Enigma is solving scalable privacy for blockchains
Enigma is a company building technology for the blockchain space, including a privacy protocol and crypto trading platform.
Blockchain (the technology responsible for the cryptocurrency craze) is transforming the way companies and individuals transact by removing third-party intermediaries and recording transactions on a distributed ledger verified by a network of individuals. Fueled by the technology’s broad range of potential applications, the blockchain industry is booming and expected to drive critical changes in industries ranging from healthcare to supply chain.
With a successful initial product launch in August, a $45M token sale in September, and an ambitious vision to revolutionize the way data is exchanged, Enigma is quickly becoming one of the most talked about projects in this emerging industry.
In light of the buzz, I sat down with Enigma’s co-founders, Guy Zyskind and Can Kisagun, to discuss the company’s mission to power the decentralized future.
Managing confidential data is a messy process.
The threat of illegal resale and the vulnerabilities of third-party centralized systems hinder the process of exchanging and analyzing sensitive data.
Grown out of the MIT Media Lab in 2015, Enigma is solving this issue with the Enigma privacy protocol, a second-layer, off-chain network.
“Enigma aims to power the decentralized future by focusing on the toughest problems that face the blockchain ecosystem, scalability and privacy” Can Kisagun, Co-Founder of Enigma
On top of the Enigma protocol, the team is building a peer-to-peer data marketplace where parties can run computations on sensitive data while keeping the underlying data private. Blockchain technology is utilized to manage access control and store metadata. The protocol distributes the data among hundreds of nodes in the Enigma network – with each node running computations on only a small chunk of data.
Enigma secret contracts
“Our goal is to rethink what applications can be made possible if people and organizations can securely share data with each other – then enable those through our protocol.” Guy Zyskind, Co-Founder of Enigma
Their long-term goal is to facilitate the exchange and computation of everything, from human genomic data to personal credit ratings.
The future of crypto hedge funds
Riding the wave of excitement over blockchain and crypto, Enigma launched their first product offering in August – Catalyst is a platform that enables data-driven crypto investments.
With the remarkable rise in price and trading volume across most of the major cryptocurrencies over the last year, it’s no surprise that hedge funds and individual enthusiasts are exploring opportunities to leverage data to make trading decisions.
“The opportunities on the quant side are very appealing, especially if you have a team that is strong on both crypto, quantitative trading, and machine learning. You can do arbitrage, long/short, etc.” Paul Veradittakit, Partner at Pantera Capital
Aided by platforms like Bloomberg and Quantopian, the U.S. securities markets have seen quant trading rise to 60% of total trading volume. Yet in the crypto world, these fundamental tool sets do not exist.
Enigma is looking to solve this problem with Catalyst – a platform that allows anyone who can code in Python to curate data and build sophisticated quant crypto-trading strategies.
So, what does crypto trading have to do with data marketplaces?
Well, quant trading strategies can only be tested and executed with the right data and Enigma plans to focus the first iteration of the data marketplace on crypto data for its 17,000 users.
Anything from transaction speeds to Twitter sentiment analysis can help quant traders focus their models.
High-quality data will lead to more demand for Catalyst, in turn creating more opportunities for crypto exchanges and news aggregators to monetize their data.
How does a pre-revenue startup with nine employees raise $45M?
It’s called a initial coin offering (ICO) and it is the fundraising strategy of choice for Blockchain startups.
In a typical ICO, a blockchain company will exchange their digital tokens for an established liquid cryptocurrency (usually BTC or ETH). Unlike shares purchased in an IPO, venture financing, or crowdfunding, the tokens are not securities and do not represent ownership in the company. Instead, they are used to power the company’s application. In theory, a successful project should increase the long-term demand for the token.
2017 was the year the ICO became mainstream – the $4B raised globally was more than 16x total ICO funding in 2016. In Q3 2017, ICOs outpaced VC funding in blockchain by 8x. ICOs are essentially unregulated, making them an appealing alternative to traditional forms of capital.
In Enigma’s case, the long-term value of its ENG token will rely on the success of the Enigma protocol. Since the ICO in September, ENG’s market cap has grown by 4x.
ENG trading volume and price since ICO
Enigma may have entered the frothy ICO market at just the right time.
The last few months of 2017 saw a slowdown in completed ICOs, with only 25% of companies reaching their target funding.
Concerns over the growing number of scams (10% of total funds raised by E&Y’s estimate) and potential for regulatory crackdown may lead to an ICO drop off in 2018.
In the cryptocurrency world, community is everything
While the team remains focused on disrupting data marketplaces and solving infrastructural problems that limit blockchain adoption, their community of supporters (ENG holders, crypto traders, and blockchain enthusiasts) always remain top of mind.
Enigma has adopted a policy of complete transparency with its community of 5,000 Discord members and 40,000 Twitter followers.
Enigma team interacting with the community on Discord
The company relies on the community for advice on product development, introductions to potential partners, and support with marketing the project to other crypto enthusiasts.
“Being a blockchain company, we fully embraced the philosophy of transparency. In this space, a strong community is a required ingredient for success.” Guy Zyskind, Co-Founder of Enigma
In August, when the company’s Slack and email were compromised prior to the ICO, members of the community stepped into action by shutting down new scam sites and educating Enigma and other members on potential vulnerabilities.
As Enigma moves towards its long-term vision, the company’s reputation for honesty and transparency will be critical to their success.