Aeternity Token Sale (ICO): The Oracle Machine - Smith + Crown

Aeternity Token Sale (ICO): The Oracle Machine

Aeternity is a smart-contract blockchain specialized for on-chain oracles, state channels, and prediction markets.

Project Description

What is the project?

Aeternity is a smart-contract blockchain secured through a hybrid of proof-of-stake and proof-of-work. The team asserts it will be ready to shard (like Ethereum) for massive scalability. Aeternity’s technology draws upon several innovations from other blockchains to improve the efficiency of existing smart contract and oracle platforms. Aeternity includes the following key features.

Note: There are several features of Aeternity that Smith + Crown is still investigating, and when we receive a response from the team, we will update these explanations.

  • On-chain Oracles:  Applications like Augur have introduced decentralized oracles, but they use a separate consensus mechanism built on top of Ethereum’s. In contrast, Aeternity’s oracle infrastructure is designed to work with the same consensus mechanism as the Aeternity blockchain. Consensus nodes can play several roles on the chain: one of them is validating oracles. It appears that there will be consensus nodes that validate oracle data. If their approach works, it will allow Aeternity to run a prediction market using its native consensus mechanism. The team is still releasing additional information about the exact process of opening, challenging, and resolving an oracle.
  • Smart Contracts in State Channels: The Bitcoin Lightning Network is creating a system for routing payments through state channels–payment networks that exchange funds off-chain and periodically settle up accounts with the main Bitcoin blockchain. Aeternity proposes doing this for smart contracts. The state chain approach has several advantages. One of the biggest is smart contract privacy: because the contracts are executed off chain, actual smart contract code won’t need to be broadcast to the primary blockchain. This has the potential to increase processing capacity by allowing contracts to execute in parallel. However, because of the reduced transparency, running smart contracts in state channels requires more trust in both the contract creator and the node running it.
  • Governance by prediction markets: The emphasis on oracles makes the project well suited for prediction markets, and Aeternity proposes using prediction markets as the basis of a governance system. The Aeternity team will draw on user input to help govern the protocol itself: by having a prediction market for which protocol changes and features will lead to a higher aeon price, Aeternity will be able to gauge which changes the market wants. This could even include variables like blocktimes and block capacity. Initially, the consensus made by the prediction market will simply provide input to the development team’s decision-making. However, in the future the team plans to implement a fully autonomous prediction market governance DAO. This is an example of futarchy; the blockchain industry has seen a variation of this in Wings.
  • Written in Erlang: Erlang is a language normally used for large-scale systems that manage the allocation of scarce network resources, such as telecoms, banking, e-commerce, computer telephony, and instant messaging. Erlang has not been a common language in blockchain development to date, though it presumably should help in processing many parallel state channels.
  • Diverse node roles. There will be different nodes in the Aeternity ecosystem that help all the elements function efficiently. The functions that nodes can specialize in are consensus processes, prediction markets, state channel liquidity, exchanges, and others. At time of writing, the exact roles and functions of different nodes hasn’t been fully explained, nor have the benefits for participation.

What is the token being sold?

AE tokens function similar to ether on Ethereum: as a utility token needed to pay transaction fees and used as a means of value transfer across the network. Aeons are also required to participate in the proof-of-stake consensus process.

More AE tokens will be created through mining, although details about the initial inflation rate haven’t been released. Presumably, this is something that can be changed through a governance-focused prediction market.

At the time of writing, detailed information about the AE token, such as its initial supply and distribution, hasn’t been released.

What is the project status?

According to the white paper, most key elements have a proof-of-concept written in Erlang. Additionally, instructions for the testnet, written for Ubuntu, are in their Github repository. Smith + Crown has not run the testnet.

Crowdsale funds will be used to massively grow the development team and flesh out the remaining pieces of code.

Competition and Challenges

The primary source of Aeternity’s competition is going to come from other smart contract platforms. This includes established platforms like Ethereum, as well as other developing blockchain projects seeking to improve upon Ethereum’s seminal innovation–the smart contract. 

Aeternity’s feature set bears some similarity to projects like Qtum, which also propose a smart contract infrastructure with native oracle integration. Aeternity also might find itself competing with Dfinity, a smart contract platform that raised $3.75 million in less than 24 hours during its pre-sale. Dfinity features a governance model that uses a distributed intelligence to make decisions, in a similar spirit as Aeternity’s prediction market governance model. Both Dfinity and Qtum claim that their platform will support Ethereum dapps, allowing for easy portability of existing products and technology. Waves, Lisk, and Rootstock also support smart contracts. With so many promising smart contract blockchains currently in some stage of development, one can’t avoid asking: how many smart contract platforms can the market bear, particularly ones written in different languages? In order to be successful at launch, Aeternity will need to foster a mature community of developers to help improve and grow the platform.

Aeternity’s prediction-market capabilities will also compete with Augur, which launched a crowdsale in 2014 and Gnosis, which has announced a crowdsale in early 2017. Both will run prediction markets on top of Ethereum’s consensus process. Without more information on the mechanics of Aeternity’s prediction markets, it’s difficult to comment on the relative strengths and weaknesses of their respective approaches.

Who is the team behind the project?

The Aeternity team is composed of a number of blockchain entrepreneurs, developers, and alumni from well-known projects including Synereo, Ethereum, and Augur.

  • Founder and CEO Yanislav Malahov has been involved in the blockchain space since at least 2013. Chat records show he communicated with Vitalik Buterin about some Ethereum features back in November 2013. He was also involved in developing the first Dogecoin browser wallet.
  • Technical lead Zack Hess (formerly of Augur) leads Aeternty’s prediction market capabilities. His LinkedIn has not been updated to include his involvement in the Aternity Project, though he is quoted in articles about Aeternity by Cryptocoins News and Fintek. Zach Hess’ Github is also links to Aeternity’s github account. There was confusion around the extent of Zack’s involvement in Aeternity. In this Reddit thread, Zack (agorism1337) clarifies that he may not have officially been part of the team, but now has worked out a compensation arrangement with Aeternity and has been regularly explaining aspects of Aeternity’s technology on reddit. Update courtesy of ICODNA.
  • Science and technology lead Jack Pettersson previously worked as a blockchain developer for the Synereo project. He has a masters degree in computer science. Jack also hasn’t updated his LinkedIn or his Twitter to include his involvement in the Aeternity project.
  • The Aeternity team has eight other members listed on their website. Of them, Smith + Crown has spoken to head of Marketing and Operations Marion Vogel, head of Buisness Development Nikola Stojanow,  and Legal Advisor Lior Zysman about the project.

Token Details

Role of token: Used to pay fees, exchange value, and for participation in proof of stake consensus.
Token Supply: Proportional to amount raised
Distributed in ICO:      TBA
Emission Rate: TBA
Consensus Method: PoW + PoS

ICO Details

Sale period: First round: April 3rd, 2017 to April 6th, 2017
Second round: 45 days after first round ends
Token Distribution Date: Ethereum meta-token distributed immediately
Minimum Investment Goal:      None
Maximum Investment Cap: None
 How are funds held: Ethereum Smart Contract
 Mainnet Release Date: Quarter one, 2018
 First round price: 1000 AE per 1 ETH

Official Resources