COTI AMA with Wolf Crypto
We held an AMA with COTI in our public Telegram channel on November 12th.
COTI is the world’s first blockchain protocol optimized for decentralized payments, designed for use by merchants, governments, decentralized payment networks and stable coin issuers. The COTI DAG-based Trustchain protocol is the next evolution in blockchain, a viable blockchain 3.0 solution that will be fit for specialized use cases with a vision of digitising money and improving the technology that powers it.
COTI successfully raised $15M USD in May 2018 and is expected to start a further $15M USD raise in the next month. You can check out the COTI Trustchain whitepaper and COTI Pay whitepaper by following the links above.
You can also visit the COTI Telegram channel or COTI website for further details.
Here’s what COTI CEO Shahaf Bar-Geffen and COTI CTO Dr. Nir Haloani had to say in the AMA.*
*This AMA has been edited for clarity.
WC (Wolf Crypto Telegram Member)
Welcome to another edition of Wolf Crypto AMA, this time with COTI!
Hello to Shahaf and Nir. Shahaf is the CEO of COTI and Nir is the CTO. Thanks for taking the time to speak to us today.
SBG
Hi everyone, it is a pleasure to be here and thank you for inviting us.
NH
Hello everyone and thanks for having us.
TEAM & TEAM GOALS
WC
Thanks Shahaf, can you please give us a little background on yourself and how you came to be involved in crypto and COTI?
SBG
I have been an entrepreneur for the past 15 years and co-founded 5 companies — one of which was WEB3, a leading digital marketing company. Since my tenure there from 2006, it grew from a two-person start-up to a multinational business operating in 15 countries around the world. In my previous career, I was also an officer ranked Air Force Major.
I decided to make the jump to COTI when I was approached to take the helm as CEO, not long after COTI’s founding and after I had been serving as an advisory board member and investor for some time.
WC
Hi Nir, can we ask the same question? What is your background, when did you get involved in COTI and what attracted you to the project?
NH
I have over 19 years of experience leading research and development teams at a number of tech companies and was the former co-founder and CTO of Infima Technologies, which was later acquired by IBM. I was the head of research in IBM RTC and as part of my experience I have a PhD in Applied Mathematics and have authored over 13 patents in the areas of data compression, AI, and machine learning.
I was attracted to COTI mostly because of the technological challenges and as it takes a holistic approach to solving the fundamental problems in today’s payments landscape.
Personally, I was an early adopter of Bitcoin. I maintained small mining networks for experimental purposes a few years ago, and was looking for the right opportunity to join a company which can take the challenges faced by the traditional cryptocurrencies and make the transaction of deploying a solution which can be of use and adapted by the mainstream.
WC
Can you please give us a brief rundown on COTI and what the big picture vision is for the project?
SBG
COTI is the world’s first blockchain protocol optimized for decentralized payments, designed for use by merchants, governments, decentralized payment networks and stable coin issuers. Our DAG-based Trustchain protocol is the next evolution in blockchain, a truly viable blockchain 3.0 solution that will be particularly fit for specialized use cases.
Our vision is to digitize money and to improve the technology behind it. We see a future in which money is completely digitized and unbound with the limitations money has today.
WC
COTI has some impressive advisors on the team, Greg Kidd from Ripple Labs, Dr Matt McBrady from BlackRock, Steven Heilbron from Investec Bank, Avi Chesed from Processing.com and Stas Oskin from Wings, among others. What attracted them to the project and what is the extent of their involvement?
SBG
Our technology, regulatory standards and existing partnerships are some of the standouts at COTI that have attracted our existing advisory team. We have taken upon ourselves a challenge with great magnitude, and that attracts leaders and entrepreneurs.
The role of COTI’s advisors is to help us realise the company’s vision using their experience and network. They are very involved, as we don’t take any advisors just for their names.
WC
Ian Bailina recently named COTI as one of his top ICO picks. What is your involvement with Ian and how is he supporting the project?
SBG
We recently had the opportunity to connect with Ian at his Blockchain Pitch competition at the Crypto World Tour in Tel Aviv. Following two challenging rounds at the competition, we landed a first place win. We have kept in touch and his team and him have been deeply investigating what we do and what we have accomplished. I hope that he’ll find what we do promising enough to be put on his list.
