September 24, 2018

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Meet Zen Protocol – The Financial Assets Blockchain



Even before it ends, 2017 is currently the biggest year in terms of market cap gain for the cryptocurrency space. This massive growth gave birth to many new projects. Zen Protocol is one of the more interesting projects we have had the chance to review. This project brings serious competition to the field of smart blockchains and smart contracts and adds financial purpose to it.

Zen Protocol is building a custom blockchain, focused on financial applications and smart contracts. The platform’s development process puts its emphasis on the financial aspect of the blockchain by handling new tokens as first-class currencies, staying in sync with Bitcoin’s network, utilizing oracles for real-time stock market and other data, and providing financial instruments without the need for a middleman. In addition, many classic blockchain-based applications issues are addressed in Zen’s own unique manner.

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Unlike other projects, Zen Protocol brings a working alpha product which has been going through development for more than a year now. Zen Protocol’s alpha testnet can already be played with.

We had the pleasure of filming a video interview with the team’s CTO, Nathan Cook, and one of Zen’s core developers, Asher Manning. Interviewed by Max Rochman.


Starting off with a general question, how did you guys first hear about Bitcoin and blockchain technology?

Asher: So I first heard about Bitcoin some time in 2011, I wasn’t very interested in high tech, privacy and anonymity. I got more involved in cryptocurrency in 2016, when we I met our CEO Adam Perlow. We discussed the Zen project and decided to move forward with it.

Nathan: It was 2011 as well when I first heard about Bitcoin it was on a site called “less wrong.” The site turned into “effective altruism”, a bunch of futurist guys talking about radical new ideas and Bitcoin was pretty out there in 2011. So yeah, it was very interesting and I put it down, and went on with my life for couple of years and in 2013 I met Adam and he was also interested in Bitcoin. We started doing stuff in this field. Since then we’ve been working together on Bitcoin and now on Zen Protocol.

Can you just elaborate a little bit more on the background of Zen protocol? How did you guys create it? How did it get to where it is today?

Nathan: Zen is from work that me and Adam been doing for the past couple of years. We saw that there was a problem to be solved where you don’t have financial assets with same sort of security as you do with digital money, like to buy a bitcoin. We thought that we could create something that would actually solve that problem, something that would provide financial assets with decentralized security. That’s how we got started. We’ve been working on it for a little over a year full time now. We brought a few people on and at this point we’ve got a working alpha and working demonstrations. That’s how we got to this point.

Your solution is parallel to solutions such as Ethereum and Tezos, as all of which deal with asset creation and advanced code execution. Can you explain that in simpler terms for everyone in the audience to understand exactly what you guys are doing?

Nathan: So creating assets is about financial assets like stocks, swaps, bonds, and things like that. Tezos can do that, Ethereum can sort of do that. But what we see is that these other blockchains don’t really have a lot of financial applications or financial usage. We think that’s because they weren’t designed specifically for finance, that’s what we’re doing at Zen Protocol. We’re making a blockchain for finance. Things that have to do with assets and so on, it is dealt with at the lowest level possible so it all just works very naturally. We also connect to Bitcoin, so you can use Bitcoin value on the Zen Protocol and that’s something where we’re different from other smart contract solutions out there.

Can you break down all the competitive aspects and modules of your solution and provide a quick simple explanation for each one them?

Asher: There are several functions we have with smart contracting platforms. We’ve designed ourselves to be able to scale better, to have better security facilities and we’re far more specialized for finance which is our target use case. We aim to be able to have higher transaction throughput, faster smart contract execution, with parallel smart contract execution so that we can we can process a lot more than something like Ethereum can. We have much stronger security capabilities because we see hundreds of million dollars lost, I think over a billion dollars have been lost so far this year, through bugs in Ethereum smart contracts. This is a serious, serious problem so it’s worth investing in trying to find solutions to it. A lot of our architecture is chosen to try and enhance our security over other platforms and we are far more specialized for finance and we have first class tokens, so that we can issue assets that actually behave more like assets rather than just entries in the database. We have a separation of assets from that contract as well. We’re focused on trying to have crypto-assets behave more like one would expect an asset to behave, we have strong collateralization features, we can collateralize in Bitcoin much as ZEN. We can also collateralize in other tokens. We think Zen has all the necessary prerequisites to be a large-scale financial ecosystem.

