Bridging Traditional Finance and Decentralized Finance
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PROJECT: AllianceBlock
TICKER: ALBT
FOUNDED: EU, August 2018
WEB PAGE: allianceblock.io
DOCUMENTS: Whitepaper & Tokenomics
FIELD OF INTEREST: DeFi regulatory and compliance standards protocols
SHORT DESCRIPTION: AllianceBlock is allowing traditional off-chain finance to enter DeFi while providing layer-2 regulatory and compliance framework.
GOAL: “Since AllianceBlock was founded in August 2018, the scope and ambition of our decentralized capital market solution have expanded immensely, as a result of some of the insights and partnerships we formed, as well as the strong institutional and retail interest in our ecosystem. Our goal is to democratize access to investments and give traditional finance (TradFi) firms and SMEs a way to access the blossoming DeFi industry while remaining compliant across all jurisdictions, by allowing firms to easily connect with blockchain applications and launch their regulated tokens. “
CHAIN /TOKEN TYPE: Ethereum / ERC-20
CONSENSUS MECHANISM: Hybrid protocol consensus with Proof-of-Authority (PoA) and Delegated Proof-of-Stake (dPoS) where PoA contributes to the compliance factor, while dPoS helps with decentralization.
LIVE MAINNET & SCALABILITY [TPS]: testnet planned for Q1 2021, mainnet for Q2 2021
DEV ACTIVITY (Github): no Github available
Explanation about code availability and open sources by one of the community managers in Allianceblock’s official Telegram channel: “We have the code of the Proof of Concept, but it is not running now. Mainly because of the last few months as AWS was costing us a lot. We will make parts public though, but not all. In the end, some are mandatory, especially for the API and the data-centric parts of the protocol. The rest of 2020 is going to be filled with technical development and ecosystem growth. We are aiming to have our V1 protocol live by Q2/Q3 2021, so our coders will be busy making countless Github commits.“
AllianceBlock smart contract was fully audited by CertiK, one of the leading and most established blockchain security verification companies.
Matthijs de Vries, Founder & CTO AllianceBlock: “Smart contract security is of vital importance to our blockchain ecosystem. When you invest in a token, you want to be safe in the knowledge that its smart contracts are secure in every way. CertiK, a leading blockchain security company, has an outstanding reputation and together with their great attention to detail and deep knowledge we made sure to achieve exactly that.”
Based on the audit, ALBT tokens smart contract ensures a high level of security. Yvan Nasr, Head of Professional Services, certik.io: “AllianceBlock’s codebase displays a high degree of technical expertise and engineering discipline. A series of assessments focused on identifying code patterns commonly associated with smart contract vulnerabilities were carried out during the audit, and we are happy to conclude that AllianceBlock’s smart contract abides by high-security standards. We look forward to collaborating with the team shortly.”.
PRODUCTS: AllianceBlock released their Decentralised Investment Platform MVP in late 2018 and their Brain PoC called The Wisdom of Crowd in 2019. I was amongst the early testers for both platform and app. These two products were made before AllianceBlock pivoted to building Prometheus regulatory protocols and the future usage is currently not known to me.
AllianceBlock Prometheus Testnet is planned for early 2021 release with a later release of the mainnet in the following months.
EXISTING CUSTOMERS AND USERS: There is no product available at this point but first clients should come after the Mainnet launch in the first half of 2021.
COMPETITORS: Several blockchain protocols are connecting the TradFi and DeFi by being regulation compliant. There are also identity protocols dealing with sensitive and private data that need to be compliant with the regulations. But there are no other projects is pursuing the same as Prometheus protocol is solving with its layered architecture of regulatory and compliance layers.
TEAM:
*Rachid Ajaja, Co-founder and CEO. Rachid worked for 10 years in investment banking as a quantitative analyst and risk management consultant in Barclays Investment Bank and PNB Paribas. Rachid had a position as a Sr. AI Researcher in VINCI building smart infrastructures. He is also an active venture partner in an Alpha Omega Capital, tokenized Asian VC fund.
