Stellar (XLM) Token Report

XLM In-Depth Report (PDF)

XLM Model (XLS)

XLM Update Report (PDF)

Stellar Lumens is a payments rail that is specifically designed for remittances, micropayments, and low cost financial services. The protocol employs a novel consensus mechanism called the Stellar Consensus Protocol (SCP), which provides low latency for transactions regardless of the amount being transacted. SCP also allows trust ratings to be assigned to the nodes that validate transactions, thereby making validation power proportionate to a quantitative metric representing trust. This protocol design also allows for low network fees, thereby enabling low cost microtransactions. Many partnerships have been created to build services on the Stellar network. For example, Deloitte, in June 2016, announced a partnership with Stellar to build a cross-border micropayments app. In November 2017, a partnership with IBM was announced to move money across borders throughout the South Pacific.

ETHEREUM (ETH) Token Report

Ethereum Token Analysis (PDF)

Constantinople Update (PDF)

Roadmap Update (PDF)

Constantinople and ProgPow (PDF)

Ethereum is an open source network of computers that enables the creation of smart contracts. Smart contracts are transfers of value contingent upon verifiable events and executed automatically by the network. Many businesses depend on both trust and reputation when transacting with unfamiliar parties, as the enforcement of real-world contracts can be both costly and lengthy. The logic behind many of these business processes, however, is very simple and many can be represented by the statement, “If X (event) happens, transfer Y (amount) of tokens to Z (recipient).” Ethereum enables that statement to be converted to computer code as a smart contract, which is then stored on the Ethereum blockchain. Once deployed, all smart contracts that sit on the Ethereum blockchain are automatically executed by the Ethereum Virtual Machine (EVM), a group of computers responsible for executing smart contracts based on verifiable events. Since execution requires computing power, mining in the context of Ethereum means not only confirming and validating peer-to-peer transactions, but also executing the code that represents the smart contracts. Recently, Ethereum has become a platform for the creation of digital tokens that leverage the Ethereum Blockchain and EVM. This was made possible after the creation of the ERC-20 standard, a set of rules that facilitate the creation of Ethereum-based tokens, commonly referred to as “ERC-20 Tokens.”

Ripple (XRP) Token Report

XRP In-Depth Report (PDF)

XRP Model (XLSX)

XRP is one of the most contentious projects in the digital asset industry. It is one of the oldest projects and largest in terms of network value, trailing only Bitcoin and Ethereum. This contentiousness is a result of differing philosophical beliefs about decentralization and the value of censorship-resistance. The debate can be summed up by the fact that the XRP digital asset was created and continues to be largely maintained by a central organization, Ripple Labs. This structure is in direct opposition to the open source ethos espoused by the cryptocurrency community at large. So, while XRP is technically a cryptocurrency, it is not decentralized like most. We think it is helpful to think of Ripple Labs as an enterprise software company that has developed interfaces and APIs for financial institutions that in some, but not all cases, use the XRP digital asset. Its current product offerings include xCurrent, a financial institution messaging system like SWIFT, xRapid, a real-time payment platform that uses the XRP digital asset, and xVia, an upcoming payments interface that targets emerging markets.  Financial institutions that use these assets make up RippleNet, the interconnected network of market participants.

Bitcoin (BTC) Token Reports

Bitcoin In-Depth Report (PDF)

SegWit Analysis (PDF)

Bitcoin as a Store of Value (PDF)

Let There Be Lightning (PDF)

Lightning BTC Sensitivity Model (XLS)

Schnorr Signatures (PDF)

Update on Lightning (PDF)

Bitcoin was created in 2009 by a programmer, or a team of programmers, under the name Satoshi Nakamoto. It was built upon a number of technologies put forth in the 1990s, namely Reusable Proof-of-Work and BitGold, and the first digital token to effectively implement a distributed ledger that economically incentivizes participation. The value of Bitcoin is based on the principal of Digital Scarcity, as the underlying technology caps the maximum supply of tokens at 21M. Until that cap is reached, Bitcoin’s supply is inflationary as the network’s maintainers, also known as miners, are rewarded for validating and confirming transactions with newly minted bitcoins. One bitcoin can be divided into one million fractions, or Satoshis, and the effects of supply deflation can be eased by the token’s high divisibility. Bitcoin is the largest digital token by market capitalization and its user base has grown significantly over the past two years. Although it was initially intended for peer-to-peer transactions, its purpose has changed. As Bitcoin’s popularity increased, so did transaction fees and confirmation times. For this reason, other digital tokens are preferred for P2P transactions and bitcoin now serves as a store of value or, as some refer to, digital gold. It also serves as a gateway to the digital token economy and the overwhelming majority of digital tokens can be exchanged for bitcoin. Many other popular digital currencies were forked from the Bitcoin protocol, such as Dash, Bitcoin Classic, Bitcoin Dark, and, more recently, Bitcoin Cash.