How is your general vision and ambitions for this project? Where do you see this going?

Nathan: In general, we’re trying to bring financial products, assets, and stuff like that, where you don’t find it right now, so it can be for more people, people who don’t have access to these products apparently. It can be a new source of products, can be things related to cryptocurrency, they can also be for stuff where there is too little volume right now, or very strange sounding projects or things that are just too unusual for someone to think of. All these ideas of generating new sorts of assets, anything you can think of. You can program, you can turn it into a secure asset, a secure object that’s tradable. That’s the sort of thing we’re trying to do. That’s where we are going with this, having an open decentralized way of exchanging and trading and creating financial products on a blockchain.

How do you see the company in three years from today?

Asher: Three years from today, hopefully we’ll have grown a little bit. We want to be maintaining Zen for a long time, we’ll be making sure that it’s always best in class for this kind of application. We want make sure that we have sufficient outreach to parties who might be able to improve the financial ecosystem by providing things like liquidity. That’s more or less it.

Nathan: I think in three years we’re really about to see some increased integration with Bitcoin so that you can have all these sorts of contracts like automatically using Bitcoin and a much smoother experience than you can get today in any blockchain. As I’ve said, we’re going to be maintaining this product, maintaining an exemplary score but we must have a fee plan as well. We want to have a broad base of developers beyond the guys who created it. It’s expanding to open development which is the only way we can use it as a decentralized protocol.

Can you explain a bit about pay-per-block? The system?

Nathan: Yes, this is about contracts, creating contracts. When you create a contract it takes up space in the blockchain. Think of space in the memory of people who are using these contracts, people just verify what happened in the blockchain. Essentially it also represents computational cost, representative costs are actually bringing the contract, let’s find out what happened, and all of these costs are born firstly by miners, people securing the blockchain, securing the history and secondly by users, because users have to pay miners to do anything. Pay-per-block means that when you create the transaction it creates a contract. That contract comes alive and then lives in what we call the active contract set until it runs out of funds, then it becomes inactive. Meaning that it only runs while it’s paying for it’s own existence. Of course later if you want to use the contract in any business, reactivate it or turn it off again, so while it’s inactive no one has to track it or do anything so it makes it cheaper. This is something that a couple of people proposed something similar, rootstock for instance. Our system makes it very easy just to switch it on and use it exactly as it was when you sent it off.

In your whitepaper, it states that the Zen Protocol controls where state can live with limited expectations. The only mechanism is to put data in the transaction outputs. This is similar to Bitcoin and distinct from protocols like Ethereum and Tezos which allows contracts to store data in a global store. Contracts in Zen are immutable. They can store their state and transaction outputs but their source code never changes. Can you address all the differences mentioned above? Mutable contracts and putting data in outputs, in comparison to Tezos and Ethereum?

Asher: Yes so this is kind of a more functional view of state. We expected that this problem would be that every contract invocation would consume an old state and produce a new one rather than just modifying states. So you never actually modify any state, you just take all old ones and produce new ones. Nothing ever actually changes and this is important because state has been a frequent source of vulnerabilities in things like Ethereum. We saw with Parity, the past two large scale parity bugs have been due to a contract state. The most recent ones because the state of the library contract was changed to make it into a wallet. Not having state is the best way to avoid bugs involving state. There’s very little reason to need state within contracts or a mutable state. In fact it is necessary to be able to persist data between contract invocations. Tezos has a method for doing this where people pay full storage, contracts pay full storage between their invocations, this is a, more or less, equivalent to storing state on transaction outputs. Except Tezos state is not actually part of the consensus, it’s something that’s acquired by running Tezos contracts whereas in Zen, states are actually stored on transaction outputs which makes them visible to the network. So suppose you’re running a wallet or something that isn’t a full node, something that isn’t validating the entire blockchain you can still see the last state of a contract from its outputs, rather than having to actually run it to see what it’s output was.