*Matthijs de Vries, Co-founder & CTO. Matthijs is an experienced developer and software, development manager. He worked as a software developer and consultant since 2001. He is also a serial entrepreneur as he founded and managed three companies. Matthijs has currently active another position as an Editor in media production company ZB.
*Dr. Amber Ghaddar, Co-founder. Amber is a fintech expert. She spent 6 years working in the capital markets for a JPMorgan bank. Before that, Amber worked in Goldman Sachs as an investment researcher for about a year. Amber holds a B.Sc in Science & Technology, Three Masters (Neurosciences, Microelectronics & Nanotechnologies, and International Business) and a PhD in Molecular Medicine. She is a graduate of McGill Canada and HEC Paris.
*Johannes Schoster, CM. Johannes has focused on digital business management and development. He is an experienced fundamental analyst interested in blockchain companies and a consultant of startups entering the secondary markets.
The team has hired several developers as well which is essential. Currently, they have 6 experienced developers listed on their web site.
Rachid Ajaja: “I started as an investor in crypto back in 2017. This is the year when I did my first ICO! After that, I made many more investments and saw the problems related to ICOs. s. This is when AllianceBlock started, after meeting Matthijs in a telegram group where we discussed the problems we both saw. We aimed to build a decentralised investment platform with milestone-based financing for projects. Amber joined us with her extensive experience in traditional finance. We then, after meeting many financial institutions saw that we can provide a solution that can bridge both worlds and this is how our current vision is being built.”
Amongst the advisors we can find some interesting people. David Atkinson who is in Executive team at Holochain and is a Co-founder Blockleaders. Anders Christensen is a head of the Avaloq ecosystem, the largest Core Banking System provider in Switzerland. Based on him there is a lot of interest in DeFI from traditional players such as private institutions, investment banks, and wealth managers. Anders might be one of the most important advisors of AllianceBlock. Six other advisors come from the financial sector — fintech, banking investment and funding.
PARTNERS:
*Holochain became a partner in 2018. David Atkinson, a CCO of Holochain became a Strategic Advisor. AllianceBlock wanted to build their social network of investors and its collective intelligence called The Brain on the Holochain. The Brain was supposed to be based on the proof of reputation. Could we see Augmented Collective Intelligence dApp build on Holochain?
Holochain might be a part of Prometheus protocol and be used for data management and GDPR compliance. It will be interesting to follow future collaboration.
*Quant to leverage Overledger infrastructure for cross-chain interoperability as a layer to swap with fiat/stablecoins as well as enable multi-chain token swap. Currently, AllianceBlock platform is bootstrapped with Ethereum Network but might switch to Quant and Holochain as a blockchain agnostic layer-2.
*AIKON to implement user identity management system.
“As part of the partnership, AIKON will assist AllianceBlock with implementing ORE ID as a key part of AllianceBlock’s identity management system, and AIKON will join the AllianceBlock ecosystem as a preferred partner in the Identity & Privacy category. Once integrated, ORE ID will allow users to access AllianceBlock’s services in a single click, opening up investment opportunities to the masses.”
*AllianceBlock has applied for Binance grant for DeFi projects focusing on interoperability
*Joined L39 Fintech Accelerator Station F, and Kickstart Innovation
*Kyros Ventures to raise awareness amongst the Vietnamese crypto communities.
*TopJuan Tech Corporation (TCC) to join forces on the development of a regulations compliant digital asset ecosystem in the Philippines. TCC is a financial tech company that will be working with Central Bank of the Philippines (BSP) to provide regulatory compliant digital finance solutions for TradFi. AllianceBlock will provide the cross border regulatory compliance framework.
*Orion as liquidity aggregator provider.
