DFINITY Fundamental Analysis

Authored by Aaron Berghuber& Ben Erickson

DISCLAIMER

The information in this document and the links provided are for general information only and should not be taken as constituting professional advice from authors. The authors are not a financial advisors. You should consider seeking independent legal, financial, taxation or other advice to check how the document information relates to your unique circumstances. The authors are not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information provided directly or indirectly, by the use of this document.

PROJECT DESCRIPTION

DFINITY is a third generation virtual blockchain network that sets out to function as an “intelligent decentralised cloud,”¹ strongly focused on delivering a viable corporate cloud solution. The DFINITY project is overseen, supported and promoted by DFINITY Stiftung, a not-for-profit foundation based in Zug, Switzerland.

The DFINITY cloud has two core applications:

  1. Enabling the re-engineering of business:
    DFINITY ambitiously aims to facilitate the re-engineering of mass-market services (such as Web Search, Ridesharing Services, Messaging Services, Social Media, Supply Chain, etc) into open source businesses that leverage autonomous software and decentralised governance systems to operate and update themselves more efficiently.
  2. Enable the re-engineering of enterprise IT systems to reduce costs:
    DFINITY seeks to re-engineer enterprise IT systems to take advantage of the unique properties that blockchain computer networks provide.

At present, computation on blockchain-based computer networks is far more expensive than traditional, centralised solutions (Amazon Web Services, Microsoft Azure, Google Cloud Platform, etc). Despite increasing computational cost, DFINITY intends to lower net costs “by 90% or more” through reducing the human capital cost associated with sustaining and supporting these services.

Whilst conceptually similar to Ethereum, DFINITY employs original and new cryptography methods and protocols (crypto:3) at the network level, in concert with AI and network-fuelled systemic governance (Blockchain Nervous System — BNS) to facilitate Corporate adoption.

DFINITY recognises that different users value different properties² and sees itself as more of a fully-compatible extension of the Ethereum ecosystem rather than a competitor of the Ethereum network.

DFINITY is currently in Stage 1 of a release schedule consisting of three clients software releases: Copper, Zinc and Tungsten. “A beta network created using the Copper Release client software is expected towards the end of Q1 2018. The expectation is that the Copper network will launch end Q2 2018.”³

In the future, DFINITY hopes that much of their “new crypto might be used within the Ethereum network and are also working hard on shared technology components.”

As the DFINITY project develops over time, the DFINITY Stiftung foundation intends to steadily increase the BNS’ decision-making responsibilities over time, eventually resulting in the dissolution of its own involvement entirely, once the BNS is sufficiently sophisticated.⁴

VALUE PROPOSITION

Corporate adoption of decentralised cloud computing is currently inhibited by factors such as (but not necessarily limited to): network speed and scalability limitations and incompatibility with ‘ungoverned’ decentralised ecosystems.

In a bid to facilitate Corporate adoption, DFINITY employs its distinguished ‘crypto:3’ protocol to address speed and capacity limitations, whilst leveraging it’s unique algorithmic governance system (BNS) to render the system more mass market friendly.

It’s apparent that much of DFINITY’s success will be predicated on the success of it’s crypto:3 protocol and BNS innovations.

Below are just a few of the ‘surface-level’ benefits proposed by the system:

Unlimited, Scalable Compute Capacity 
Most decentralised platforms (Ethereum included) are currently limited by fixed scaling capacities. With DFINITY, when a new client (miner) joins the decentralised network, the overall compute capacity scales up. DFINITY operate on the assumption that the network must contain a million or more mining computers, and that together these will be required to provide a massive virtual compute capacity (i.e. scale out).

AI and Network-fuelled Governance 
Bitcoin and Ethereum ecosystems employ a “code is law” paradigm, which means there is no governance regulating the platform use or underlying network itself and is suitable for non-business peer-to-peer transactions. The “AI is law” paradigm that combines crowd wisdom and AI technology to create a highly governed environment to stamp out actors that wish to harm the interests of those using the platform, creating ‘The intelligent decentralised cloud’. This is proposed to be better than the “code is law” paradigm for businesses that require highly governed environments. An example would be using governance to stop illegal activities operating on the same infrastructure as public companies. These companies require a certain level of assurance that the “AI is law” approach can provide.

Automated, Opaque Protocol and Software Upgrades
The BNS is capable of accessing “special op codes” in the virtual machine allowing it to freeze, unfreeze and modify otherwise independent software objects (smart contracts). The BNS is also capable of transparently upgrading the client software run by users without impact. This is a huge step forward, removing a lot of the human capital required for patching and maintaining software.