THE COTI PLATFORM
WC
Can you give us your elevator pitch on COTI? Why another blockchain based payment solution?
SBG
We are not a payment solution (an app). We are a blockchain that is optimized for payments. We are the first and only at that.
Payment apps are built on an unsuitable blockchain and we believe that is one of the reasons they don’t get adopted.
Scalability and transaction costs are a major issue for current blockchain when it comes to payments, but there are more issues like privacy (how to not expose your shopping history), anonymity (won’t work for AML), charge-backs, pegging to value — and more. we solve all of that.
WC
COTI’s objectives seem to have changed over time. Originally you were a payment DApp and token based on Ethereum, why did you change the project scope and build a DAG instead?
SBG
A while back we were trying to build a payment dApp on Ethereum and felt the pain of scaling it and gas costs. We have learnt how unrealistic it is using Ethereum and other platform solutions for payments.
We decided to focus on the platform and technological protocol as that will add the greatest value to the crypto sphere. It is also the most realistic segway for cryptocurrencies to be adopted by the masses, as well as enterprises, governments, merchants and more.
WC
How does the COTI DAG differ to other DAGs?
NH
Just to name some of the differences:
Proof of Trust (PoT) consensus — Each transaction in the COTI Cluster receives a Trust Score equal to the sending account’s Trust Score. A transaction’s Trust Score is used to define the unvalidated transactions (sources) which will be validated and referenced by the transaction, as well as the amount of PoT that should be performed prior to transaction attachment.
The second thing is the ability to monitor network behavior — In the COTI network, Trust Scores are a universal concept that is applicable not only to users, but also to Nodes. Node Trust Scores are computed in a similar way to users, but with different parameters matrix. The primary set of parameters consists of transaction generation frequency, transaction propagation flow, confirmation frequency and other load parameters. The more work a Node does for the COTI network, the greater its Trust Score will be.
Another difference is the introduction of Double Spending Prevention Nodes (DSP Nodes) — which are a set of highly trusted distributed servers responsible for DSP Consensus, account balance control and general protocol and data integrity. Each transaction has to be approved and signed by the majority of the DSP nodes to be considered fully confirmed.
One additional difference is the introduction of MultiDAG in which COTI won’t bounded to one instance of DAG. The same infrastructure of nodes permits the creation of multiple DAGs for different originators and purposes. There can be voucher tokens, stablecoins of varying nature or even scalability tokens to speed up settlements in other blockchains.
And another important aspect is supporting Smart contracts over DAG: COTI is introducing on-chain smart contracts for the DAG, which is a first of its kind. Unlike most other high-performance projects, where smart contracts are executed off-chain using specialized servers or nodes in quasi-decentralized manner, COTI smart contracts are executed on-chain and are decentralized.
WC
You claim 10K TPS on your AlphaNet. Has this been verified? What TPS do you expect once MainNet is released?
NH
10K TPS has being verified and benchmark internally using synthetic transactions and loads simulations we have executed on our AlphaNet environment (This tests can be replicated by any users). It is also important to note that the benchmark we have generated verify the findings of our simulation performed prior to our AlphaNet release.
We believe that following our MainNet release as more user will join the network it will result in improved network scalability. In other words, there is a positive correlation between the number of network users and the rate at which transactions are confirmed. So as our solution expands and adopted the rate of transaction per second will also increase significantly.
WC
You claim instant or almost instant transactions. How instant is instant?
NH
Instant is ~1–3 secs but it depends on the Trust Score of the transaction. Higher Trust Score transaction are instant but low Trust Score transaction will require more time and won’t be approved immediately.
Basically, the way that it works is that low Trust Score transactions require more PoT (Proof of Trust — more work) for approval as well as getting more consensus from the network about the transaction while high Trust Score transactions will require less work and can be approved instantly.
WC
Why introduce a stablecoin into the platform? What purpose does it serve?
SBG
When you ask real world merchants and consumers what deters them from paying with crypto, then volatility is the #1 issue.
#2 is buyer-seller protection and #3 is complexity.
