Full disclosure: I am in active discussions to advise Blockcloud because I think reimagining the current stack of the internet and connected devices may one day be a necessity with the projected growth of connected devices. Plus I really enjoyed my conversations with the entire team. Beyond the technology, working with great people is paramount.
Shout out to my new team member CryptoRaider for his technical due diligence and editorial support on this article. Shout out to Windra over at Coin Crunch for his read over my initial draft. If you are a researcher or writer and would like to join the team please reach out to me at firstname.lastname@example.org
Blockcloud aims to provide a stronger alternative to TCP/IP, an important protocol that enables peer to peer communication. The internet today is a series of technology layers that work together to enable the websites and applications we are familiar with today. Before getting to Blockcloud let’s look at these layers briefly:
- Application Layer: apps and websites such as Quantalysus.com operate using several protocols at this layer, such as: HTTP, FTP, SMTP
- Transfer Layer: Protocols such as TCP/IP and UDP operate here. The transfer layer segments information into separate data packets with instructions how to reassemble the data.
- Internet Layer: Packets are then pushed to this layer with an origin and destination address (known as IP addresses).
- Network Address: Handles the MAC address and sends information to the appropriate physical machine
When reviewing the Blockcloud whitepaper the very first thing that leaps off the page is the number of mentions of the term “IoT”. While IoT is a hot topic in cryptocurrencies, Blockcloud is selling their solution far short of its potential. Let’s not forget what the goal of these “decentralized” projects is supposed to be. The real goal is to reinvent, or at least add, technology infrastructure alternatives to our current solutions. Blockchain solutions to date have built on top of our existing technology stack, but Blockcloud aims to innovate a few layers down to enable peer-to-peer computing.
Last week I attended the Blockchain Connect conference in San Jose. I had the opportunity of sitting down with Ming, Blockcloud’s CEO. Sitting down with him allowed me to pick his brain on the problems he was trying to solve. As an informal advisor to many projects, it was quite clear there was a different angle to position this project to the public. Calling Blockcloud an “IoT” project is far too narrow. Personally, I think Blockcloud is a solution for “constant connectivity for dynamic networks”. Buzzword soup for sure, but what does it really mean. To understand my thinking, let’s dive into how devices connect to the internet today.
When a device accesses a website the device connects to a Domain Name Service (DNS) server. Your device will connect to a DNS server and register a combination of information including your IP address and gateway. The DNS server you connect to will then procedurally (called DNS Resolution) look up where the website you are requesting is located via its public IP address. Let’s say you typed in “Quantalysus.com” into your browser. DNS will convert “Quantalysus.com” into its IP address 18.104.22.168 (that’s the actual IP address per DNSlookup.com). Rather than remember a set of numbers, you just have to remember the name of the website. This makes looking up websites on the internet simpler for everyone.
Connectivity has become constant and dynamic. We’re always on the move. Whether it’s a tablet, a mobile phone, or a laptop, people constantly have access to the internet. If you move geographically, your IP address changes. Typically, IP addresses are assigned by an ISP (Internet Service Provider). There are IP address pools set aside for different regions. IP routing tables are then used for passing data (otherwise known as packets) from router to router until received by the final destination (normally not assigned specifically to your IP address but to a group of IP addresses known as subnets). Without your IP address changing when you move, IP routing tables would need to expand and thus increase the data processing overhead. The end result is a slower communication network. To reduce this, when you change locations your public IP address changes too. Under this current architecture, the DNS server and IP routing tables are an instrumental component of the internet. But with the increasing number of mobile phones and IoT devices (smart appliances, watches, health monitors, vehicle sensors) connecting to internet services the questions of security and scalability should be reexamined.
Enter Blockcloud. But first let’s look at the team.