Cost Reduction for Businesses and Enterprise IT Systems
The BNS provides an efficient, automated form of governance paving the way for ‘open-source businesses’ to participate in offering mass-market services in an extremely cost-effective way. For example, a decentralised open-source ride-sharing application could launch on DFINITY pairing riders and drivers. With the assistance of automated governance, the cost of operating the service is dramatically reduced, resulting in substantially reduced fees for riders, and higher profits for drivers. Over time, the BHS seamlessly institutes network-favouring upgrades and improvements whilst filtering out bad actors.

Similarly, human capital is responsible for the vast majority of costs associated with Enterprise IT Systems support and maintenance. Whilst incurring an increase in computational cost, the BNS significantly reduces (if not eliminates) the majority of human capital cost, leading to a far cheaper delivery of service, whilst also delivering the benefits of decentralised architecture.

Interoperability
On Ethereum, businesses creating Private Chains are completely isolated, rendering them incapable of interacting with the Ethereum public chain and other private chains. With DFINITY, businesses can integrate their private chain with other private chains and public blockchain services allowing systems to effectively build on other systems without compromising their security, whilst significantly reducing the cost of implementing functionality.

TEAM

The DFINITY project features a large, diverse and experienced team. Notable team members include:

Dominic Williams (Chief Scientist)

Dominic Williams is a well-respected crypto theoretician who has hosted millions of users in an MMO game using his own distributed systems. He has invented most of the technology deployed by Dfinity. I recommend listening to his interview with Arthur Falls below to see what this man is all about.

LinkedIn: https://www.linkedin.com/in/thedwilliams/

Twitter: https://twitter.com/dominic_w 
Medium: https://medium.com/@dominic_w

Timo Hanke (Head of Engineering)

Timo was previously a Professor of Mathematics and Cryptography at Aachen University in Germany. In 2013, he created AsicBoost to reduce the gate count on Bitcoin mining chips and increase the efficiency of Bitcoin mining by 20–30% that has since become a standard in large-scale mining operations.

LinkedIn: https://www.linkedin.com/in/timo-hanke-62079775/

Twitter: https://twitter.com/timothanke

GitHub: https://github.com/bcpki

Ben Lynn (Senior Staff Scientist and Engineer)

A prolific publisher, Ben Lynn is the “L” from the “BLS” cryptography applied by ‘Threshold Relay’. He completed a PhD under Dan Boneh at Stanford and has 10 years in senior engineering roles at Google.

LinkedIn: https://www.linkedin.com/in/benjamin-lynn-51832a8/

Blog: http://benlynn.blogspot.com.au

GitHub: https://github.com/blynn

Arthur Falls (Director of Communications)

Arthur Falls implemented ConsenSys’ content marketing strategy and is widely known for his podcasts The Ether Review and The Third Web.

Twitter: https://twitter.com/ArthurFalls

LinkedIn: https://www.linkedin.com/in/arthur-falls-29274a55/

Full team: https://dfinity.org/team

COMPETITORS

DFINITY is primarily targeting the business enterprise space to deliver cloud solutions. The largest players providing cloud compute are Microsoft (Azure), Amazon (AWS) and Google (Google Cloud Platform). The Gartner Magic Quadrant for Cloud IaaS below shows the rest of the players in this space. As you look at these companies, you instantly recognise their brand and could name their services you utilise at work. You will understand how ingrained they are in the delivery of your core business.

These are some of the largest companies globally and if you work in IT, you will know how challenging it can be to adopt new systems; risk, strategy, governance, migrate data, infrastructure, testing, downtime procedures, change management, support etc. Think about how difficult it was for your company to move to cloud infrastructure. Now DFINITY’s challenge is to convince enterprises to leave behind their new, shiny, stable cloud infrastructure for bleeding edge technology.

To compound this challenge, incumbents such as Microsoft are already developing in blockchain space, with a view to compatibility through their Coco framework.

ROADMAP AND PROGRESS

DFINITY currently have a release schedule which includes the first three client software releases on their roadmap: Copper, Zinc and Tungsten.

“A beta network created using the Copper Release client software is expected towards the end of Q1 2018. The expectation is that the Copper network will launch end Q2 2018.”

The Copper release predominantly focuses on the institution of Threshold Relay which produces a deterministic source of randomness that is almost incorruptible, totally unmanipulable and unpredictable. For more information on the Threshold Relay, view the DFINITY Technical White Paper.

It should be noted that the Copper release does not set out to implement all of the core technical features as laid out in their white paper. Without straying too deeply into the technical layer, some of the core functionality and scalability components (Atomic Calls, Validation Towers, Validation Trees and Microshards) are not introduced until Zinc or Tungsten releases which do not currently have release dates set.

Whilst DFINITY is somewhat lacking with regards to a clear, public roadmap for future development, it is perhaps a symptom of developing unchartered territory with bleeding edge technology.

