Astronaut Capital invests in Quarkchain (QKC)

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Astronaut Capital

8 min readMay 10, 2018

Astronaut has taken exposure to the Quarkchain token sale.

On the 9th of May 2018, Astronaut Capital (ASTRO) released a report stating that they have become an investor in Quarkchain (QKC). View the full report here.

Overview

Quarkchain is a 3rd generation blockchain seeking to solve scalability issues that plague the 1st and 2nd generation blockchains. As of current writing, the throughput of Quarkchain is ~2279 transactions per second (TPS) and is able to achieve a million TPS theoretically.

Quarkchain’s creation encompasses a permission-less architecture without compromising the security and scalability of a blockchain. The team is based in San Francisco and aims to deliver a million TPS within the next few years. They are building a blockchain to support industries that require high transaction demands such as advertising, IOT, P2P sharing, AI and Big Data, with a focus on mobile Apps (DApps2go).

Quarkchain is a 3rd generation blockchain that focuses on solving several issues such as:

1) Security

2) Risk of decentralization created by an increasing amount of mining pools

3) Scalability

4) Issues with running multiple blockchains (interoperability) :

Inefficiencies in current/future TPS enhancement solutions, such as lightning network and off chain solutions
Limitations of sharding technology

Commercial & Technical Strategy

Quarkchain technology includes several features:

Two-layered blockchain to achieve scalability and security

An elastic sharding blockchain layer (shards) to process transactions. The number of shards can be increased easily and is directly proportional to the amount of transactions it can process
A root blockchain (rootchain) only confirms the blocks and does not process transactions

Collaborative mining where hash powers are distributed equally among shards to incentivize weak miners. On the other hand, the rootchain will consume over 50% of all the hash power (this can be dynamically adjusted), to prevent double spending attacks.

Simplifying account management through the usage of ONE account across all addresses in all shards

Cross Chain transactions between Quarkchain and other blockchains (interoperability)

Compatibility with EVM (Ethereum Virtual Machine)

Turing Complete smart contracts

Project Strategy

Quarkchains brief business development plan includes focusing on the market of DApps built on mobile devices (DApps2go) and will provide developer kits for the Android family. The goal is to reduce the time taken for developers to turn their MVPs (minimum viable products) into working products through their build-measure-learn feedback loop.

Quarkchain is targeting 2–5 industries with mentions of Internet of Things (Iot), AI and Big Data. However, Quarkchain intends to focus on technology first before enhancing network adoptability.

Roadmap

The roadmap lays out the technical progress clearly in a detailed manner with goals being set out by the team to include progressive TPS targets. Here, we cite some major developments:

Q2 2018 — Release of Testnet, achieve 10k+ TPS Multi-Threaded
Q3 2018 — Release of QuarkChain Core (enabling most features of QuarkChain such as smart contract, reshard, etc)
Q4 2018 — Release of Mainnet, achieve 100k TPS with GPU optimization cluster
Q2 2019 — Version 2.0 of Mainnet, QuarkChain Core and Wallet released, achieve 1m+ TPS with Cluster v2.0

Token Sale

Quarkchain will conduct two fund raising rounds, a private sale (USD 16m with 25% bonus) and a public sale (USD 4m). Due to the oversubscription of the private sale, the team promises to ensure a smooth and fair ICO process for public sale to accommodate to early community supporters. The token distribution comprises of the following structure with a total supply of 10b tokens:

Tokens for the team, foundation and advisors will be locked up for 2 years. In addition, Lockup is applicable for tokens sold in private sale with 10% released each month for first 4 months and 20% each month for the following 3 months. Tokens will be distributed at the end of each month.

Token Use

Currency — Similar to most currency tokens, QKC will be used to facilitate transactions and act as an exchange medium for digital service or payments. Transaction fees will be minimal, given Quarkchain’s strong throughput ability. It also supports smart contracts that creates value within the community for any services rendered through future Apps.
Contribution Reward — An economic means to reward/motivate the community for continuous contributions to the project
Mining — Miners will earn a reward (QKC) by running minor chains (shards) or super-full node.

Use of Proceeds

There has been no budget or use of proceeds stipulated to date.

Team

The team consists of ~10 employees including professors and academics backed by a strong operations team. The technical capability of the team appears to be significant, boasting a total of 28 published papers and 250+ research contributions to academia with strengths lying in all facets of computer engineering. The depth in business development is also not compromised with most having start-up experience in operations, marketing and developing business partnerships. It is highly likely that the team had worked together before Quarkchain, which further creates synergistic effects. Here are some of the notable team members.