Nathan: One more thing to add, a big problem is shared state, global shared state. If one contract is sort of changed by what another contract is doing that’s where these focusing again, it also makes it slower. It means you have to run all the transactions in order. If we’re storing state as we are, in transactional outputs, it means that contracts can usually run in parallel to each other. That means it would be running faster, get more scalability and a higher throughput on the network. So it’s security but it’s also scalability.

Do you see yourself as a competitor to Ethereum?

Nathan: Yeah, at some points. Ethereum is doing smart contracts, we’re doing smart contracts. But Ethereum is not focusing on the financial use cases as much as we are. Ethereum is a world computer, where we are a financial system. Everything we do is designed for finance with financial products making it easier to write secure financial products, and that’s some of the products on the technical side. There’s another side too, which is the money side, Ethereum is trying to be additional cash like Bitcoin. We’re really not, we’re being a system for trading assets that connects to Bitcoin so that you can use Bitcoin value. So we’re not competing to be the next money better than Bitcoin and all that stuff. All the stuff that Ethereum is occasionally making claims about. So in that sense we’re not really going after the same market and we’re not going after people who are looking to find the next digital money we’re going after people looking for a decentralized financial system.

Next, multi hash mining. What is it? Are you concerned about it?

Nathan: Multi has mining is something new, something that we came up with it at Zen. The idea is that you can have lots of different functions to mine the blockchain. It’s like in Bitcoin you got sha-256 square. Ethereum has got another algorithm, there are several different algorithms. What we use are quite a few of them and you have your option as a miner for every block which one you choose to mine. That’s the basic idea, there’s some other stuff where you have voting. People who hold the native ZEN token, they can vote on which functions they want more, to see more of and which functions they want to see less of. This adjusts the difficulties so that the idea is that you get these blocks by the right functions, in the right proportions. The advantages are that it lets token holders have a say in how they want their blockchain to be secured. They’re not just using a take it or leave it system anymore. You can give feedback but at the same time it is still secured by hash power. So miners are still doing work, real work, in order to provide

security. Downsides; there is one difficulty, one problem, that might be the case, we

don’t quite know yet. Which is that in something like Bitcoin we’ve got a single function, there’s certainly difficulty. It’s the same. Here you’re summing up different things, so over a long period of time, it might be possible for someone to mount a very long range attack, to mine lots of blocks in the same function. But, if this happen it will be very obvious, it all affects a lot of history. You can’t just do it on the fly, I think that it would be addressed quickly if it did happen. So this is something that would happen over a period, you’d have to have months and months of transaction history, so a huge amount of money investment, to do it and even after you’ve done it, you don’t know if the community of Zen holders will just ignore what you’ve done.

Asher: Even though this kind of thing can be controlled with statistical measures. Nathan: Sure, I mean, that’s the sort of thing we looking into right now, assessing it. That’s like the main issue there. Everything else it’s just like regular proof of work mining, just with more than one different function as a possibility.

Many people express their opinions about the energy wasting aspect of proof-of-work mining. As Bitcoin and other blockchain systems try to improve the terms of the financial world, they also contribute to environmental damage in the form of energy waste. Do you have a take on this?

Asher: I don’t think we’re so concerned about the environmental impact. The economics of proof-of-work makes a lot of sense, there’s a reward for people mining so naturally they’re going to invest resources up until the point where mining is barely profitable. In a good competitive market this is what we see happening, you have about four major mining groups in Bitcoin, they’re all extremely large and have a very high investment of resources, particularly in how much energy they’re using in order to mine. This makes sense, the Bitcoin they are mining is valuable, because they are expending resources to extract it. Proof of stake doesn’t have this kind of economic argument. It’s a kind of inflation where new money is created without any kind of economic value being created. It’s also far less secured, having to do a large amount of work in order to secure the blockchain, means that it’s very difficult to forge entries into the blockchain. With a proof-of-stake system this becomes much easier because there’s not as much difficulty involved and there’s not as much competition between people which incentivizes them to invest resources in actually mining competitively, rather than trying to lie.

