VeriBlock: Project Review
Iterative Capital relies on a proprietary diligence process to determine what it will mine, hold, and trade. Periodically the firm releases an edited summary of its internal project evaluations, in order to educate the community on the merits of Proof-of-Work networks. These summaries take the form of a standardized 12-question rubric which is applied to all projects.
1. Is there a development budget behind the project?
The primary groups pushing this project are the shareholders of Bittrex and Upbit. Prominent advisors also play a role: Anthony Di Iorio (the Ethereum cofounder, and operator of Jaxx); Jeff Garzik and founders of Bloq; founder of Landmark Bank, which recently sold to Arkansas Bank for $96MM; Fenbushi; and Matthew Roszak (Bloq, Tally Capital, Silkroad Equity).
2. Does the team show signs of being smart and persistent?
Persistence is somewhat given, since the project itself is not new. VeriBlock Inc. was registered in 2015 by Justin Fisher, the current CEO of the company. There is little public information about Fisher. His LinkedIn shows he worked on a VoIP operation for three years until it was sold to a competitor in 2002, and he basically has been running his own family office. LinkedIn shows Andrew "Flip" Filipowski, co-founder of Silkroad Equity with Matthew Roszak, has been associated with VeriBlock inc. since its inception. Rozak was the intermediary to get connected to Bloq. In March 2017, VeriBlock, along with Qtum and Drivechains, was the first to get incubated in Bloq’s “Idea Factory.” Note this is not the first time Roszak and Bittrex’s Shihara are on the same board; in September they were both advising a “supply-chain-as-a-service” startup. I suspect Tally Capital is an investor in Bittrex and Upbit.
The main dev is Maxwell Sanchez, whom I think is the owner of the Legendary bitcointalk account “Vorksholk” (he is the only dev that has been with VeriBlock Inc. for more than 2 years). His Github activities look sparse, but it's clear he has an interest in mining and GPU utilization. His previous project Curecoin essentially rents GPU computation resources to biomedical research. In addition, he worked on a CUDA miner for PascalCoin and a GPU miner for Sia. The other two developers both joined Veriblock in December 2017.
In total, the current team has been working on Veriblock for roughly four years together, and it would appear that Matthew Roszak is the most key man behind this project.
3. Was there a premine, and what’s the motivation of the premine?
Illustration of coins distribution, per Bittrex:
Note that “Reserves,” “Future Initiatives,” and “Security Deposit” are really the same things. A proper way to illustrate the distribution should be:
-Team and advisors: 10%
-Controlled by company: 13.4%
-Sold through Bittrex: 5.2%
-”Pre-mined” on Testnets: 5.4%
-Available for PoP/PoW: 66.0%
Note that this allocation went through modification several times.
Testnet miners have been mining since July 2018 and Sept 2018 on Testnet 1 and 2, respectively. Testnet miners have mined roughly 50 million coins. Later on, as Binance announced it would be launching Intial Exchange Offerings (not of VBK, but other assets) the main “shareholders” suggested doing an IEO through Bittrex. In order to compensate miners (read: keep them happy) the team offered to “airdrop” Testnet miners’ coins to make them double.
Essentially the first distribution of coins to the public happened with the mainnet snapshot. Users who mined coins during testnets had their addresses snapshotted and received 100% more coins. The total amount of coins these testnet speculators will receive is doubled, however the additional 100% coins are in an one-year lockup. The second half of the coins is to be released once a month for three years to the same addresses, in 1/36 tranches. Hence the Testnet miners’s coin makes up 5.4% (~110MM coins).
For Testnet miners, even if they sell everything they have right now to IEO folks, in a year they will get everything back for free. Had Bittrex managed the process well (ie., with a price pop), Testnet miners would have absolutely killed it!
In “Use of Proceeds,” 20% are dedicated to “Strategic Investments," which we assume will be in companies “incubated” by Tally Capital & Bloq.
The total coin issuance is 2.1 billion coins, and currently 288 million are in circulation, including Testnet miners’s coins.
4. Does it fit into existing cryptocurrency narratives?
VeriBlock's marketing narrative has the characteristics of both Bitcoin and Ripple. It is similar to Ripple/Stellar in the way that it is designed to simulate a "company" with "board members" and other trappings. However, the core purpose is very much reliant on Bitcoin: the network purports to help Bitcoin develop a robust transaction fee market by creating a market where external parties can bid on / anchor to Bitcoin’s security.
