IOTA’s Qubic | The Rise of Incredible Interoperability
Get ready for IOTA to change a whole lot of things in blockchain and modern finance. This is a speculative post on research I conducted and I am not a member of the IOTA Foundation.
These are screenshots of what the founders of IOTA have to say about Q.
Sergey Ivanchelo (Come-from-Beyond)
Sergey Ivanchelo(aka CfB) founded NXT, one of the first proof-of-stake blockchains. From CfB’s statements above we can come to some conclusions:
1. Q is not about hardware (ternary processor, JINN) or AI.
2. Q has to deals with the introduction of IOTA to the existing financial infrastructure. After all of the IOTA infrastructure is set in place (JINN ternary processors and an IOTA related AI), “it will make no sense to go into fiat”.
3. Q is not related to a Bosch announcement.
4. Q will make IOTA moon further than BCash. Meaning IOTA will move 5x its current market value. (When moon?)
Leading the IOTA Foundation, a German non-profit organization, dedicated to push human progress forward and the man with a plan. Well there are several plans:
IOTA should not be considered an alternative coin (altcoin) to existing cryptocurrencies such as Bitcoin, rather it is an extension of the growing Blockchain ecosystem. It’s meant to work in synergy with these other platforms to form cohesion and symbiotic relationships. IOTA is designed to provide one solution that no other crypto does: efficient, secure, lightweight, real time micro-transactions without fees.
Given that IOTA is primarily meant to act as the transactive token without ‘heavier features’ such as Turing complete smart contracts, it’s designed such that it can communicate to these other blockchains. This means it can trigger smart contracts such as smart property via acting as an oracle for platforms like Ethereum or Rootstock . On top of this it can provide additional securities for these platforms via checkpointing the transactions in these networks.
Published November 17, 2015
This is one of the earliest posts about IOTA that I found. It introduces IOTA to the world and David’s vision for the project. IOTA can be seen as an extension to the distributed ledger space to enhance it. There aren’t any maximalists at IOTA and they want to coexist with Bitcoin using Rootstock and Ethereum for their smart contract functionality. The gif above was from that same post as well.
Enter IOTA eXtension Interface (IXI)
From the image above we can see “Modul Q”. Which is meant to extend the Tangle’s functionality. In the same blog post written by David you can see the stages of development for each module. But we learned more information about Q through this post.
5. Q is an IOTA eXtension Interface module.
Something really interesting was the development stage of IOTA’s Oracles.
IOTA has been working on oracles for about a year now and there hasn’t been a release about oracles yet. A lot of speculation about Q deals with Qubic, which sounds a lot like IOTA on it’s own, or JINN ternary processors but nothing oracle related. If oracles have been developed for a year and they were in an “Advanced development” stage a year ago, then these oracles must be of incredible importance.
6. Q is one of THE biggest things to come to the IOTA project.
Dominik Schiener (Dom)
Dom has been starting companies since 2012 and has been in the blockchain space for a while. He actually tried to develop a fiat ←→ cryptocurrency exchange in Switzerland but it did not come to fruition. I am sure Dom learned various lessons from his failures and used them to found IOTA and the IOTA Foundation. Dom wrote a blog post where the following elements were presented:
Of the IXI modules released, we have seen Flash Channels and Masked Authenticated Messaging be released. The IOTA Foundation is working on Permanodes, which is a node that retains all of the Tangle’s transactions without snapshots trimming down the ledger, but the Oracle is more advanced in development from David’s post stated earlier.
Our approach to Oracles will make it possible to directly form oracles on top of IOTA. This is unlike anything that’s currently being used in this space. With our Oracle platform we not only aim at connecting the physical world with IOTA; but we also want to enable true interoperability with all other Blockchain platforms.
Published May 21, 2017
Interoperability is key.
We are not maximalists and believe in the future of purpose-specific technologies. Because of that, we are working actively on interoperability with existing Blockchain technologies and communities. Right now the main focus is on EVM-based Blockchains (Ethereum, RSK, Qtum) and Hyperledger. With the release of our new Oracle platform we envision true interoperability with many more projects in this space.