Nathan: I would say that any economic activity can have externalities. Things like bad things that happen to other people as a result of what you’re doing. The externalities of creating energy which is effectively what proof of work is incentivizing. They are well known, you can have green power, you can have not so green power. You can quantify it, you can offset it, that’s the sort of thing that would happen in a way.

However that energy is being created for whatever purpose, the externalities are well quantified and they can be addressed. In the case of proof-of-stake all the externalities might be externalities that are effectively social and there’s the idea that you’re going to reward early holders or people who currently hold these tokens with being able to have a levy, a tax, on anyone who uses a protocol and you get a rich get richer in fact. And that’s the sort of thing you can’t really address the same way as you can with carbon offsets. It’s inherent to the protocol and quite apart from that proof-of-stake, doesn’t work properly, well hasn’t been shown to work properly and provide the same sort of security.

As we all know, getting real world data onto blockchain is very difficult, how do you guys find a solution to this?

Nathan: So there are a few ways that people come up with ways to do this, you can have people vote on it, you can have people make it an enforced part of your protocol. Our solution is a little bit different, our solution is people announce, using what we call an Oracle a commitment, something that they can’t alter about the data they want to sell on-chain. This commitment is small, it’s only a few bytes, which means you can make a lot of it, can commit a lot of data and you can do it frequently. Then later when you want to use an Oracle, all you need is a proof. A proof that they committed, its Oracle committed to the right data. An Oracle can sell you that kind of payment. It can sell you not only the commitment; it can sell you the proof. It can say if you send me data then I can automatically send you the proof and I don’t get the money unless I actually give you the information. So you don’t have to trust them so much anymore and you can use more than one Oracle as a backup and your Oracles get paid and like I said your commitments are efficient. Which is also quite a bit of a problem. If you think about committing to let’s say, stock prices there can be thousands of stocks and the act ticker can be every second so that’s pretty much impossible to put all of our information on to a blockchain. But if you only want to trade on three or four prices that happen in any one day, and you don’t know which prices they are and we’ve got the right solution because you can commit to all of them in a few bytes and then only use proofs for those three or four things that you actually do. This uses pretty standard technology, mobile proofs, Merkle roots, same stuff that Bitcoin uses for its transactions. We have a few extra bits, technically a new data structure to make it richer and more efficient to update these proofs. So it’s proven technology and it’s efficient.

Can you talk a little bit about Zen’s security features?

Asher: Yes, we’re very aware of all the different security issues that are faced by the blockchain smart contract platforms. So we’ve talked earlier about problems with them having shared states. What we are virtually believers in as well is language-based security, one of the problems you have in other smart contracts platforms is that the languages people are using to write contracts are very difficult to use if you want to write secure code. It’s very difficult to write secure code in saying, Solidity, which is the main language people use to program Ethereum. It’s very difficult to test contracts as well. There’s just no proper tooling set up to do this, it’s very hard to audit this kind of code, very, few people understand the internals. All these languages mean that there’s a lot of bugs in these contracts. We’re interested in language based security which means we’re trying to use our programming languages to enforce security properties. As I mentioned earlier and we’re able to prove properties about programs using our programming language, this can extend to security properties so you might want to prove things about an authentication for a contract you might want to prove something about the conditions under which it pays out. Like a proof. Something pays out if an idea of certain conditions are mapped and will only ever pay out certain amounts and then these kind of proofs are very… It’s not like anything else that someone might be familiar with in the software world. It’s not like unit tests, or anything like that. I’m not testing a bunch of cases, you’re actually formally proving something. Often this can be done by automatic theorem provers but users also have the ability to write their own proofs by hand if they need to, or want to. So they will be able to state arbitrary properties that they are interested in, try and prove them and then other people can trust those proofs as being reliable. If the assertions people are making in their contracts are not true then these contracts will fail to compile or fail to execute. So you have a strong degree of trustworthiness from this kind of language based security.