Qi Zhou (Founder) — Specializes in the field of high performance systems with over 15 years of experience. Was a former engineer in Facebook, Google, and Dell EMC. He holds a PhD in Electrical and Computer Engineering and contributed 23 scientific publications to academia.

Xiaoli Ma (Research Scientist) — A full professor and IEEE fellow at Georgia Institute of Technology with over 13 years of experience. She holds a PhD in Electrical Engineering and was involved in 230+ research contributions for academia.

Yaodong Yang (Research Scientist) — Co-Founder of Demo++ Incubator, a professor and PhD advisor at Xi’an Jiaotong University with a focus in blockchain development and research. He has more than 10 years of experience and holds a PhD in Engineering. He made a total of 5 contributions to academia.

Wencen Wu (Research Scientist) — An assistant professor at RPI who specialize in model simulation and verification in distributed autonomous systems. She holds a PhD in Electrical and Computer Engineering and contributed to 27 research items to date.

Zhaoguang Wang (Software Engineer) — Former Facebook, Instagram and Google engineer with 6 years of experience in developing high capacity processing systems. Currently holds a Master’s degree in computer science and engineering.

Advisors

There is a total of six advisors. Some notable advisors include:

Dr. Arun G. Phadke — Distinguished Professor emeritus in Electrical Engineering @ Virginia Tech, Awardee of Benjamin Franklin Medal in 2008

Bill Moore — Partner/ Managing Director @ Walden International, Previously President @ DSSD, Inc, EMC Fellow @ DELL EMC

Dr Zhiyun Qian — Assistant Professor @ University of California, expert in Cyber Security and owns several Patents

Strengths

Quarkchain has launched their Testnet and will be launching their Mainnet in Q4 2018. They are currently ahead of their intended roadmap
An experienced team with most personnel holding a PhD in relevant fields

Its compatibility with EVM is critical in increasing Quarkchain’s network value as DApps could be easily deployed onto their blockchain. An increase in network value would make their token more valuable
There is always a trade-off between decentralization and scalability. Quarkchain fits nicely in the middle by balancing both aspects as compared to other blockchains that are typically skewed
Deal structure is very attractive with a low hard cap of $20m for a project of such scale

Weaknesses

Not all team members have linked-in profiles for social verification
The Github is currently private and will be opened source in three months. The team is currently recruiting testers, which means robustness in their codes that is ready for testnet. Their Github page has also been very active since Jan 2018
The concept of collaborative mining and parallel chains is not full proof. Chains can still be overloaded at times, dampening the equal distribution of hash rate across chains. Being able to create an effective market parity model will be essential
The team are yet to establish major partnerships although several collaborations appear to be underway

Opportunities

High Throughput Blockchains — The need for high throughput blockchains has become inevitable since the CryptoKitties saga. It showcased how congested networks could lead to much higher transaction costs with huge delays in transaction times. The current major blockchains (Bitcoin, Ethereuem, NEO) are still far away from handling the speeds of Visa (~56k tps) or Mastercard (~34k tps). Therefore, there is significant demand for high throughput blockchain projects in this space.
Interoperability — The explosion of ICOs in 2017 have brought about numerous blockchain projects to the market. As these blockchains continue to scale vertically, most are lacking the native connectivity aspect between one and other. Hence, Quarkchain is well positioned to take advantage of this imminent gap utilizing their value of cross chain transactions.

Threats

Strong competition in the high throughput space against projects such as Zilliqa (mainnet launching in Q3 2018) and Fusion (Mainnet in Q2 2018), and within the cross-chain space such as WanChain.

Conclusion

Overall, Astronaut is positive on the project as we find their technology in implementing a blockchain intriguing. Quarkchain exhibits several unique features that differentiates itself from its competitors.

For the reasons listed below, Astronaut has taken conservative exposure to Quarkchain.

A high throughput blockchain that seeks to position itself between decentralization and security, without compromising the network’s scalability and speed
Market opportunity for such projects are required to further lever the development of blockchain technology
Astronaut is confident in the team’s ability as it portrays relevant technical experience from established companies with solid academic backgrounds
Attractive low hard cap of $20m

Astronaut Capital is taking an early-stage view on Quarkchain but believes that the team will be able to execute their roadmap. We are cautious of the 1million TPS claims as current technology is not capable of reaching such speeds, however, a substantial achievement of 50–100k TPS is viable. We are excited regarding the possibilities this project can achieve and will continue to monitor its developments moving forward.

Our exposure to the private sale has been very limited, due to the tight allocation and strong investor demand. Management will continue to work with our strategic partners to further increase fund holdings in Quarkchain.

In light of the preceding, the Astronaut Investment Committee (IC) has agreed to take a conservative level of exposure for the long-term and will seek to increase this over the coming weeks.

End.