5. Is the project narrative exciting to whale influencer boards and Bitcointalk, and are crypto news sites and influencers are shilling it?
BitcoinTalk response has been largely positive. The idea has gone through several iterations and the current iteration of Veriblock is actively monitored by the community. Neutral observers such as Jameson Lopp also watch the project, making positive comments (“If you’re paying the fees to put it in the blockchain and you convince some miners to put it in, then there might be some economic rationality for this,” he said. Lopp also noted that he can see “the value of having a data anchor” for Bitcoin.) Lopp has also made negative comments about the implementation (“seems inefficient”).
Since the project's inception, quite a few news sites have reported on VeriBlock and explained how it works, most notably on how it jacked up Bitcoin Transaction fee.
Other than mainstream media, GPU miners in general are pretty excited about this. Big GPU personality Ambroid published a deep-dive article on Medium (very positive). Twitter personalities are also actively commenting on the Veriblock phenomenon.
Large Chinese GPU miners are clearly watching this close. F2Pool rolled out VBK support very quickly. Upbit is a good strategy to tap into Korean market.
The Bittrex IEO (initial exchange offering) represents an opportunity for non-US retailers to come in. Average participants can gain coins through PoP. Getting into PoP mining is fairly simple & straightforward.
6. Is codebase & development active and public?
The project has nothing on Github except for NodeCore. Mining is clearly the focus of the project team right now. The devs have announced that they plan to gradually open-source the entire project at some point in the future, but the specific date is unknown.
The team has been actively open-sourcing parts of the codebase as promised. For instance, this morning they made core utilities and mining UCP public.
Some community members find the decision to keep the codebase closed source particularly worrisome, especially given that there are potential attack vector never answered by dev team. Some speculate that there is hidden centralized mechanism able to enforce consensus in case of emergency, hence the decision to keep closed source.
7. Are there natural sellers, and are they motivated to hold long?
Per section 3, Testnet miners are motivated to capture the 50 million coins they generated. Currently there are 288 million coins in circulation, 50 million would be 17% of the existing. At this point most of the coins the team planned to sell have been sold (IEO, Bittrex OTC, testnet rollover etc.) except for the additional 50 million in the one-year lockup.
Bittrex and Upbit realized that opening up the market right now could potentially mean Testnet miners keep dumping, since their cost-basis is now halved; perhaps as a result, both exchanges disabled withdrawal & deposit. Large miners subsequently found a new Chinese exchange BitMesh on which to sell. Chinese miners are also currently making OTC deals via Wechat groups.
Due to the efficiency of Veriblock's Blake algorithm, the network hashrate has exploded since mainnet launch. With the poor execution of IEO, new miners may be mining close to break-even (on paper, anyway).
The PoP miners’ cost-basis is easier to calculate: we can use OP_RETURN charts to calculate how much BTC has been spent on Veriblock tx (104.5 BTC), and we know the network has generated 2,533,760 coins through PoP, making average cost ~4100 Sat. Interesting, after the IEO the price immediately crashed to ~2000 Sat, now it is only hovering around 1700 Sat on Upbit, and about 1380 Sat on BitMesh. Note that only BitMesh allows withdrawal right now.
8. Who (if anyone) is paying to get it listed?
The founding team did not explicitly state “exchange listing” in Use of Proceeds. Binance may potentially not want to list this coin very soon due to its Bittrex affiliation, but if VBK continues to receive hype, they may become more receptive.
9. Which exchanges own it?
Currently trading on Bittrex, Upbit, and BitMesh.
10. Which shitcoin traders are buying it (and will later shill as they sell)?
Both GPU miners in China and here are pretty excited about it. Lots of GPU miners are involved with Testnet mining. So far most of the conversations are around mining. Only one trading post on TradingView so far. On Twitter lots people are complaining about Bittrex execution. Looks like speculative buyers have not been able to load up their bags yet.
11. Google search trends up or down?
12. Twitter activity around the coin and brand?
Most VBK enthusiasts are active on Telegram, currently with 9300 members. The project's Discord channel is fairly active, currently with 3000 members. Veriblock has 3270 followers on Twitter.