 Roadmap

The company’s past roadmap is full of goals Zen has already achieved, from the creation of Zen at Q3 2016, through improving and adding core features, up to the implementation of them into the testnet in Q4 2017. Below is the current roadmap, which includes a release candidate version in Q1 2018, genesis block creation in Q2 2018 and the creation of an ecosystem in Q3 2018. The items are well described, it is recommended that you fully review the roadmap and its items.

roadmap

Competition

Zen Protocol is competing in the most lucrative category within the blockchain space – the “Blockchain 2.0” category, which talks about the evolution of the blockchain from being a simple mean for storing currencies and their transfers, to being a platform which runs code on nodes around the network, thus enabling the ability to create decentralized applications and smart contracts.

As most of the differences are quite technical between each chain, we will provide a short description for each of the strongest competitors out there.

Ethereum

Anyone who reads this article has probably, at least, heard of Ethereum. Currently placed as the 2nd most valued cryptocurrency in the planet (by market cap), Ethereum is a smart contracts platform which led to an extreme increase in token sales. It is using Solidity as its contracting language and the ERC-20 standard for issuing new tokens. Unlike Zen Protocol, tokens are not an integral part of the platform, but a patched code which enables them. Ethereum currently uses the Proof-of-Work mechanism but plans to shift over to using Proof-of-Stake.

Tezos

Tezos is a custom blockchain which is currently under development. On July this year, the team behind it raised an insane amount of $232,000,000, which, at the time, broke the record for ICOs.

The main objective for Tezos is to create a new digital commonwealth which uses a built-in consensus mechanism. This mechanism allows changes to the protocol without initiating any hard forks. In addition, it is using formal verification, a technique which proofs the correctness of smart contracts and code. The planned mining method for this blockchain is the Proof-of-Stake consensus algorithm.

Cardano

Cardano is a research and philosophy driven decentralized smart contracts and decentralized applications platform. According to the project’s website, it seeks to build more advanced features than any other protocol. It is using the Proof-of-Stake mechanism as well.

NEO

Formerly known as AntShares, NEO is a Chinese-based blockchain project which handles smart contracts, digital asset management, and digital identities, in order to create a “smart economy”. NEO has seen huge price swells, as it was seen as the “Chinese Ethereum” and was also affected largely by Chinese regulation. The main cryptocurrency, NEO, represents a voting right for changes in the protocol, practically representing a share. GAS is the coin that drives its economy. Holding NEO will automatically produce gas for its holders. NEO cannot be mined, it is using nodes for verifying transactions, and holding NEO to produce GAS.

Those listed above are the main competitors of Zen Protocol, but naturally, networks for assets creation and smart blockchains are very common. We chose to present you with the top leading networks we believe worth mentioning.

In Conclusion

Zen Protocol is a very interesting project. It aims to build a smart blockchain which puts its focus on finance. The platform is built especially for issuing tokens, which means that tokens will have more options and power, such as having the ability to pay network fees by using them, instead of using the native network currency. The team behind the project elegantly approached scalability issues, contract runtime issues and resource management in a way that could give this platform the required edge. The fact that an already running alpha version is available, and that the team has been working on the product for more than a year, provides a positive light for this project which is competing in one of the harshest sectors of the blockchain industry.

ICO Details

Starting Date: November 30th, 2017

End Date: December 30th, 2017

Hard Cap: $30,000,000

Price: 1 ZEN = $2.75

Total Future Supply: 100,000,000 ZEN Tokens

ICO Token Supply: 20,000,000 ZEN Tokens

Accepted Currency: BTC

For more information

Zen’s website

Zen’s whitepaper

token_allocation

 



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