- Zhongxing Ming, CEO – Visiting Scholar to Princeton University, Ph.D at Tsinghua University, Member of Blockchain Special Committee of China Computer Federation, Shenzhen High-Level Overseas Expert, 40 Million Accumulative Project Financing, 13 Publications On Top Conferences and Journals
- Shu Yang, Chairman – Visiting Scholar to Case Western University, Ph.D at Tsinghua University, currently CEO at Shenzhen Oudmon Technology (what appears to be a small consumer health device manufacturer)
- Dai Pan, COO – Master’s Degree from Peking University. Also works at Shenzhen Oudmon Technology
- Dong Huo, Strategic Scientist – Ph.D at the University of Tokyo, United Nations Development Program (UNDP) Sustainability Goal (SDG) Network Expert
- Qi Li, Network Security, Cryptography – Associate Professor of Computer Science, Tsinghua University, Network Security Expert, Editor of IEEE/TDSC, Over 60 Publications on Top Conferences and Journals
- Zhengzhou Wu, Cloud Platform Director – Proficient in Lisp, works at Shenzhen Oudmon Technology
- Roger Lim – Founding Partner of NEO Global Capital. Advisor for projects like Bluzelle, Qlink, CoinFi, Thekey, Tomocoin, 0Chain, Switcheo, Open Platform, nOS. Successful entrepreneur who founded Webvisions, an asian cloud hosting company.
Alex Likhtenstein – Founded EVR. Featured in both live interviews and write ups by practically every major media company from CNN to Fox to the NY Post.
- Hoan Soo Lee – Economist of Council of Economic Adviser (CEA) during the first term of Obama government; partner of CMB International; co-founder and COO of Give2gether in Boston, Massachusetts, U.S.; consultant of Dorinku in London, U.K.; microcredit consultant of Harvard College Branch in Cambridge, Massachusetts, U.S. Dr. Hoan Soo Lee obtained his master degree and doctor degree at Economy Department of Harvard University and Harvard Business School in 2011 and 2013 respectively, and bachelors with highest honors in applied mathematics and economics at University of California, Berkeley in 2008.
- Ticker: BLOC
- Total Supply
- Full dilution: 10 billion BLOC
- Assuming foundation released evenly like mining award
- End of year 1: 5 billion
- End of year 2: 6 billion
- End of year 3: 7 billion
- End of year 4: 8 billion
- End of year 5: 9 billion
- End of year 6: 10 billion
- Total Supply for Sale: 2,000,000,000 BLOC
- Distribution of tokens
- Private Sale: 15% (1.5 billion BLOC)
- Other Sale: 5% (500 million BLOC)
- Early Contributors: 10% (1.0 billion BLOC)
- Team: 10% (1.0 billion BLOC)
- Mining Award: 30% (released evenly over 6 years) (3.0 billion BLOC)
- Foundation: 30% (3.0 billion BLOC)
- Hard Cap: $15,000,000 (private 80%, public 20%)
- Website says implied market cap from private sale is $80M (calculated as $15M hard cap x 80% private, all divided by 12% [15% x 80%]).
- The team put the $80M market cap on their site to look better. As an investor, I’d prefer to find high potential projects with lower cap. This might be a good one for that reason alone.
- Upper bound market cap: I’d prefer to look at fully diluted market cap of $75M (calculated as $15M hard cap / 20% [private sale + other sale]
- Lower bound market cap: If we look at a tighter circulating supply with the operating assumption of even distribution of both mining, foundation tokens over six years and 100% of early contributors and team tokens hitting after the first year then the market cap based on circulating supply would be $30M (calculated as $15M / 50% [20% sales + 10% early contributors + 10% team + 5% mining + 5% foundation])
- Cracking Coinmarketcap’s Top 100 at the time of this writing would require a valuation of $90M USD. That leaves a potential 3x runway for the project.
Blockcloud’s approach can be broken down into five different components:
- Physical layer + blockchain: proposes to combine Service Centric Networking (SCN), which essentially serves as the physical layer, with blockchain with the goal of supporting mobility and scalability.
- Communication: A Service Access Layer (SAL) to enable service-based communications.
- Consensus: A Proof-of-Service (PoS) mechanism to reliably verify services.
- Recording transactions: A Compacted Directed Acyclic Graph (CoDAG) structure to effectively record transactions.
- Service distribution: A truthful continuous double auction (TCDA) mechanism to fairly distribute services
Physical layer + blockchain
SCN provides content to users directly as opposed to routing through DNS servers and IP routing. Think of it as calling someone directly on the phone as opposed to calling into a switchboard where your call is routed to the right person. The idea here is to move beyond or complement today’s internet design: communication between two fixed entities. With mobility at a premium, a service-centric approach that can accommodate dynamic connections makes sense. The downside of current SCN architectures is trust and security. Blockcloud envisions solving these issues applying blockchain atop.