Bitcoin Cash (BCH) Report

Bitcoin Cash (BCH) Report (PDF)

Bitcoin Cash (BCH) Model (XLSX)

Bitcoin Cash (BCH) Fork Follow Up (PDF)

Bitcoin Cash was the result of a forceful split in the Bitcoin network, an event referred to as a hard fork. As Bitcoin’s user base gained traction in 2015, the network became very congested and transaction confirmation times increased significantly. That triggered what has been described as the “block size debate” — an ongoing discussion about the trade-offs related to increasing Bitcoin’s block size in order for more transactions to be allocated into one block. Since mining BTC is a capital intensive activity, miners want to maximize the number of transactions on a per block basis to increase their level of profitability from transaction fees. The easiest way to achieve that is by increasing Bitcoin’s block size, which has been 1MB since the coin’s inception. Although the core development team understands the need for faster transactions, they fear that merely increasing block size could affect the underlying safety of the protocol. Another recurring argument against a simple block size increase is the possibility of further mining centralization, which in itself is concerning for the community, whose general philosophy revolves around decentralization. In light of these challenges, Bitcoin core released in November of 2016 a solution to increase transaction speed without necessarily increasing block size. This came to be known as SegWit or Segregated Witness — a change in Bitcoin’s code that optimizes block size by removing unnecessary information from each Block, leaving more space for transaction data and ultimately reducing confirmation times. The update was welcomed by most of the community, but several prominent figures of the Bitcoin mining industry characterized SegWit as an inefficient solution. In April of 2017, mining hardware manufacturer Bitmain was the first to suggest a hard fork and the idea for Bitcoin Cash begun getting support. In the following month, the Bitcoin ABC Project (Adjustable Block Cap) announced it was developing a full node implementation of the Bitcoin protocol that is compatible with Bitcoin Cash. The project’s goal was to support a version of Bitcoin that rejects SegWit, and that increases the block limit to 8MB. The fork happened on August 1, 2017, and the first Bitcoin Cash block was mined 6 hours after Bitcoin block 478558 by ViaBCT, a Chinese digital token exchange and mining pool. Since most exchanges did not provide support for Bitcoin Cash immediately after the fork, only 2% of the total supply of Bitcoin Cash tokens was in circulation, and prices were based on the limited supply in circulation. Bitcoin Cash reached its all-time-high on August 2, when it topped $747, but as exchanges started adding support for the token, prices have decreased significantly. As of this date, a total of 84 exchanges support Bitcoin Cash. However, it is important to note that the majority of Bitcoin holders that store their tokens in desktop-based wallets are still unsure as to how to get an equivalent balance of Bitcoin Cash. As more information about that process becomes available, we expect further downward pressure on the price of Bitcoin Cash.

Tether (USDT) Report

Quick Note on Tether (USDT) in the Wake of Market Volatility (PDF)

Following Up on Tether (PDF)

Tether or USDT is a digital token that is supposedly backed by a U.S. Dollar reserve fund. Its unit value is pegged directly to that of the U.S. Dollar and its purpose is to provide a decentralized method of exchanging value while also using a familiar accounting unit. Although initially offered through a mobile P2P payments app as an exchange-traded token, its use case has expanded as more exchanges have listed it. Because these exchanges must enact KYC and AML procedures to determine withdrawal limits, they establish a cap on the amount of funds their clients are allowed to withdraw. If a user’s portfolio exceeds the cap, there is no way to hedge against a market downturn. Accordingly, USDT is often used as a hedging tool that allows users to liquidate cryptocurrency holdings for a token pegged to the U.S. Dollar. Unusual demand and supply for USDT has resulted in several instances where the U.S. Dollar peg was broken, and the token traded at a premium or a discount. Tether’s blockchain is based on the Omni Protocol and uses Proof of Reserves to provide records of its reserves, which serves as an auditing mechanism. USDT and its token pairs are supported by many exchanges, including Poloniex, Bitfinex, ShapeShift, and Kraken.

Monero (XMR) Report

Monero Token Profile (PDF)

Monero (XMR) Token Report (PDF)

Monero (XMR) Model (XLSX)

Monero is a privacy-preserving cryptocurrency based on the CryptoNote protocol. Its key components are anonymity, security, and fungibility. Recipients and senders of Monero use unique, one-time only, public keys for every transaction. These are called Stealth Addresses and mitigate the risks of wallet data mining, a non-trivial concern of Bitcoin users. Another feature, Ring Signatures, is also used in every transaction and is made by fusing a transaction’s actual signer with a group of random signers pulled from past transactions in the blockchain. This masks the true identities of the sender and receiver.