When you consider payments on mass scale, it is clear that merchants won’t accept a coin that can decrease in value and consumers won’t pay with a coin that may appreciate in value. It also keeps the enterprises and big merchants out as they don’t want to add risk to their business. It was clear that a price stable coin is needed.
Also, while investigating stable coins, we realised that they have similar needs to those of payment coins. They are both transactable coins and hence can’t be served with a token that was meant to do decentralized computing like ETH or EOS.
WC
A big point of difference with COTI and other payment projects is the buyer seller protection. How does the arbitration system work? And how will users be rewarded for being a mediator? Will they need to stake COTI to do so?
NH
They are handling but in their case this is a very expensive and inefficient process which is centeralized and does not have any incentive to anyone other than the banks.
So although the initial process of the arbitration in COTI solution is quite similar to any currently available online dispute management system in which the consumer and merchant have a timeframe for trying to resolve the dispute between themselves without moving forward to an arbitration voting. The process include uploading any supporting documents or information which is interacted and presented, first to merchant and later on in the process also to arbitrators.
In COTI, arbitrators rule disputes in order to collect arbitration fees. They are incentivised to rule honestly because after a dispute is over, arbitrators whose vote is not coherent with the majority will lose the significant part of the arbitration fees that will be given to the coherent arbitrators. After the COTI Arbitration System has reached a decision on the dispute, tokens are unfrozen and redistributed among arbitrators, and the stake itself is returned to all participants.
The arbitration fee that arbitrators gets from a dispute vote depends on the stake in COTI coins made by the arbitrator on the particular case. To participate in the arbitration process it is required that arbitrators have a sufficient amount of COTI locked per their stake and released once the dispute decision has been made. The fee arbitrators receive is dependent on the case type, the stage of the dispute resolution, and the arbitrator’s stake.
WC
How do wallet to wallet transactions actually work? Is this like Tap and Go on debit or credit cards?
NH
It basically depends on the type of transaction but in all cases the flow is straightforward:
- In user to user transactions — the only requirement is to know the recipient address.
- In user to merchant transactions — the transaction is similar to “Buy Now” type of payments currently available for example in PayPal which goes through the merchant website and only require login and confirmation from the consumer side.
SBG
There also various technologies we test to make things faster in case there is proximity between wallets. other than the obvious QR code, there’s also ultra-sonic verification that is interesting.
WC
COTI now has a “whitelabel” solution that allows devs to issue tokens on COTI’s platform. How will COTI go about getting developer to build on COTI? And what is their incentive?
SBG
We are actively approaching both enterprises on one end and actively working developers from the blockchain community on the other end. We try to showcase the advantages of working with us. Aside of working on a better suited platform, node operators are incentivised as they can collect fees. That creates a monetary incentive.
Enterprises also love this as they can create their own economy where they set the rules, and not the banks or card issuers.
WC
How will merchants be on-boarded to the platform? Will they have a POS device?
NH
Onboarding of merchants will require a KYC process as well as questionnaire being filled which will define the initial Trust Score of the merchant in COTI network as well as enable the merchant to generate his wallet and seed. The integration itself will require a code being implemented on the merchant website — similar to PayPal “buy now” button.
Some of our plans and partnership will also include integration to point-of-sale devices and offer it as part of our solution in certain countries.
COMPETITORS
WC
What projects in the space do you consider as competitors and what differentiates COTI from them?
SBG
COTI’s specialization grants it a unique position in the market as the first blockchain optimized for payments and stable coins. Other infrastructure projects, all valued over $1B, are not focused on solving one problem well and end up being unsuitable for most needs.
Payment apps and stable coins are not a competitor to COTI as they operate at a lower tier in the value chain and can become clients of COTI. Current incumbents that operate in the financial sector are Ripple and Stellar.
Stellar and Ripple are looking to create an environment of near instantaneous transfers to help serve the global unbanked population. However, their tech stack is based on previous generation blockchain that is challenging in terms of scale and costs. COTI is unrivaled in terms of scalability, processing tens of thousands of transactions per second (TPS) on account of its DAG-based Trustchain consensus protocol.
COTI’s data structure allows for the incentivization of node operators for their contribution to the network, while Ripple is centralized by nature (and criticized for it) and Stellar’s node operators have no incentives to run nodes. This approach creates a risk of centralization and lack of distribution.
