“We think the potential of this thing is unlimited — the whole world runs on software” — Dominic Williams, President and Chief Scientist at Dfinity
Dfinity is a highly anticipated project that has garnered significant attention in crypto and cloud circles; its recent funding round valued the project at over $2B without even launching a Mainnet.
Dfinity is an ambitious project to create Cloud 3.0, run by some of the smartest people in the room with three goals: replace cloud companies, host blockchain based decentralized applications and support autonomous systems.
We believe Dfinity won’t be able to compete with established entities on the first two pillars, and the last pillar is still a toss up that will be flipping through the air for 10-20 years.
Dfinity has not yet launched and is a highly complex project – our goal is to proactively examine the project before it launches while simplifying the complexities. We wish the Dfinity team the best of luck, and are rooting for them, but we have to examine the project to the best of our ability based upon current information.
Dfinity describes itself as a blockchain-based cloud computing project, with the goal of creating a decentralized internet computer known as cloud 3.0. Dfinity has three goals: To disrupt and support existing cloud workloads, to host blockchain based decentralized applications at scale and to support autonomous software. Dfinity offers innovative new components setting it apart from other blockchain projects. The most interesting is Dfinity’s use of Threshold Relay to provide true randomness for the system. True randomness prevents consensus (decisions) from being manipulated since no one is able to ascertain who the next set of validators will be. Ethereum is targeting a similar concept with its random beacon chain.
Separately, the system’s notary technique offers near instant finality of transactions, a vast improvement over Bitcoin’s probabilistic finality after ~6 confirmations (~60 mins). Six confirmations is an arbitrary number that provides enough economic finality for the community.
One of the most novel aspects of Dfinity is its use of a Blockchain Nervous System (BNS), its governance mechanism. Despite the media’s sensationalization, the BNS is not a general purpose AI system, but is an algorithmic system similar to delegated proof-of-stake.
Governance takes many forms, from Bitcoin where nodes decide which software implementation to run to Decred where token holders enter a random lottery to vote on system changes, or use their token ownership to propose changes through a proposal system.
Users can lock up their DFN tokens (Dfinity’s cryptocurrency) to set up Neurons, which are the entities that vote on consensus and system changes. Humans can vote neurons manually, but in practice most voting will be automatic as Neurons are built to follow more experienced voters. For instance, a user can set their Neuron to vote “Yes” on proposals if three out of five users its following votes “Yes” for a proposal.
This makes a lot of sense, a user can set its neurons to follow those who are specialized on governance or economics or game theory to vote on items where the user may not have enough experience. It would be better to have Nasa, SpaceX and Blue Origin decide the next planet we visit instead of the the entire populace of the U.S.
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Disclosures: Tom Shaughnessy does not currently own tokens in Dfinity, but was a part of the pending airdrop (was a part of their early newsletter) and will likely receive DFN tokens in the future due to this airdrop. This research is strictly informational and is not investment advice. Do not buy or sell any tokens based upon this research. This research strictly reflects our views and opinions which can be wrong. 51percent did not receive compensation to create this report, outside of our subscription paying members. Membership prices can be viewed here.
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