Blockcloud adopts the Serval architecture for its SCN. Serval was originally designed for online services running on multiple servers in different locations for mobile devices. Serval introduces a Service Access Layer (SAL) atop an unmodified network layer (IP), enabling services to communicate directly on service names as opposed to IP addresses and ports. The key difference for Serval is that instead of sitting above the Transfer layer (see above), Serval’s SAL is located between the Network and the Transfer layer.
Blockcloud’s SAL (derived from Serval) promises efficient load balancing and faster failover. Network layer forwarding will allow traffic to flow between two end-points (circumventing) the need for an intermediary. Blockcloud’s SAL will perform signaling over a variety of interfaces, ultimately leading to a transport-agnostic solution. Consumers will experience constant mobile device connectivity and applications will have virtual-machine migration.
The blockchain in Blockcloud’s solution is used to bind services to providers. Changes to any name-value pairs (i.e. services provided by a particular provider) are updated and matched on the underlying blockchain, or the transaction chain in layer 1 of the diagram above. In blockcloud the control and service layers are separated. When devices receive services from the service chain, authenticity is verified in one of two ways: first, checking for the service hash is in the service file, or second, the service includes the name owners public key in the transaction signature.
Blockcloud uses Coral to enable a peer-to-peer content distribution network (CDN). Coral CDN is comprised of a world-wide network of web proxies and nameservers. It uses peer-to-peer indexing techniques to locate cached objects if the content exists within the network. The original server only needs to fetch the object once. One of Coral’s best features is avoiding content hot spots, clustering of information that could be lost if a particular patch of files go offline, by introducing a distributed sloppy hash table (DSHT). This DSHT (or call it a DHT if you will) creates self-organizing node clusters and reducing the need to communicate with distant or taxed servers.
Blockcloud designed its proof-of-service consensus for reliable verification of IoT services. To meet the needs of a global user base the network will need to recruit and verify resource providers that bring storage, computation, bandwidth and routing capabilities to the table. The consensus employed will not only need to verify services, but also incentivize providers to join the fray. Several projects have tackled storage contribution such as Filecoin and Siacoin. Golem, Hypernet, and Perlin are tackling the computation problem. Blockcloud’s solution aims to incentivize all the resources mentioned above. The whitepaper does not go into detail regarding storage and computation, but only briefly mentions they draw inspiration from their peers. I flag this as an area to explore with the team and list it as a concern below.
The team goes on to label storage and computational resources as deterministic, essentially you have a service to provide or not. With bandwidth and relay resources, these resources are probabilistic in nature and should be measured in terms of the quality provided. When a service provider signs up for the service it promises a certain level of quality. Verifiers will then test the service provider to see if they are meeting their advertised quality. These test results will be stored in a DHT for other verifiers to read and write to.
Blockcloud developed a Compacted Directed Acyclic Graph (CoDAG) for fast recording of IoT transactions. Understanding that mobile devices and IoT devices exhibit smaller batteries, weaker computing power, and constrained communication bandwidth, Blockcloud introduces three network participants: miners, gateways, devices.
Miners will into one of two camps: slow and fast modes. Slow mode miners will use a DAG-based ledger structure and are responsible for de-centrally electing fast mode miners. Fast mode miners use Byzantine agreement to record transactions onto the blockchain
Gateways are off-chain intermediate nodes (devices) running the protocol. These devices must feature enough resources to properly download the most recent portion of the distributed ledger, maintain an encrypted communication channels, and transact with other gateways.
Devices only send and receive data to the gateways mentioned above.
All nodes start off in Slow Mode as they join the permissionless network. As nodes start to properly mine blocks they are elected into Fast Mode. The more transactions that are properly mined, the more nodes enter fast mode. If nodes begin to cheat the network those nodes lose their Fast Mode status and begin to slow down the average speed of the network.
Blockcloud’s DAG differs from other DAGs currently available. Instead of a fixed width of nodes (or branches if you think of it visually), Blockcloud features dynamic widths of nodes connected. In the worst case scenario, Blockcloud’s DAG devolves into a linear blockchain (i.e. Bitcoin’s structure). The DAG’s width influences the puzzle difficulty. The smaller the width, the higher the level of security to the network. Similar to Nano’s block lattice, Blockcloud’s miners generates new blocks by correctly solving a puzzle and validating two blocks in the previous level. The new block is appended to the tip of the CoDAG. To avoid forks in Blockcloud, the nodes with the highest level of reverse connectivity (or essentially longest chain history) will have higher priority to be considered valid nodes of the network. Shorter reverse history will isolate those nodes from the overall network.