Beyond this key difference COTI also ensures price stability mechanisms to bypass digital currency volatility, which is uncommon to many other payment networks. Stability remains a key barrier to the widespread adoption of digital payment methods. Price-stable coins are crypto-assets that maintain a stable value against a target price. While some stablecoin projects have added stability to the system, many others have compromised on decentralization and security and all lack the technological foundation for real world use.
COTI also stands out in terms of its decentralized buyer-seller protection system, which protects all entities against errors, fraud and counterparty abuse. A decentralised and distributed group of independent juries stake their own coins to resolve disputes by analyzing real world information pertaining to the transaction in question and cast votes on a mediated outcome.
This type of resource is currently unavailable to cryptocurrencies and decentralized payment networks. Privacy is also a standout for COTI, meaning that transactions cannot be tracked back to a specific user, as a multi-address is implemented for each transaction.
Sorry for the long replay about Ripple (and Stellar) — we get asked about it a lot.
WC
How about competing with existing traditional payment platform? How do you intend to exist in a world that involves PayPal, Visa and MasterCard?
SBG
While traditional payment systems and networks own the market now, they are faced with the innovator’s dilemma. They can’t create the solution that will mean their demise. We saw history repeats itself again and again, like Kodak and digital photography. Down the line, the service that they provide can be replaced with blockchain and so I believe it is a matter of time and market adoption. 50 years from now we won’t have their rails, for sure.
TOKEN UTILITY
WC
You spoke about your stable coin COTI Dime earlier. What is the difference between COTI coin and COTI Dime?
SBG
COTI coin is the utility coin that pays fees and arbitration, used across the system. COTI Dime is a price stable coin that we have issued as an off the shelf solution for merchants that want all the advantages that comes with our system but don’t want to issue their own coin.
WC
So if COTI coin is used for fees, what fees are expected on the platform? I thought the idea of COTI was to reduce fees?
NH
The COTI network uses a transparent and equitable fee model. All fees are collected by Full Nodes. The COTI network receives a portion of fees collected by Full Nodes to support infrastructural technology such as the DSP Nodes and Trust Score nodes. When the network is first created, a portion of all generated COTI’s will be set aside as a Reserve Fund to pay for all transactions until the network matures. Therefore, the network fee will be set to be very minimal during the network’s adoption phase.
Following this period, the fees will be minor due to the decentralised nature of the network. Each node charges a fee that is in part determined by the node itself. Some nodes may set a higher fee if they believe they provide a good service and other nodes may charge less or possibly nothing.
The price charged by a node for its services should be equitable, publicly available and compliant with common network rules that will define a ceiling for fees, but there will be no minimum fee.
WC
So I can earn COTI coins by running a node? What hardware do I need for a node, do I have to stake COTI and what rewards will I receive for running a node?
NH
There are basically two models of nodes payouts:
1. Full Nodes are free to define their own price list and have obligations to transfer defined network fee to the network pool. This model works because of the distributed nature of the network: one node can’t grab all users because it would lead to overloading and performance degradation, so the users will be spread between nodes and fees also will be distributed — resulting a very competitive and low fee environment.
2. The model for DSP and Trust Score nodes is different. The revenue of a node should cover standard node expenses and provide reasonable interest income for the stake required to node creation. The amount of stake and the interest rate are not yet defined.
Regarding the the hardware requirement — it will be defined upon the release of our TestNet (end of December).
WC
How does staking coins for merchants work? How will the effect the overall supply of COTI coins?
NH
Merchants do not stake coin in COTI platform but rather required to maintain a rolling reserve for dispute resolution. The rolling reserve is a share of a merchant’s transactions that is temporarily set aside to cover potential business risks, such as when a merchant loses an arbitration dispute and must compensate the consumer.
Rolling reserve funds are denominated in COTI coins and automatically accumulate in the merchant’s account for a defined term. So in the sense of supply it means that a certain percent of all turnover in the COTI ecosystem is locked and cannot be released from circulation.
WC
Just to clarify this point. It’s not a stake per say, but it still locks tokens up from the overall supply?
NH
Yes, this is correct.