Published May 21, 2017
IOTA working with other blockchains to possibly integrate cross-chain smart contracts? What does an oracle do anyway? Where is the progress with these integrations?
Well we can see that the Rootstock, a smart-contract platform that incorporates a Turing Complete Virtual Machine to Bitcoin, integration has already been made because they wouldn’t have announced a demo at all. IOTA never demoed the Rootstock smart contract. I also found this article by Mark Norton on how someone from IOTA going by the name of Nick Ward stating the following:
We are even working together with Rootstock on demonstrating some of this interoperability between the ledgers. For payments however you cannot beat no fees and no scaling limit, which is what IOTA as a transactional settlement layer brings *on ledger*.
I was not able to find much on Nick Ward and his relationship to the IOTA Foundation. Take that last quote with a grain of salt, but it follows the timeline.
If they did I never found it or it was a community developer that created such integration that I was not able to find.
CfB’s bio shows what he’s developed to fix in the crypto industry.
- Proof-of-Stake = NXT
- Miners dictatorship = IOTA
- Smart contracts = Q? or (Q + AI + JINN)?
I strongly believe that Q deals with the interoperability of other blockchains and financial infrastructure.
Module Q: The Oraqle
Now if Q is such an oracle that can create interoperability with blockchains and their smart contracts, what else is this oracle capable of?
To have banking interoperability IOTA will need the expertise of people that know the banking infrastructure and with high credibility.
These two individuals are key to the development of Q and they are both IOTA Foundation members. Oliver Bussmann has a big background in finance:
- Senior Technology Executive with 25+years of influential leadership in different industries (High Tech and Financial Service) with UBS, SAP, Allianz, Deutsche Bank, and IBM.
- Thought Leader in FinTech, Blockchain, Enterprise Mobility, and Cloud Computing. A pioneer in spotting trends and employing business-building social media strategies from the CXO role.
All of that experience in financial services comes with a great amount of influence. He also had the following to say in an interview
Blockchain does enable new services that you couldn’t do before. We are moving into a future with IoT and machine-to-machine communication. If you go to a gas station in the future your car will have an electronic wallet and make the payment automatically. The integration of financial services in other industries will become possible in the connected world. When you look a mobility-as-a-service not only traditional players but the non-industry specific players will try and define financial services. We are really at the beginning of a significant market infrastructure change. I am not talking about incremental new functionality.
We will see business models change dramatically. This poses major challenges for banks. They find it tough to break out of traditional thinking in their own industries to work with peers and nonbanks and figure out what is the win-win. The other issue is that now in a connected world of sensors banks have to start working in a real-time environment.
For IOTA to work with banks, the banks will have to change their entire business model. Why would they do that? Easy, because of PSD2.
IOTA’s AMA on Reddit January 7th
IOTA held an Ask Me Anything (AMA) on r/Iota to answer the community’s questions. The most important notes here:
Smart contract storage was asked and John Licciardello, IOTA Ecosystem Fund Manager, replied “I don’t think I’m allowed to answer this one? lol David?” This could be for two reasons:
- John doesn’t think he is qualified enough to answer the question asking David to answer in that regard.
- John knows where the smart contracts will be stored (the Oraqle) but doesn’t know if he should disclose that information and asks David if he can answer the question.
Banking disruption and central banking relations. Dominik answered that IOTA will not be disrupting banking but helping create a new form of banking. Oliver Bussmann agreed with Dom and stated the importance of banks and central banks in existing and upcoming financial ecosystems. Oliver argues that fiat payment processing needs to end because it is not as efficient as digital currency realtime connected processing.
We are in touch with a few central banks and entities in the state sector which are interested in exploring how Distributed Ledgers can be integrated into the preexisting infrastructure and push forth a digital paradigmshift. We are not at liberty to disclose which or at what stage these dialogs are yet.
The IOTA Foundation is not a consultancy, so our dialogs surround utilizing the live IOTA network yes. Of course, for all sorts of reasons a central bank issued DLT need some unique properties, so there’s still a lot of open questions.
