The AMA took take place on July 9th, 2019 from 12:00 to 13:00 UTC in the Ethfinex Telegram Channel.
From the Dusk team were present:
- Emanuele Francioni
- Jelle Pol
- Mels Dees
- Pascal Putman
Hi Jelle, as the Netherlands is a fairly friendly crypto country, do you guys have any plans to work with the AEX to help them build an STO for them on Dusk? I feel you guys have a great shot at it.
Haha a big one straight off the bat, I will tackle in pieces.
1. The Netherlands is indeed relatively crypto friendly, and the nice thing about the European Union as a financial hub is that a big part of the regulations are all harmonized across the entire EU, this means generally that things work the same way across the continent, which allows for a lot more scalability.
2. The AEX is an index, which means that they are effectively a representation of a large number of underlying assets, stocks in this case. To turn the example into our space: You could think of a token that represents the value of 50 other tokens, making it easier to follow the market or to invest into the top 50 for example. This also means that the AEX could be a great partner for a STO, or just direct tokenization without a fundraiser. They can do a security index token, which is already very innovative, however the real innovation would be when all the underlying stocks are also tokenized. In that scenario buying/selling more of the index tokens could be settled on the blockchain in real time, which would be a significant improvement over the current settlement times of ~2 days. This would be a large step to (re)introducing 24/7 trading into the traditional markets because all the settlement/creation/redemption can be automated on chain.
3. I cannot disclose the exact names of the partnerships in our pipeline, but we are working with several institutions on this level of the sector to bridge traditional finance into the security token ecosystem.
Congratulations on the listing Mels and thanks for AMA. Can you shed some light on your recent releases. You guys have been releasing a lot of material, most significantly is your research on the zero knowledge contracts. Can you shed some light on the significance of those releases and how they make Dusk special.
Great question. Basically our research on zero-knowledge(ZK) aims to bridge the gap between trustlessness and compliance. Traditionally, the only way to prove the truthfulness of a statement or the correctness of a process outcome has been to fetch the input of such process, do the computation and compare if the outcomes match. For example to know if you are allowed to access a service, a traditional cloud-based application would need to verify knowledge of a secret password by comparing it with the one it saved. ZK technology would allow to validate knowledge of a secret without the need to reveal the secret and then compare it. By expanding this to decentralized processing you can keep transactional privacy and prove mathematically the adherence to a predefined protocol. We use this to enforce compliance to legal frameworks (through the XSC standard) as well as any arbitrary decentralized processing (i.e. smart contracts)
When will we know about the companies that will use Dusk? And how will they use Dusk?
The companies that we currently work with are going to be included in the upcoming months of testing on the testnet. The deployment of their security token propositions will naturally occur on mainnet, but we are working to be able to announce the first partnerships towards the end of summer (late Aug, early Sept). You will see not only see STOs that are used by small/medium sized companies looking to raise funds in a new framework, but also larger traditional finance players that want to issue a blockchain based asset.
Can a company decide to switch 50% to security token and to keep 50% of shares in a traditional way? Any experience?
I will get to your question, but giving a little bit of background information first. At dusk we are creating a privacy-oriented blockchain protocol that enables smart contract operations. Our first token standard release is what we call Confidential Security Contract (short XSC).
Using XSC companies could digitize their securities (often called security tokens, or tokenized securities) while complying with applicable legislation and any restrictions, albeit in the shareholder agreement, articles of association or coming from legislative directives.
Now to your question;
Yes, a company that issues security tokens is not required to represent all of their securities in a token. They could do a smaller amount, or reserve some in a treasury. They just need to create well defined agreements with the parties involved that the tokens resemble the securities, and that all restrictions and requirements in legislation/shareholder agreement etc. can be adhered to.
Can I send a Security token to another person’s wallet?
Blockchains such as Dusk (or Ethereum / Stellar) with security token standards can be used to transfer security tokens. Again, it is very important that the blockchain and smart contract that handle these transactions adhere to all legal requirements. Thus, in almost all cases, there needs to be a whitelist, so you can only trade with someone who has been approved by the issuer (after rigorous investor identification).