Alexey Koloskov, Orion CEO: »Together with @AllianceBlock we’ll provide the likes of private banks, wealth managers, and funds a singular, compliant, and non-custodial point of access to the crypto market — funnelling new users and significant capital into space. Excited for this one.«
*Discussion with a big traditional stock exchange for a potential partnership (under NDA for now)
INVESTORS: In the middle of 2019 AllianceBlock raised $1M from a seed round of early investors. Another fundraising of $500k in a private sale took place in August 2020. There are no publicly known institutional investors. There was a lot of demand for private sale.
The private sale was offered to strategic investors from the community. Those who wanted to contribute to the long term vision of AllianceBlock were considered for private sale allocations. 50 individuals were chosen to take part in the private sale. Unfortunately, there was a mistake done when sending an e-mail to private sale participants. The mail included other parties in CC so the names of participants became known to the other private sale participants. The screenshot of those names got leaked by one of the participants and publicly shared. AllianceBlock immediately admitted doing this mistake and apologised for that. Human error is a very stressful period before the TGE and first exchange listings. Amongst those 50 participants, there were many publicly known individuals. Some of them are influencers or promoters with big fan bases. All those strategic investors who are promoting the project should disclose that they are invested. Due to transparency, trustworthiness and legal issues. There were also some well-connected investors, who share their allocations within their private communities. Such investors usually don’t intend to support the project they invest in, might not care about the tech background and long term vision. There might be a better strategy to choose strategic investors. Additional comments from the AllianceBlock team will be added to this research article when available.
Luke Lombe, Strategic Advisor of AllianceBlock: “On behalf of the AB team, we appreciate the enquiry into details of the private sale. Due to confidentiality, we are unable to share details of the sale, including wallet addresses. There were almost 50 individual contributors that included a range of strategic participants able to bring long-term benefit to AllianceBlock. Each participant has been restricted to a small allocation so that no one individual can have a material impact on liquidity. We recognise that there are several very similar DeFi projects emerging and seeking to cash in on the current DeFi enthusiasm. We would recommend that everyone exercises caution when participating in any kind of private or public sale. AllianceBlock prides itself on two years’ of development and its open and transparent approach to the market. You can check the teams’ LinkedIn and see that they are experienced and very real. Given that AllianceBlock is working closely with regulators in multiple jurisdictions everything must be done above board. Full audits will be conducted and information shared with appropriately qualified parties as required. We encourage you to keep asking the tough questions of all projects that attract your attention but please also be mindful that certain information may be proprietary or confidential and may be withheld. In the case of AllianceBlock, such information is only restricted to support the interests of the project, and never to obfuscate or mislead. We’re excited that you have shown an interest in AllianceBlock and look forward to your continued support as we build the world’s first globally compliant decentralised capital market.”
TOKEN USE CASE AND REVENUES:
Two streams of revenue were mentioned by the team. One revenue is from traditional users such as software provider a licensing and the other mainly from fees to be able to deal with the network (from which part of the fees will be burned). DeFi dApps will be able to use the Prometheus protocol and propose their services to the users.
Prometheus Network is powered by the ALBT token. The token utility and value should increase with acceptance as well as a deflationary tokenomics with staking mechanisms, revenue-based token burns, and protocol-based token burns. The ALBT tokens will be used as a medium of exchange, rewarding, network fee payment, data access and query payments, voting and delegating of voting power, staking and network participant ratings.
AllianceBlock is also developing a new token model framework to deal with volatility. They will create a Treasury Conversion Protocol which will provide liquidity for integrated cryptocurrencies, starting with ALBT and DAI. There will be an atomic swap option to exclude the need to trade on external exchanges and expensive gas fee costs. The protocol will include rebalancing algorithms for automated liquidity providing process. There will be also external liquidity pools such as Kyber Network or Uniswap to maintain healthy liquidity. Third-party providers will enable FIAT gateways as well.