This part might be the craziest of all in my opinion. The things happening behind the curtains to make sure the media doesn’t find out about IOTA’s deals and relations is crazy. I am sure the IOTA Foundation inner circle knows what is going on and must have meetings in Faraday Cages working with a lot of inspiration. This makes me confident that the IOTA Foundation are literally preventing as much FOMO as possible to truly execute on technology and not just pump their token.
The Oraqle can provide all of the interoperability to not just work with blockchains but with banks as well.
Banks play a crucial role in the IOTA Ecosystem, especially in the short and mid term. For one, banks are there to provide liquidity, and act as an entry and exit point between the current legacy system (i.e. Fiat currencies), and IOTA.
In 2018 we will be working more closely with Banks, not just industrial companies. Mostly on new use cases (think PSD2, and how IOTA can enable new business models there), but also specifically on products that we can develop together with them. Central banks are obviously the most strategic partners that we at the IOTA Foundation could think of :)
Bringing together practitioners, developers, hobbyists and enthusiasts building IOTA applications into all aspects of the economy including the for-profit, not-for-profit, academic, and governmental sectors, the IOTA Ecosystem will be ground-zero for permissionless, distributed and decentralized technology striving to build a more inclusive, resilient and prosperous world.
John Licciardello on the IOTA Ecosystem.
The IOTA Ecosystem was announced recently and it’s website will be launched in March. The IOTA Ecosystem will bring together banks, businesses, and developers. By everyone working together we can have a rise of more businesses using IOTA as a currency. This ecosystem will incentivize more developments for the IOTA community and you will eventually use your IOTA instead of HODLing it. Banks can provide liquidity for the fiat ←→ IOTA exchange which will reduce the IOTA volatility in the mid term. IOTA is currently tied to Bitcoin, so if Bitcoin value falls, IOTA value falls. 2018 is the year of the decoupling. Of course all of this interoperability will be from the Oraqle and it’s integration with the IOTA Ecosystem.
How is it possible to base a payments system on such a volatile currency?
Alon Elmaliah: “The volatility is certainly an obstacle to adoption of the currency, and that’s a challenge that faces all digital currencies today. The foundation is therefore talking to banks about creating a tool that will facilitate quick conversion of fiat currencies, such as euros or dollars, to IOTA.”
Dom: “One thing I can say is that I cannot say what we are doing. Traditionally, the Libertarians and Bitcoin people like to say Fuck banks. But the thing is, Banks play a crucial role in adoption of this [digital assets]. They are a gateway for the future. Traditional currencies to cryptocurrencies. We will enable this. They are crucial bridges. The development of IOTA is becoming more stable. Banks play a crucial role. Every time you make a transaction you have to transfer into IOTA. When a machine receives IOTA they can sell it immediately.”
Alon Elmaliah is one of IOTA’s core developers and is in the know. Alon and Dom’s quotes show how the banks and IOTA will work together to make digital payments seamless.
The Swedish e-Crown
The Swedish Central Bank, Riksbank, started accepting proposals for the creation of their native digital currency. A variety of organizations submitted their proposals and the IOTA Foundation submitted this proposal. From the proposal you can see the differences the native currency will have but some key notes of the proposal are:
The research and implementations made by the IOTA foundation on technique around the Tangle serves as a platform, or ecosystem, from which further expansion of connectivity and integration to other technological development, digital and physical, are enabled, offering the Riksbank great flexibility to add further features in the future.
The IOTA foundation is at the forefront of technological development and works with large for-profit and non-profit organizations. Currently, they are in talks with other central banks about development of central bank issued digital currencies.
Great infrastructure is being built behind the scenes and it will revolutionize the distributed ledger technology space. Module Q will be a part of the ecosystem to promote connectivity and collaboration between several organizations and talented individuals.
Mark Sulavka is also the former Chairman and CEO of the National Stock Exchange, a SEC-registered stock exchange and self-regulatory organization (“SRO”) & was Co-founder and CTO of MatchPoint Trading an equity portfolio base call market matching system with a unique lease cost matching algorithm that was acquired by the New York Stock Exchange(NYSE).