ROADMAP, BETA & FUTURE GROWTH
WC
COTI seems to be a bit different to regular ICO’s in the sense you’ve already raised a significant amount of funds and built a decent amount of tech. What would you consider your biggest achievement to date?
SBG
Yes, we have played a different game than most ICOs and have tiered our fundraising according to our accomplishments. We didn’t want to raise more than what we need. Also, we have been more distributed and less VC focused to date. Most of our funding came from community and early clients.
Our biggest achievement is building the team that we have build, consisted of nothing but “A” players. With them, our most significant milestone was the release of our AlphaNet two months ago.
WC
Your MainNet is scheduled for Q1 2019. How confident are you that you’ll be meeting that date?
NH
Up until now, we hit all our roadmap releases without any delays or setbacks and I am fully confident that the COTI team will be able to deploy all the future releases we have set on our roadmap.
WC
What will MainNet launch actually involve? Will Trustchain, COTI Pay and COTI-X all be fully live?
NH
Yes, all platforms will be live and are part of the ecosystem of our infrastructure. COTI-X will be used to deploy new tokens on our platform and also for providing the framework needed for issuing stable coins on our platform. COTI-PAY will be a consumer/merchant use case which we are building to demonstrate the business and also the technological aspects of deploying a solution on our environment.
The MainNet launch will also involve the release of our native coin along with SDK for application developer and token issuers and will support smart contracts and multiDAG.
WC
How many users do you expect to have on the platform at MainNet launch?
SBG
That depends on the amount of products we’ll be able to ship to enterprises at that time. I dare say, however, that by the end of next year — our platform will be the one that sees more users than any other platform out there.
The reason is that payments are common to everybody around the world and that our client base is the big enterprises and publishers, that already have a significant user base and tools to bring adoption to products that they create
WC
How can I sign up for the COTI Pay beta app?
NH
Currently, the COTI Pay beta is only available for a sign up via invite. In the next couple of weeks it will be open to the public and will be available through our website.
WC
How functional is the COTI Pay beta app compared to the final version?
NH
The beta version of COTI Pay platform enables consumers to pay merchants with COTI Dime tokens in exchange for merchandise sold on e-commerce sites. COTI Pay consists of a frontend web application, inclusive of a digital wallet, as well as a backend layer that serves both the wallet application and third party API calls from the merchant’s servers.
So the current version supports: merchant integration, wallet, arbitration process, and Trust Score.
The future version will also have support for popular e-commerce websites such as: Shopify, WooCommerce, WordPress, and will also include full integration with the MainNet infrastructure.
It is close to finalized and will be released publicly in a few weeks.
WC
You make mention of a debit card…We have seen a bunch of ICO’s promise these and have trouble delivering. Whats the plan around the debit card, who will issue it, where will it be available and when?
SBG
We have partnered with an issuer (Transact Europe) that helps with that and there are a few other solutions out there. I think TenX and MCO failed because they relied on the rails that Visa and MasterCard support. We don’t rely on that and that can make a huge difference.
It will launch post MainNet probably.
WC
Have you released any of your code publicly? Do you intend to have any peer code review on your code?
NH
We are encouraging anyone to review the code. The code was not officially audited by any 3rd party. But several 3rd party companies have participated in code review and assisted in the development such as: Decent Crypto, nakamo.to and Advanced Blockchain, Leonid Beder from Orbs and Guillaume Ballet from the Ethereum Foundation.
We are also planning to have a peer code review and currently in the process of finding the proper auditor for our code.
WC
Will any of the infulencers also review the code? Sergio or Andre?
SBG
I can’t say, I don’t set their agenda. I hope they will.
ICO & TOKEN SUPPLY
WC
Your hardcap is $30M and you’ve already raised $15M and claim to have almost finished building your tech. Why do you need another $15M?
SBG
Our next fundraising is done to help us bring about adoption. We need to be able to put our tech in front of decision makers in enterprises, grow communities, developers and develop our business.
We are competing with giants and we need to arm ourselves.
WC
When will the next round begin? Who can contribute?
SBG
It begins in a week or two, probably.We are bringing on the more traditional VCs. Our community will hopefully have another chance to contribute, closer to MainNet.