Truthful Continuous Double Auction (TCDA)
Okay to be honest this part of the network is a bit confusing. Essentially the TCDA is designed to provide fair pricing and matching of services. I don’t profess to be an economics expert, but for a technology startup to wade into the territory of devising economic formulas to manage what is essentially a free market seems folly to me. In all honesty, I breezed through this section due to my biased judgment here.
- Low hard cap for an infrastructure project. Finding comparable projects on Coinmarketcap Top 100 is not so easy but let’s try to look at a few angles (for the record none of these are perfect comparisons):
- IoT comparison: Iota (#9), Nano (#39)
- Decentralized resources: Sia (#35), Golem (#44)
- Why fix what essentially is not broken? Why do we need this?
- While the combination of ISP registries and DNS servers accommodate today’s level of connectivity, the exponentially increasing number of devices could require complementary architectures
- DNS and ISP registries are points of failures due to their centralized design. A decentralized registry system, say via blockchain, could serve as a complement or substitute to today’s system
- Incentives combined with Serval architecture could be a more powerful combination in comparison to current IoT protocols such as MQTT
- The team has incredibly strong academic backgrounds. Their experience running an IoT device company positions them well to understand the ins and outs of improving device connectivity
- If every household or enterprise installs IoT devices and share the data accordingly to Blockcloud enabled services, the network Blockcloud has built would build tremendous value to honest resource and network providers.
- A unique solution to connect devices at Cloud, Fog and Edge levels.
- Unknown terms of private sale, particularly around early lockups. Projects without significant lockups (with larger bonuses) of early investors are likely to dump.
- Why fix what essentially is not broken? Why do we need this? Blockcloud is striving to reduce friction of mobile connection but that amounts to potentially little more than dropped mobile calls while on the move.
- How will Blockcloud properly incentivize computational, storage, relay and bandwidth resources to the network? Will each resource require its own different incentive structure?
- Can gateways (intermediate nodes) be attacked and used maliciously?
- By setting an upper limit to the width of the network, will Blockcloud unintentionally prune honest nodes in the network?
- How will Blockcloud be different from MQTT? MQTT is a machine-to-machine communication protocol for low-bandwidth, high-latency environments (aka IoT devices).
- IoT adoption of Blockcloud might be slow as the market already has popular IoT data capture platforms like Cisco Jasper or GE Predix.
- Blockcloud TPS needs to be battle tested and proved. IoT devices send heavy levels of data traffic.
Blockcloud’s team has a very strong academic background. Rather than raising over $20M like other projects, Blockcloud has opted to raise, in crypto terms a reasonable, $15M. As far as valuations go relative to other crypto projects, Blockcloud could be a nice diversification opportunity for investment portfolios. The overall architecture of Blockcloud combines a blockchain, a Service Centric Network through Serval, a decentralized CDN via Coral, a dynamically width altering DAG for throughput and reputation management, and a marketplace where buyers and sellers of services transact. There are many moving parts to this project so inherently a ton of risk to the network architecture. However, the inspiration to meet the needs of the future internet are here with this project. IoT devices today are low power, lower data consuming, and mobile devices but what is to say that will be the case going forward. These devices will not only multiply in quantity but also likely to increase in their capability.
Today’s applications send information to devices using TCP/IP where applications on hosts send data back and forth using IP addresses and DNS name servers. For service and resource providers, Blockcloud may serve as a workaround to the legacy standards of TCP/IP and the clunkiness of today’s evolving standards and solutions (MQTT, Predix, etc.). Public blockchains of the future may also wish to follow their decentralized ethos and bypass the current internet layers altogether. Decades of international regulatory cooperations and billions of dollars in capital expenditures by Internet Service Providers and other infrastructure players to expand our current network services appear to be a ripe area for potential disruption. Or at the very least, a complementary internet architecture. As always, this is not financial advice but Blockcloud might just be a small investment for such a gamble.
- How DNS Works
- Generalized Virtual Networking: an enabler for Service Centric Networking and Network Function Virtualization, (Salsano, Blefari-Melazzi, Lo Presti, Siracusano, Ventre)
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