Rachid Ajaja: »One of the biggest problems that block institutional money to come to the decentralized world or invest in security token is of course compliance with regulations but also and most importantly no possible recourse or dispute. Now imagine a regulatory and compliance layer that is plugged to the CSD (Central Security Depositary). When you have a share sitting on the CSD, you create a token (see it as derivative of the shares), this token can be traded in a decentralized market, but each transfer it will be communicated to the CSD via our API, and each trade will be compliant as the check are done pre-trade. Like this institutional des with the security as they always do, but you add this extra layer taking benefit from the blockchain. This is a first step to bridge the two words and is part of the solution that we are proposing.
Another example that shows the potential bridge between both entities is the following.
Imagine a High Neth Worth Individual which is a private bank client, as we know HNWI are asset rich, cash poor. This HNWI has a property or an art piece worth few million of dollars and he want to put it as collateral to have a short term loan financing. The banker may not want to have this on his balance sheet. The banker will use our protocol to connect to a peer to peer lending platform ( a DeFi app), he will get the amount of loan asked (in general to not have bigger risk, the amount is 50% LTV (Loan to Value) from the peer to peer network. The lenders will get an interest rate, the banker gets a small margin, and the HNWI will get his short term financing. Our protocol will be also used to make sure that all lenders are compliant with regulation with our automatic-check mechanism. The banker, in this case, manages to make his client happy, he gets a margin, shifted his balance sheet, and increase asset under management. Here we see the potential of bridging TradFi and DeFI thanks to our technology. These are two of many use case we will have.«
TOKEN METRICS:
FULLY DILUTED MARKET CAP: $85 million (considering current token price $0,085)
CURRENT MARKET CAP: $2,1 million
INITIAL MARKET CAP: $763k (with an initial listing price $0,03)
TOTAL TOKEN SUPPLY: 1 billion
INITIAL CIRCULATING SUPPLY [%]: 25%
FUNDS RAISING INFO:
*Seed $1 million or 10% of the total supply was raised in August 2019 for a token price of $0,01
*Private $0,5 million or 4% of the total supply was raised in August 2020 for a token price of $0,0125
The private sale was 12x oversubscribed. Additional info about the private sale can be found here.
*Public There was no public sale or exchange token offering of any kind
TOKEN DISTRIBUTION AND VESTING:
10% Seed — 10% after 3 months, 25% after 6 months, 40% after 9 month, 25% after 1 year
4% Private sale — 25% unlocked tokens, 50% after 1 month and 25% after 2 months
1% Initial liquidity
9% Team — tokens starting to unlock after a 2-year cliff
6% Advisors — starting to unlock after a 1-year cliff
45% Ecosystem and Treasury — tokens are gradually unlocked at an increasing pace
15% Nodes — unlock after the mainnet launch
5% Partners — unlock gradually after a 1-year cliff
5% AllianceBlock Fund — unlock gradually after a 1-year cliff
The team was very transparent and has provided all the information regarding token metrics, unlock schedule and token distribution. The had a seed sale about a year ago and raised 66% of their funding that way. Seed investors have a very small advantage compared to later private investors regarding the token price. They hold more ALBT tokens but have a longer unlock schedule. The token distribution and token metrics seem fair. The private investors had 25% of their tokens released prior to the ALBT token listing on the Uniswap exchange with the opening price of $0,03. That price would bring private investors 240% ROI. The ALBT token price peaked at $0,20 which would bring a 1600% ROI. In the following 20 days, the price slowly declined and stabilized around $0,09.
After 30 days from the token generation event (TGE), another 50% of the private sale allocation get unlocked. That is 20 million tokens which would be currently worth $1,7 million. Another 10 million tokens will get unlocked after 60 days from the TGE worth $850k and first seed sale tokens get unlocked after 90 days from TGE. Which is 10 million tokens or 10% of the total seed sale token allocation. The price might further decline due to some selling pressure of the investors (in the mentioned time frame) and stabilize afterwards.
Additional info about the token metrics and economics can be found here and the token unlock schedule here.
ROADMAP
Short term roadmap includes PoA and DPoS integration as well as Compliance and Regulation integration. Prometheus Protocol v1.0 and Testnet are planned for early 2021, while the Mainnet launch for the first half of 2021. Followed by the implementation of Data, Compliance & Regulation Layers and onboarding of Institutional Partners to form a regulated decentralised data marketplace.