WC
What is the percentage of tokens available to the public and team? Does the team and advisors have a lock up on their tokens?
SBG
We are selling 30% of the tokens and distributing another 45% as incentive plans.
The team gets 15% which is locked for 24 month with a vesting mechanism.
Advisors got 10% and that is also locked for about a year with a vesting mechanism.
WC
45% of tokens are assigned to the ‘incentive and liquidity reserve’. What does this actually mean? Can COTI dump these on a secondary market?
SBG
There is no point in dumping these tokens as they are not ours to sell. As any new system, it is helpful to be able to incentivise users and businesses to use it. We offer, for instance, COTI coins to both merchants and consumers that download the COTI Pay app and use it.
We also incentivise enterprises that issue coins on our system and so on. If you remember, PayPal did the same thing when you have downloaded a new wallet. You got it with $10 and if you referred friends, you got another extra $5.
WC
Ian Balina said you offered a bonus of 70%.in your first round, is this true?
SBG
I’m afraid so. When we started off we didn’t strategize enough and ended up selling a small portion of our allocation (less than $250K) with that bonus.
As it stands it only accounts for less than 1% of our fundraising so I don’t expect it to have a significant impact, but it was a valuable lesson, for sure.
WC
What is the total supply of COTI coin and COTI Dime? How many COTI coin will be in circulation at the end of the sale?
SBG
There are 2B COTI coins as total supply with the intention to distribute 30% via sale and 45% via incentives. With regards to COTI Dime, we issue them as the network grows. We start off by issuing 10M coins for the testing phase.
PARTNERSHIPS & EXCHANGES
WC
COTI has an internal exchange, COTI-X, will this compete with existing exchanges? And will your tokens be listed on other exchanges?
SBG
No, we have no intention of getting into the exchange business. It is there for the streamlining of the processes of those who issue coins upon our infrastructure. It is also very helpful when it comes to price stabilization for the stable coins we host.
We will list in quite a few exchanges, once we have a full utility to our coins. We want to lower the speculations and raise the utility once traded.
WC
You already have several industry partnerships, including Bancor and Processing.com. Are these crypto ‘partnerships’ or will they actually be involved in helping COTI past the sale?
SBG
We actually have a few more partnerships, ranging from enterprises that issue coins to publishers that needs micropayments. To be accurate, most of our partnerships are from the world beyond cryptocurrencies. We don’t partner where we don’t see an actual use case.
WC
How important are future partnerships to gaining adoption on the COTI platform? What are your plans there?
SBG
As I said earlier, this is key. We are looking for partners that can bring about masses of users or volume of transactions as part of our strategy. We make sure that they get a lot of value and they give us access to their user base and business volume.
WC
Do you have any upcoming partnerships you could tell us the inside word on?
SBG
I can disclose that we are about to sign a partnership to power up a company that is building Point Of Sale devices with 250,000 terminals to be implemented in the US and Korea.
WC
This is actually 250K real businesses? Not people? And how quickly do you expect to on-board them?
SBG
Yes, 250K terminals at brick and mortar businesses.
We are being paid per device and a monthly fee. I don’t want to speculate here but we will be generating revenue hopefully as soon as this year.
WC
Now that you’re accepting new investors in the next round of your crowdsale, do you have any new investors of note?
SBG
Yes, we do. I hope I will be in the position to tell you and your community by the end of the week. We are very excited about it.
CLOSING THOUGHTS
WC
Thank you Shahaf and Nir for answering our questions today. If there are no other questions we’ll leave it here for today.
SBG
Thank you all for hosting us, you have been great!!
NH
Thanks everyone, great AMA!
WC
If you’d like to know more about COTI or we’ve missed a question, you can join their Telegram group here.
COTI Resources
Website: https://coti.io/
Telegram: https://t.me/COTInetwork
Github: https://github.com/coti-io
Wolf Crypto Resources
Website: https://wolfcrypto.net/
Public Group: https://t.me/WolfCryptoPub
News Channel: https://t.me/WolfCryptoAnnounce
ICO Review Channel: https://t.me/WolfCryptoICO
Discord: https://discordapp.com/invite/teS68qn
Twitter: https://twitter.com/WolfCryptoGroup