A sneak peak of the DFINITY testnet operating with 500 nodes can be viewed via the link below.

DFINITY Testnet (500 nodes — Oct 2017): https://youtu.be/aOzxxeOYJpY

WEB PRESENCE & COMMUNITY

At time of writing:

Website: https://dfinity.org
GitHub: https://github.com/dfinity

Reddit — 4,320 subscribers: https://www.reddit.com/r/dfinity/ 
Twitter — 19,700 followers: https://twitter.com/dfinity

YouTube — 700 subscribers: https://goo.gl/5zBmPN 
Telegram — 24,729 members: https://t.me/dfinity 
Medium (Blog) — 2,700 followers: https://medium.com/dfinity 
Rocket Chat: https://dfinity.rocket.chat/home

STRENGTHS & WEAKNESSES

STRENGTHS:

  1. Incredibly strong team that has created the base technology being deployed in DFINITY.
  2. Using the Ethereum Virtual Machine (EVM), DFINITY is fully compatible with the Ethereum blockchain and supports Solidity written applications.
  3. The compute power of the DFINITY network scales out with each new client or miner (limitlessly) making it ideal for enterprise solutions.
  4. Through the BNS, the technology can be updated seamlessly in the background without user interference or downtime inconvenience (no tedious visible hard fork processes).
  5. The DFINITY network allows for Interoperability between private and public and private and private blockchains, making it easier to adopt, deploy and share functionality.
  6. They have raised $61M in private funding to date (without an ICO).
  7. They have a ‘No Zero Sum’ view of technology and will be looking to maintain compatibility and even fund Ethereum projects.
  8. DFINITY uses strong, unique randomness selectors (Random Beacon/Threshold Relay) in concert with BLS (a threshold signature algorithm) to create “unpredictable, deterministic randomness on demand.” Decentralised systems that rely on ‘weak randomness selectors’ have a far higher likelihood of being attacked and broken.

WEAKNESSES:

  1. The Platform could still fail, this team is surveying uncharted territory with bleeding edge technology, anything can happen and they are yet to publish the beta of their first software release.
  2. The foundation intends for the BNS to eventually inherit full governance of the system. If the AI and/or network influencing the governance framework makes poor decisions, this could be detrimental to faith in the network and the state of the network itself.
  3. Incredibly complicated documents, blogs and interviews makes this technology difficult to understand and inaccessible to most.
  4. Low amount of capital raised to build out a project of this size and compete with incumbents. Additional capital will be required.

CONCLUSION

DFINITY is an extremely ambitious project with an outstanding team that are focused on solving a multi-billion dollar problem of decentralised global cloud compute. They have made fantastic progress in a short period of time and have received a lot of attention. We must remember that this project is in its infancy and they are literally creating new technology that has not existed before and wish to scale globally, all while solving some of the largest challenges that blockchain technology faces.

Touted as “Ethereum’s crazy sister”, this is definitely a project that you should keep a close eye on as they progress development, given they have true purpose and utilisation of blockchain technology. This may just be the project that brings blockchain technology to the masses and changes the world.

ADDITIONAL RESOURCES

¹ DFINITY in a Nutshell: https://medium.com/dfinity/dfinity-in-a-nutshell-a-non-technical-introduction-ec45ec5967c1

² YouTube: A Brief Tour of DFINITY: https://youtu.be/DP8X-NuG4z0

³ DFINITY FAQ: https://dfinity.org/faq

⁴ DFINITY Foundation Website: https://dfinity.org/foundation

DFINITY Website:

https://dfinity.org/

DFINITY in a Nutshell: A Non-Technical Introduction:

https://medium.com/dfinity/dfinity-in-a-nutshell-a-non-technical-introduction-ec45ec5967c1

A Brief Tour Of DFINITY:
If you consider 2hrs and 19minutes to be “brief.”

https://youtu.be/DP8X-NuG4z0

Arthur Falls Interviews Dominic Williams on his Podcast — ‘The Third Web:’

A highly technical but great listen as they walk through the Dfinity whitepaper. https://www.thirdweb.net/news/2018/1/23/the-third-web-4-dfinity-consensus

GitHub Commits:
https://github.com/dfinity

Funding Explanation and an ICO (Second Round Funding) May or May Not Happen: https://medium.com/dfinity/announcing-dfinity-fundraising-plans-and-a-massive-welcome-to-polychain-capital-and-andreessen-2ceb34769cd3

DFINITY Raises $61m for Blockchain-based Cloud:

https://hugethinking.com/post/dfinity-raises-61-million-for-blockchain-based-cloud/

Inside Dfinity — The Core Team’s View on DFINITY:

https://youtu.be/8qk-mRdRowU

DFINITY Testnet, October 2017 (500 nodes):

https://youtu.be/aOzxxeOYJpY