized. There are risks of bad CBE controlling abilities and LOC failure risks.

The further system development steps will add more decentralization up to a fully decentralized model including LabourX.

Competitors hostile actions. Companies currently working on the labour hiring market may not like the new and more effective actors as Chronobank is expected to be.

Final conclusions

The revolutionary Chronobank plan to change the crypto and labour industries is very ambitious and promising. The team did a great work designing a new system that can satisfy many different sides interests and change the existing economic relationships. The amount of work ahead is enormous but the tasks to be solved are extremely interesting and challenging.

Please remember this post is written about the initial project stage before LabourX launch. After LabourX whitepaper is published it will be possible to know and understand it better.