Are whitelist/KYC both off chain?
We have created a way to keep the whitelist on-chain. Meaning, an issuer can create a list of public key addresses that are able to trade. Of course the issuer knows who owns the public key address as they've performed rigorous investor identification, which all of these details they store themselves, "off-chain".
After all, storing sensitive data on a blockchain is never a good idea. As it is immutable and there forever.
I can't imagine how an established company could use Dusk.
An existing financial institution would find it quite easy to issue a new asset type on Dusk. They could for example decide to offer some of their existing assets to a blockchain native crowd, or issue something new all together. For non-finance companies they could offer various types of securities, such as a revenue sharing token, or a series A/B/C that is fully tokenized.
Hi team can you please give a technical overview and explain what makes Dusk Network special and suited for security tokens. What problems are you solving?
There are a couple of questions within your message, so let me try to answer in a short way. We're are a protocol blockchain specifically build for digital securities. We're combining the newest technology around zero-knowledge proofs and BTF and are able to translate these novel technologies into our protocol being able to comply to the needs of traditional players and regulation. Have you read our series 'designing a Security Token Blockchain'? it's a great read to better understand why we're making certain choices. First one can be found here: https://medium.com/dusk-networ... guess that also answers my next question - why not just wait for Etheruem to adopt privacy layers? is the short answer that Ethereum is a general purpose chain?
Yes, also because there are certain protocol design choices that Ethereum made that do not sit well in many regulatory frameworks. It's not just about layer 2 privacy, but also specific layer 1 decisions around technology, for example the type of consensus you use, that impact regulatory approval.
This means that all the ERC20 applications trying to achieve the same thing are wasting their time? (looking at Polymath cancelling a few STOs and laying off people)
This is why they announced recently they would be building their own protocol now because effectively they found out that working around the limitations of ethereum in the security token space was quite a big task. Since we have already been building and researching for 1.5 years it is a great piece of validation for our vision of a protocol that is built from the ground up for compliance and privacy.
As for wasting time, definitely not. Various players in the industry are creating infrastructure for security tokens and this greatly propels the ecosystem. Although most of the progress I see resolves around applications that support security token issuance (i.e. where legal teams and consultants help issuers to issue compliantly). Dusk is a standard that could be integrated directly by those applications.
Hi, I’m an ordinary investor and acquired some Dusk through the sales on Ethfinex platform. I Want to know more about the distribution. So where can we get those tokens? And what will happen when the vesting starts.
Tokinex users have received an email detailing all the specifics around redeeming their tokens. If you did not receive an e-mail or have remaining questions feel free to PM @rossmidd after the AMA and he will help sort you out. When the vesting starts you will be able to acquire your tokens based on the vesting schedule we announced earlier: https://medium.com/dusk-network/binance-dex-re-vesting-update-ba1345d1aa17/
Hey, I just have a quick question about your Dusk Browser Node extension for Google Chrome. How accurate is the rate at which dusk is earned in the extension, exactly?
For the people who don't know about our browser node yet; We've developed and launched a browser node that will allow you to verify zero-knowledge (ZK) proofs sent over the Dusk Network directly in your browser. It's downloadable in the Chromes store already to give you the opportunity to check out this new feature and play with it a little. All info can be found HERE. To answer your question, it's not clear yet when real tokens can be earned by the browser node. But will update you as soon as we decide on the date!
Why is Dusk not forkable?
The SBA consensus consists of different phases. One of these phases is the Block Agreement, which is designed to guarantee immediate (statistical) finality to the selected block. During this phase, an additional committee gather and verifies the signatures collected at the previous phase (the Reduction phase). This phase provides a statistical guarantee that at least one honest node has received a set of votes exceeding the minimum threshold required to successfully terminate the respective phase of the protocol and prevent any forking attempt. Finality is VERY important for security tokens and regulated protocols. More info HERE.
Is there a chance for a big company to access their wallet if the private key is lost?
The short answer is no, similar to all blockchain if you lose your private key, you can no longer (and nobody else) can access your wallet. A private key is somewhat of a master key after all.