SOCIAL MEDIA:
Telegram 4200 members
Twitter 3500 followers
Discord 290 members
AllianceBlock is building its brand and product with the community since their beginnings in 2018. They have lively and knowledgeable communities with the most activity in their official Telegram group. There are several community administrators always happy to help with providing all the information and prompt answers. Rachid and Matthijs always take their time for their community and provide all the explanations needed. They seem to really appreciate all the discussions. Well done.
NOTES/SPECIALS
AllianceBlock is working on a protocol to help off-chain traditional finance (TradFi) to enter decentralised finance (DeFi) while providing layer-2 regulatory and compliance framework. To accomplish that the layered regulations protocol called Prometheus, governed by a hybrid consensus mechanism, is being developed.
Proof of Authority (PoA) is a reputation-based consensus algorithm proposed by Gavin Wood. PoA has a limited number of trustworthy validating nodes who stake their reputation and leverage their real identity. PoA allows high throughput and scalability within a private, secure and regulated environment and as such seems like a perfect mechanism for Prometheus protocol which will be used for regulation-compliant data marketplace used by financial and corporate entities.
One of the biggest hurdles for financial institutions considering blockchain adoption and entering DeFi are compliance and regulations. Prometheus protocol is built for that purpose, to help TradFi with crossing over to distributed ledger technology and adopting of the DeFi solutions. A secured and regulated data layer complying with regulations where users share and validate their data with third parties in a secure and trusted environment government by different typer of nodes.
The architecture of the Prometheus protocol consists of three types of nodes:
*institutional nodes who will ensure the automated validation of transactions and cross border regulatory compliance
*data nodes for data management and compliance with privacy laws (like GDPR for example), data curations
*service nodes, for management of KYC/AML, issuers, lawyers, etc.
On top of those three nodes/layers, there will be community nodes. AllianceBlock was always a project that engaged and involved their community. They were talking about developing Augmented Collective Intelligence framework which will use community feedback and input and leverage the reputation of the users. This should be one of the pillars of the governance of their protocols. This is where both PoA and DPoS (Delegated Proof-of-Stake) consensus mechanism could work in symbiosis as Prometheus uses a hybrid consensus mechanism. While PoA contributes to security and compliance factor with selected validators, DPoS helps with decentralisation and allows a democratic voting system that is directly dependent on the delegates reputation that is elected by the stakeholders. The validating nodes must comply with the rules and regulations by staking their identity and reputation with PoA but also get the voting power with staking tokens.
The hybrid architecture of AllianceBlock protocols seems a great combination of privacy, security and decentralisation that would work perfectly for governing the introduced regulated data layer-2 solution.
What about the sensitive and private user data going through AllianceBlock layers and the platform?
»The accuracy of data is determined by specialized authorities (Financial Institutions and companies that specialize in KYC/AML checks, etc., basically the service nodes). The recurrence of these verifications are not different per se, but they are tracked on our data registry so that a participant with old data could potentially be blocked from being whitelisted until the data is reverified.
This ultimately depends on the rules in our Cross Border Regulatory Compliance Layer. The data must be validated before being stored and then the Role-Based Access Control (RBAC) mechanism will give or revoke access to data.«
All data is stored on a decentralised data registry including the hash. Access is controlled with a Roll-Based Access Control (RBAC) mechanism using the zero-knowledge proof mechanism. The only way to access that data is by user’s hash key which ensures full control over your data and no unauthorised third party access.
Another interesting highlight is that Prometheus protocol can bridge any digital and crypto asset with a traditional form of an asset. Digital assets are assigned with an international financial standard ISIN (Individual Securities Identification Number) and are the recognized global standard for unique identification of financial instruments. ISINs are used to identify most types of financial instruments, include equity, debt and derivatives. If a digital/crypto-asset gets an ISIN every regulated entity can use and trade it. This one very big push to crypto adopting.