National Stock Exchange (NSX) was actually acquired by the New York Stock Exchange (NYSE) and renamed to be NYSE National to be opened for trading with the NYSE Pillar platform.
Mr. Sulavka is also the CEO of NYSE National. What this means is that there will be IOTA Foundation members working with established trading infrastructure. This is a way that IOTA can be included in not only cryptocurrency exchanges, but actual established exchanges.
David also wrote this when we welcomed Mark Sulavka to the IOTA Foundation:
Mark is currently leading the growth pivotal Iota eXtension Interface (IXI) Hub module development. This IXI Hub module will make exchange interfacing friction-less and ‘plug and play’ for exchanges, which will open the IOTA ecosystem to the entire global market of cryptocurrency enthusiasts. Mark will play a crucial role and be a key enabler in bridging IOTA with the established financial institutions and regulatory ecosystems.
PSD2 is a directive to increase the competition for payment processors. PSD2 enforces banks to have an open API for a merchant to be able to access a user’s account and conduct a transaction. For example, lets say a user purchases an item from Amazon. Amazon can now have access to the user’s bank account, verify the user has the required funds to make that transaction, and then conduct the transaction with the bank directly.
The payment processors now have another hurdle to deal with and banks were generating revenue by being part of the Visa or Mastercard network to provide liquidity. Now merchants have the ability to access user bank accounts and process payments themselves. This means that payment processors and banks will lose some revenue. In order for banks to survive, they’ll have to change up their business model.
New Possible Banking Business Models
- Pay per API access, since the bank will need to figure out a way to monetize their data and transaction functionality it makes sense to charge these businesses for API usage with IOTA microtransactions.
- PSD2 is a directive that will be enforced in Europe but banks will also need to find a way to use IOTA with non-European countries. IOTA Ecosystem liquidity, exchange your IOTA for fiat at a premium. This will definitely require a ton of KYC and AML regulations.
- Banks need to realize that they are the gatekeepers to the IOTA and fiat conversion and create efficient services of such exchange.
Founder’s Response to Blog Post
David and CfB have read the blog post about this Q theory and have responded the following things.
We can see that David is very careful with his words, because he should be, when talking about speculative information. David is very humble and works his ass off like the rest of the IOTA Foundation does. I believe all he does is work, sleep, workout and has fun by listening to music while he works. He will respond to the community if anyone has any questions and is able to if he can spare some time.
From CfB’s trolling attitude he referenced the following meme:
Which can mean that he likes the blog post about this theory. However, there is more. David replied:
Q is bigger
On the IOTA Norge Facebook group.
Now we impatiently wait for QQQQQQQQQQQQQQQQQQQQQQQQ.
This blog post has grown the curiosity of fellow community members to do their own research and speculate based on this theory. I will write another post with those community members that want to contribute to deeper research. However, Q is expected to be released soon since Q1 2018 is about to be over.
Prerequisites to a Series of Fortunate Events
To have behind the scene developments be released there must be a series of events to reach production mode in 2018.
- Trinity wallet
- IOTA Ecosystem
- Decentralizing Coordinator
Post Qubic Announcement
So Q was revealed to be Qubic, and it turned out to be more than just oracles. Qubic provides outsourced computations, oracles, and smart contracts. What does this all mean?
The problem with oracles is the very thing blockchain sought out to remove, trust. How can you trust that this data is true? We can see several examples where people change data for their own benefit. For instance, when Coin Market Cap removed all the Korean prices from their averages making it seem like the cryptocurrency market was crashing. Even when interesting tokens that have a high chance to appreciate in value but aren’t even listed in their charts (Pundi X). I use Coin Market Cap because I’m sure you all can relate.
Data is king. If you control the truth, you control a lot of influence. With Qubic we will gather nodes of information for the truth, decentralizing truth. I won’t get to the specifics of how oracles in Qubic work but I suggest to read this article.
The oracle problem is something several blockchains with smart contracts are facing. IOTA seeks out to create a decentralized oracle machine to make smart contracts smart.
Disclaimer: I myself own IOTA tokens and I am looking to buy more after going through this deep dive of research that took countless hours.
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