In the case of the XSC standard, designed for security tokens (for simplicity consider this the ERC1400 equivalent of Ethereum). There are additional safeguards, as security tokens cannot just become inaccessible (at the end of the day you still own them, and are part of that issuer's shareholder registry). In this case the issuer of the security token (we have no say in that) could be contacted by the owner of the security token wallet, and ask the issuer to perform a forced transfer (which again requires threshold signatures from third-parties, such as legal/custodian). To transfer, ONLY those XSC belonging to that issuer to a new wallet.
In the end, make sure to store your keys safely!
Do you have a timeline for releasing partnership updates?
Announcements towards the second half of summer, expect a sustained pipeline, and deployment on mainnet. The propositions will be more specifically divulged closer to date and issuance/fundraising could already start prior to minting.
Note that these partnerships are confirmed, I am simply describing public announcement.
What are the specs to run a node?
We are publishing the testnet with nodes (acting both as block generators and provisioners) running on very constrained specs (VPS with dual core CPU, 1Gb of RAM, 60Gb of space). We are working very hard to run the block generator on the browser so the minimum requirements will be slashed even further
You just released a paper on account based cryptocurrencies. What is the difference compared to the current used models and how will this benefit Dusk?
Account model is what is used by smart contract platforms as it is currently very difficult to have SC on top of an UTXO model. Our research on account based systems for privacy cryptocurrencies is groundbreaking because it allows zero-knowledge smart-contracts. Paraphrasing our lead cryptographer, it provides the privacy of ZCash and the capabilities of Ethereum (https://twitter.com/Khovr/status/1147890989878718465)
When can we earn real tokens with the browser nodes?
For the people who don't know about our browser node yet; We've developed and launched a browser node that will allow you to verify zero-knowledge (ZK) proofs sent over the Dusk Network directly in your browser. It's downloadable in the Chromes store already to give you the opportunity to check out this new feature and play with it a little. All info can be found in the Medium article
To answer your question, it's not clear yet when real tokens can be earned by the browser node. But will update you as soon as we decide on the date! See Medium post HERE.
Can I run two browser nodes at the same time? Chrome and brave?
Yes. Mind that if reaching 50% CPU one of the two will ease on the verifications though
So it depends on my computer power how much Dusk I can ear right?
In a way yes. Also right now all browser nodes get continuous zero-knowledge validation requests to help us collecting data. On mainnet, the validation requests will probably be far less.
I watched part of the zerocaf livestream (difficult maths and all😅), and was wondering if you guys could provide a simple explanation about how zerocaf works?
Zero-Caf is quite well documented HERE. Explaining it better, requires some question, as there's a lot to take in! Happy to take them and forward to Luke or Carlos
Apologies if this has already been asked, but it is a question that always puzzles me. What do you think the 'sweet spot' for STOs is going to be? 1) Small 'crowdfunding type' companies. 2) Pre IPO sized companies, 3) IPO? 4) Other.
Personally when I look at the ''curve'' of company size vs investor interest you will find a few sweet spots. For SMEs for example fundraising is a big issue and there are people interested in supporting local businesses, so this is probably where the STO as a fundraising mechanism will work well. Here the problem so to say is 'access', i.e. companies want access to funds, and investors want 'access' to certain investment propositions.
Another sweet spot like you mentioned are pre-IPO companies or otherwise mature companies that might never IPO. These companies are interesting and might generate good annual profits, but without an IPO the average investor will never be able to participate here, and often after the IPO the proposition is simply not as attractive anymore. Here the value is not only around access, but also about liquidity, because it will bring a trading market to private companies, which will benefit employees/founders, etc.
Finally post-IPO companies might be interested in the automation side of things, because it will be much more interesting for them to reduce their overhead by running their share registry on a chain, doing dividend payments/voting on chain, etc. This is also the space where I mainly see the use cases for financial institutions to create new products using tokenization.
