SUMMARY

Obyte (ticker: GBYTE) was created as a reaction to the scaling issues seen with the Bitcoin protocol. Instead of blockchain technology, Obyte uses a DAG protocol (directed acyclic graph). This different model is used by other highly scalable cryptocurrencies IOTA and NANO. Obyte utilizes smart contracts to enable payments and integrate user controllable identity mechanisms while providing developer tools for applications to leverage the technology into customer facing products. It also provides a platform for ICO’s that includes an accredited investor identifier. Obyte aims to simplify to smart payments while providing a decentralized system for value transfer.

Team

Tony Churyumoff launched Byteball in December 2016, which was rebranded as Obyte in January 2019. There are 18 employees, almost all developers, currently working on the project. Churyumoff seems to be an experienced programmer, but there is not much history on the success of the team members in other projects. It did not use venture funding, opting out of an ICO entirely.

Sentiment analysis

Note- Name change leads to fragmented servers

  • Open source: Yes

  • Github repositories: 41

  • Github commits: 5.1 K

  • Telegram: 3.6 K

  • Twitter: 14.2 K

  • Facebook: 1.3 K

  • Reddit: 3.1 K

  • Steem: N/A

  • Blog: Medium activity

Utility and Incentives

The utility of GBYTE comes from two main areas. The platform’s applications are one of the main providers of utility. Owning the GBYTE token gives developers the ability to create applications on the network, and it also allows users to interact with said applications.

The second utility is the potential for smart contracts. The most important thing is that Obyte’s smart contracts are written in such a way that a non-developer can understand them. This lowers the technical aptitude required to deploy smart contracts and program them.  If smart contracts grow in popularity, having users be able to understand the contract they’re signing without having to pay someone with the technical expertise to explain it to them is an important factor and removes another intermediary from the equation. 

GBYTES or bytes are used for smart contract interactions such as conditional smart contract payments, purchasing goods, and peer to peer transfers. However, Obyte allows users to invest in ICO’s on their platform using bytes, ETH, or BTC. ICO’s are easy to deploy on the Obyte network as the smart contracts are easily programmable. Furthermore, Obyte has built in identity verification due to a feature that allows every use to link their Obyte address to their identity. Ultimately the user decides when to disclose this information to service providers on the network.

While GBYTE or bytes are the primary currency, the team also created blackbytes,  a private currency that can be sent between two parties in a direct message and thus does not have to be stored on the DAG. Blackbytes are not available for purchase on traditional cryptocurrency exchanges but can be purchased using a p2p service called Freebe.

Obyte uses a directed acyclic graph, or DAG, instead of a proof-of-stake or proof-of-work protocol. A DAG is a graph in which there is a directional flow and no point in the graph is encountered more than once. A blockchain is a kind of DAG, but one in which there is a strict ordering such that no two divergent chains can come back together.

FIgure 1: An example of a directed acyclic graph. Notice how multiple chains can exist at the same time without causing a permanent fork.

FIgure 1: An example of a directed acyclic graph. Notice how multiple chains can exist at the same time without causing a permanent fork.

With DAGs, there are no blocks produced. Unlike Bitcoin, where a new block is produced every 10 minutes, Obyte transactions have the potential to be processed almost immediately. Another consequence of the lack of blocks is that there are no miners.

There are some potential security concerns with DAGs. Sibling branches will come after parent branches (in Figure 1.1 5, 6, and 7 are all child branches of 4), but without blocks to determine the exact order, it’s unclear which of the three came first. This could lead to a resurgence of the main problem Nakomoto’s blockchain technology originally was trying to solve: the double spending problem[1]. The above causes “forking” to become a potential concern on DAG systems. As there is no mining as well the overall community can’t vote for the right “chain” or branches by mining that prospective chain.

The way Obyte tries to get around this is by using “witnesses”. Witnesses act like checkpoint authorities who post the order of transactions as they see it. There are of course many other full nodes, but witnesses are reputable characters with a real-world identity attached. It is built into the Obyte protocol that there are 12 witnesses. Currently, they are almost all controlled by Chumuryoff, but in the future would be spread among 12 different individuals, businesses, etc. They are supposed to be selected by the community at large and can change over time.

In response to criticism that centralizing this much authority in 12 people makes Obyte vulnerable to 51% attacks if a majority are hacked or act in bad faith, Chumuryoff has responded that there is a good balance between having security and knowing the identity of the witnesses. In addition, he believes with two-factor authentication it is very hard to take down multiple witnesses at once, meaning there is little security concern. In addition, the attachment of real identities to the witnesses means if they act in bad faith there will be both a loss in the value of their Obyte but also their reputations[2]. 

Regardless of whether one believes DAGs pose serious security concerns, the benefits in terms of scalability are clear. Since DAGs don’t have to process transactions in a strict order with one chain like blockchains do, witnesses must process much less information and don’t require increases in block size to keep the network from clogging. Because they don’t have blocks, data still must be shared between all full nodes, which might lead to increasing storage needs for wallet users.

Tokenomics

Obyte does not have any ICO funding, and the developing team is relatively small compared to some of the bigger coins out there as Churyumoff claims huge amounts of funding and gigantic teams aren’t necessary for development. Obyte used several airdrops which apportioned 99% of GBYTE or bytes to users who already had Bitcoin holdings. The first of ten occurred on December 25, 2016 and continued until the final one on April 11, 2017[3].  It is not clear how much funding Obyte has.

Market Opportunity

Obyte has two main classes of competitors. The first one is other DAG-based coins attempting to skirt the scalability issues of the blockchain. IOTA was the first implementation of DAG, but other projects such as Nano, Oyster, and Radix implement DAG.  

Obyte currently has a market capitalization of $25.1 M. In comparison, IOTA has a market capitalization of $796.5 M. Since Obyte has such a small relative market capitalization, if it proves to rival IOTA in terms of scalability, it has a high ceiling in terms of valuation. And more broadly, if DAGs are proven to be superior to current public digital currency implementations, then the growth of the DAG-based coin sector in general would prove to be extensive.

The second class of competitors would be smart contract platforms, blockchain based or not. ETH currently has a market capitalization of $14.5 B[4]. It’s currently the leader of smart contract platforms. Obyte’s easy to use smart contract platform reduces certain barriers to the application of the technology. For example, deploying a conditional smart contract based on the outcome of a sporting event does not require any technical aptitude and can be deployed in seconds. The ease of use for Obyte is one of its most important features. Even now users can easily send payments to one another simply using links or interacting with intuitive chat bots.

Current Status and adoption analysis

Obyte does not have a roadmap, instead focusing on bringing to fruition what is described in the whitepaper[5]. The most important milestone remaining is decentralization of witnesses, discussed further below.

Obyte theoretically has a high ceiling if it provides an alternative use case to the leading coins mentioned above, but there are a couple of problems. Firstly, the witnesses are not yet decentralized; Churyumoff is currently in charge of all of them. In a space that is supposed to focused on decentralization, it’s hard to support a currency that has all authority vested in one person. Secondly, Obyte does not have nearly as strong of a marketing presence at its competitors. Since platforms like Ethereum and IOTA have first-mover advantage, they are more likely to gain general business adoption.

References

[1] https://codeburst.io/scaling-crypto-dags-82363451e753

[2] https://www.youtube.com/watch?v=ZpCfucpwwQc

[3] https://wiki.obyte.org/Airdrop

[4] https://coinmarketcap.com

[5] https://medium.com/@Suirelav/byteball-whats-happening-april-2018-ddf5018bac23