Rachid Ajaja: »In traditional finance, there are lots of layers, old legacy systems and its impossible to change everything. The best way is to start by plugging their legacy systems to API, this is exactly what happened in retail banking and all the services proposed by fintech. For us, the first use case is the cross border regulatory compliance layer, which will be a decentralised rule engine but also API compatible, which mean can be plugged to their legacy systems and start doing the pre-trade check. this is within an organisation. Later on, you have the consortium of private banks that can create a private market between them to have more liquidity for new asset classes and this is where we will play an important role. We can not change what exists but we can build on top of it, we have to be flexible in the beginning. Once these blocks are built, they will constitute the foundation of our decentralized capital market, as these entities will become institutional nodes.
Also, we are seeing more and more banks implementing data oracles to aggregate all their source of data, this is where our data governance layer within our protocol will come into play.
There was a lot of progress lately in technological progress retail banking which could also reflect traditional financial institutions. We saw the digital transformation, the emergence of fintech companies, API on top of legacy systems and we saw the good transformation. This transformation doesn’t happen in the capital market yet. I worked 10 years in investment banking and I can tell also that just to have the right data I had to have at least 5 different systems and was very difficult. Guys like Avaloq in Switzerland, they are the top provider of core banking systems and they work with most banks in Switzerland and even internationally. The good news is that the head of the ecosystem of Avaloq is our advisor, which give us also a good opportunity to start with the 150 bank, private bank, wealth managers to propose our services. Once we achieve this first milestone it will be much easier to bridge the two worlds, but first, we need to have a concrete use case that works to have adoption and not just build cool tech and wait for people to come and use it, this will never happen. One of the biggest problems that block institutional money to come to the decentralized world or invest in security token is of course compliance with regulation but also and most importantly no possible recourse or dispute. Now imagine a regulatory and compliance layer that is plugged to the CSD (Central Security Depositary). when you have let s say a share sitting on the CSD, you create a token (see it as derivative of the shares), this token can be traded in a decentralized market, but each transfer it will be communicated to the CSD via our API, and each trade will be compliant as the check are done pre-trade. Like this institutional des with the security as they always do, but you add this extra layer taking benefit from the blockchain. This is a first step to bridge the two words and is part of the solution that we are proposing. Usually, when there is a transaction, booking systems check for compliance rules at the time of booking. Our cross border regulatory and compliance protocol allows for automatic pre-trade checks, where non-compliant transactions are greyed out, and cannot be accessed. This solution allows for a decrease in trade errors and cancelled trades, speeds up the trading process while decreasing the costs.«
AllianceBlock has a very interesting partner and community network. They are targeting upcoming booming crypto markets such as Turkey, Vietnam and the Philippines as well as EU regions. Quant for cross-chain asset swaps, Orion for liquidity, Aikon for user management ID system and Holochain which could be partially integrated into their protocol architecture. Each partner represents a very important part of the ecosystem to achieve the world’s first globally compliant decentralized capital market.
Founding team members have at least a decade of experience in fintech, investment and software development as well as business management. Working in financial institutions gave them great insight into the old legacy TradFi systems as well as hurdles for off-chain financial systems going for DLT integration. One of the main hurdles on that path lies in the lack of regulation-compliant data and assets transactions. This is one of the main reasons for them to build a cross border regulatory and compliance protocol. I believe they will need a lot of manpower to cover all the work that awaits them in this development and testing phase. Networking and connections with financial institutions, government bodies and banks are essential for AllianceBlock success and adopting. So far they seem to be on the right path. They have to reach a lot of milestones in the following months but 2021 will be their deciding year as the Mainnet should be up and running. Cryp2Gem team shall follow the progress of AllianceBlock with great interest.
It is always great to see the community involvement with the project as well as the support for them from the team. This is what AllianceBlock is doing since ever. And this is what I personally appreciate deeply.
Cryp2Gem team is always available for any further discussions in our social media. Looking forward to all the feedback.
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