Things that are uninteresting imo:
- propositions that require little liquidity by default
- propositions with extremely complex price discovery, because it will prevent liquidity
- on the short term debt instruments will be less exciting
Another thing worth saying is that I think commodities will play a bigger role than currently expected. As the blockchain sector matures people will be very interested to diversify into traditional assets such as gold or diamonds without having to use the ''traditional'' infrastructure. The blockchain crowd is quite savvy and sovereign and would like for example to hold their own gold tokens, rather than relying on multiple third parties.
Interesting, thank you. I had never considered point three - tokens as a layer on-top of traditional shares/stocks to target specific corporate actions
Yeah this is generally what we refer to as ''tokenized securities'' vs ''security tokens'' (native on chain), but the semantics are boring;)
Which companies would you be looking to partner with?
We are quite happy with the upcoming pipeline but I am still looking for a company that wants to do a Copper token. I think it's one of the hottest commodities right now and is a perfect fit for blockchain
Upon mainnet, Dusk can be used (as its open-source) by anyone wishing to create a fully private smart contract. Or use the open-source XSC standard. Of course it would be great if Security Token Platforms, or large legal boutiques would integrate Dusk's (XSC) as their standard of choice.
In the current stage we value partnerships with universities, or consortium's or universities as it's all about pushing forward the possibilities of blockchain technology. Research is about more than discovering new opportunities - we do that plenty - for us it’s about documenting that mathematical models are correct, and outlining in great detail why assumptions will hold.
Do you think a lot of people are misunderstanding the difference between STOs, tokenized securities and security tokens?
Probably, but also because for a lot of people the nuances aren't that relevant yet. In a nutshell how I see it:
- STO - security token offering, i.e you are looking for investments in return for your security tokens
- Security Tokens - a token natively on chain, i.e. a digital share
- Tokenized securities - an existing security in '''the real world'' represented by a token on chain.
STOs could be for both types. Everybody sees these things differently and we will probably agree on a paradigm as the market matures and sees more and more offerings.
When Dusk launches on Ethfinex there will suddenly be two token standards. Do you intend to launch a bridge shortly afterwards to prevent price gaps (and allow arbitrage) or will it take some time? I'd imagine it to be rather confusing for people to see the token with big price differences on different exchanges.
As Dusk is paired against other currencies, there are plenty of ways arbitrage traders can arbitrate. That said, we constantly monitor any requests from the community (our admins forward everything we should know) and can prioritize the creation of technological items if end-users or developers require it. Of course there will be mainnet bridges in the future. Dusk BEP and DUSK ERC are 1:1
Hello! So when can we play with the testnet?
In a matter of days, we are pushing all the code and relevant tooling out this week!
People are scared of STOs as they seem to be devalued by the success of IEOs, in that case aren't tokenized securities not something completely different?
STOs and tokenized securities of non-public companies solve two different issues. The former provides an alternative fund-raising methodology which would supposedly attract investors by offering an inherently liquid asset (hence shortening the time to exit). The latter solves the issue of the lack of a true price discovery mechanism, and an excessive reliance on middlemen and broker for securities of pre-IPO companies. Also it solves the discomfort of early investors provoked by increasingly longer timelines to exit (right now the average time to IPO increased up to 13 years while in early 2000 it was 5/6 years).
At how much is DUSK trading compared to IEO?
The sale price on the Ethfinex token sale platform (now Tokinex) was $0.0404. See Tokinex
What was the most exciting moment for you so far and what are you most excited about in the future regarding DUSK?
Personally so far: Concluding a successful raise in the depths of the bear market. This was hard work, but also left us battle-tested for the future.
Next 6mo: We have arguably our two largest announcements ever coming up in the next half year and they should open up everyone's eyes to the art of possibility on the Dusk protocol, I am extremely excited to be able to go public with proven traction and adoption, and I always wish I could be more explicit already.
1) 5 minutes before this AMA ;). Second most exciting was when Matteo reduced the time to generate a zero-knowledge proof from 30 seconds to 90ms in one afternoon
2) I am very much looking forward to rolling out a browser wallet to allow on-chain voting for an XSC securitized company.
Thank you Ethfinex & Dusk Community for all of your excellent questions!
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