Elixxir Report

Elixxir Report (PDF)

• Elixxir is the brainchild of David Chum, who is a digital currency pioneer and widely regarded as the “Godfather” of the cypherpunk movement.

• The Elixxir Technical Brief, the only document the project made available at this point, broadly describes one the most ambitious system architectures we have analyzed.

• The backbone of Elixxir’s system is a robust network protocol that facilities both anonymity and scalability. We find the proposed Mix Network particularly interesting, as most innovations in the space today focus on either the database layer or the application layer.

• Consensus, Sybil-attack protection, and governance is described as a unified system that looks a lot like Delegated Proof-of-Stake, a structure we’re concerned may have negative externalities.

• While the novel system described in the Technical Brief is fascinating, we should note that, like much of David Chaum’s early work, Elixxir may be a revolutionary idea too early for its time. To make stronger assessments on its technology, we would have to perform deeper due-diligence and review its codebase, which is not available at this time.

Zcash (ZEC) Report

Zcash (ZEC) Report (PDF)

Zcash (ZEC) Model (XLSX)

Zcash is a privacy preserving digital currency and the first to use Zero Knowledge Proofs to obfuscate the identities of parties to a transaction. Zcash uses zk-SNARKs, a variant of Zero Knowledge Proofs, to prove that the conditions for a valid transaction have been met without revealing any crucial information about the addresses or values involved. Even though Zcash transactions require additional computation to be processed, the architecture of its blockchain guarantees a level of privacy that cannot be matched by other privacy-preserving technologies, including Monero’s Ring Signatures. The protocol known today as Zcash was initially developed under the name Zerocoin, a collaboration between researchers at Johns Hopkins University, a group of cryptographers at the Massachusetts Institute of Technology, students at the Israel Institute of Technology, and Tel Aviv University. The genesis block of Zcash was mined in October 2016.

Laws and Regulations

SEC Fund Innovation Report (PDF)

Senate Banking Committee Hearing on Virtual Currencies (PDF)

How OFAC's Guidance May Negatively Impact Token Fungibility (PDF)

Origin Stories: The Term "Utility Token" (PDF)

CFTC Issues Advisory for Virtual Currency Products (PDF)

SEC Director's Remarks on Token Sales (PDF)

The Uncertain Tax Implications of Cryptocurrency Forks (PDF)

SEC Registration Trends for ICOs (PDF)

Rescission Rights for ICO Purchasers (PDF)


Bitcoin, at its heart, is a technology and the U.S. government generally does not regulate technologies themselves, but rather, how technologies are used. For example, PayPal is regulated as a money service business because it enables the sending of money over the Internet, but the Internet itself is not regulated as such. Not surprisingly, the U.S. Congress and many U.S. federal and state agencies, including the SEC and the CFTC, have begun examining the operations of digital asset issuers, their Users and the market for digital assets, and have claimed authority to govern various aspects of the digital assets ecosystem. 

It is not always easy to determine which agency has governing authority. For example, a CFTC commissioner recently said that digital assets “may actually transform at some point from something that starts off as a security and transforms into a commodity.” The CFTC determined in 2015 that bitcoin is a commodity and that fraud and manipulation involving bitcoin is within the purview of the agency. However, financial products linked to the value of digital assets, including bitcoin, may be structured as securities and subject to U.S. securities laws. In addition to complying with federal laws, bitcoin-related companies must also comply with state regulations, some of which are tailored specifically to digital asset activity, such as the “BitLicense”, which was created by the New York State Department of Financial Institutions in 2015. Still, because Bitcoin is a global network, the laws and regulations from jurisdictions around the world are applicable and how countries approach digital assets range from clear regulatory guidance and approval to outright bans on digital asset ownership.

Cardano (ADA) Report

Cardano (ADA) Report (PDF) 

Cardano (ADA) Model (XLSX)

Cardano is a high-profile smart contract platform and one of our favorite projects that we have analyzed. The platform is under development by IOHK, a blockchain consulting company led by Charles Hoskinson, the former CEO and Co-Founder of Ethereum. The team behind the project is technically competent and we have been impressed with their current and proposed technology. We caution investors that Cardano is still in a very early stage. There is a native token, ADA, and a standalone network, but all validating nodes are controlled by the project’s creators and the current iteration of the platform does not feature smart contract execution. Furthermore, many technical and economic decisions have not been definitively decided.

Aion (AION)

Aion (AION) Token Profile

Aion is a project focused on blockchain interoperability, or the ability to seamlessly exchange of tokens from one blockchain to the other, through its own intermediary network. Prior to founding the project, Aion’s co-founder, Matthew Spoke, was an accountant at Deloitte. While there, he wrote a paper describing the ways Bitcoin could eliminate the need for professional accountants. Deloitte’s CEO was particularly interested in the paper and decided to start a research lab that focused on blockchains. Spoke was a part of this research lab until June 2016, when he left Deloitte to join the Muskoka Group, a blockchain discussion group. Many Ethereum co-founders were members of this group and being in Toronto allowed Spoke to be involved in the early stages of the Ethereum project. Spoke is also on the Board of Directors of the Ethereum Enterprise Alliance and Nuco, the company developing Aion. The project’s technical implementation is based on the Ethereum Virtual Machine,  and it uses Zcash’s Equihash in its consensus algorithm. Aion launched a mainnet in April 2018, but its initial version does enable any degree of interoperability.


FOAM Token Sale Report (PDF)

  • FOAM is an intriguing project attempting to cryptographically prove the locations of entities through its “Proof of Location” protocol.
  • The cryptographic assurance of location is an important element for many smart contract use cases and existing infrastructure is inadequate for many proofs of location.
  • However, we are concerned that the FOAM token initially does not have enough use cases to create a robust two-sided market.
  • At launch and during the initial Static Proof of Location phase, the use cases for FOAM tokens will be limited to staking tokens on a Token Curated Registry or to “signal” the need for beacons.
  • The Dynamic Proof of Location phase is expected to introduce more opportunities for token use cases, but there is no guarantee that the project ever advances to this stage.
  • If FOAM is able to successfully create Dynamic Proof of Location, we believe there is an opportunity for some short to mid-term token appreciation.
  • Additionally, if Zones decide to exclusively accept FOAM as payment for Presence Claims, we believe there is opportunity for a healthier long-term market, but there is again no guarantee that this will occur.

Ontology (ONT)

Ontology (ONT) Token Profile

Ontology is a public blockchain project that aims to build a decentralized trust system where individuals and businesses can construct varying enterprise applications that leverage the blockchain data structure. It attempts to achieve that by repurposing many technologies originally developed by the NEO project, such as NEO’s virtual machine and Go-lang client. In essence, Ontology’s architecture mimics NEO’s smart contract platform, but with a focus on identity management and enterprise applications. There are many connections between the founders of the NEO project and Ontology. Notably, Ontology’s development company, OnChain, is also the main entity behind NEO and the both projects share team members. The Ontology blockchain utilizes a Verifiable Random Function (VRF) in addition to Delegated BFT in its consensus algorithm. This combination of Proof of Stake with VRF, and Byzantine Fault Tolerance consensus allows validators to create new blocks every 10 seconds. Like NEO, Ontology uses a dual token mechanism in its network; ONT is used as medium of exchange and in Proof of Stake, while ONG is used for transactions fees (gas).

Ontology (ONT) Report

ONT In-Depth Report (PDF)

Ontology is building a platform to make it easy for any type of business to develop and deploy their own blockchains and decentralized applications. Ontology calls itself a “peer to peer trust network” that allows all entities in the ecosystem to seamlessly trust each other and work together. The project was conceived by the Chinese blockchain development company, Onchain, which also created NEO. Onchain, NEO, and Ontology are separate entities, but Ontology is based on NEO’s architecture. Most of Ontology’s technology is forked directly from NEO, including NEO’s dBFT consensus algorithm, compiler, and virtual machine. It also largely repurposes NEO’s Go-lang client and adds a set of core protocols focused around identity management and data storage to provide a foundational layer to build trusted applications.


VEN In-Depth Report (PDF)

VeChain proposes to use the immutability of blockchains to store non-financial data through a tokenized system. Specifically, its Thor Core client was designed to store supply chain data and execute relevant applications based on smart contracts. This client is largely based on Geth, the Go implementation of the Ethereum protocol, but with changes to support an alternative consensus algorithm called “Proof-of-Authority,” which relies on a validator’s public identity and reputation. If a validator misbehaves, it is excluded from the network and its public reputation is tarnished. However, there is no collateral forfeiture or “punishment” other than loss of reputation, which we view as a key risk of the project. Like Ethereum, it uses the Ethereum Virtual Machine for the computation of smart contracts. While this design choice makes it easier to bootstrap the network, we note that, like Ethereum, Thor Core is unable to perform API calls, which may limit some of its advertised use cases.