Back in 2008 an anonymous developer pulled together a series of ideas circulating in the decidedly niche world of financial cryptography and sent his concept to the Cryptography Mailing List – a collection of individuals who shared ideas about privacy, surveillance, communications technology and much more besides on the web.
His proposal did not gain much traction there. But not long afterwards Satoshi Nakamoto, as he was known, launched bitcoin. The rest is history.
Nakamoto’s identity is still unknown, yet in the subsequent years many other developers have launched their own cryptocurrency protocols. Most are copies of bitcoin with few substantive differences, and most have sunk without trace.
Only a handful offer any real innovation, and only a subset of that number have found meaningful adoption by the wider world. Ethereum, which launched in the autumn of 2015 is one of them. A year earlier it had crowdfunded $16 million (m).
Fast forward eighteen months after that launch its market capitalization has soared to the dizzying heights of $4 billion (bn), representing a whopping 250-fold increase. And, probably as a potential inverstor you would not want to have missed out on that uplift.
The brainchild of Russian physicist Sasha Ivanov, Waves is another platform that, whilst still in its infancy, appears to hold similar promise according to some crypto pundits. Last June, the Waves Platform crowdfunded about $16m (29,445 bitcoins (BTC)) from around six thousand people. In so doing, 100m Waves tokens were distributed to investors after the crowdfund. I recently met up with this crypto pioneer at a blockchain event in London, so I was interested in finding out more and delving deeper.
Ethereum implements what are known as ‘smart contracts’: computer code, stored on a global network of servers, that executes automatically and can never be stopped or erased.
It sounds scary, but it offers benefits of transparency and security over the use of traditional data centres. No one can knock a service offline when it is run by computers all over the world. It is a bold, complicated idea that has been very successful, but that is not without its issues. And, it may take years for businesses to grasp fully the opportunities posed by smart contracts.
Waves, by contrast, aims to meet the market where the need is right now: in the very simplest of blockchain functions, namely the ability to create your own tokens quickly and easily.
Any time a business wants to launch a loyalty token or voucher, crowdfund a project, send money abroad frictionlessly – and a hundred and one other applications – blockchain tokens enable them to do that outside of the existing financial and administrative systems.
“We are convinced that this will be the frontier of blockchain adoption,” asserted Moscow-based Ivanov. “Allowing any business to access the benefits of speed, cost, transparency, reliability, security and independence that the blockchain offers. And, we know this because it is already happening.”
From Ripples to Waves
Platforms similar to Waves had existed for some time. Ripple, a decentralized platform, was one of the first, a kind of distributed ledger a bit like a blockchain that allows users to send money between each other.
“And, it is now fully controlled,” noted Ivanov. “So it loses the advantages of the open blockchain in terms of financial freedoms and trust.” Ripple, a , is used within the banking system today, but according to Ivanov “can barely be considered” part of the same stable of projects that arose from Nakamoto’s idea. Banks around the globe are partnering with Ripple to improve their cross-border payment offerings.
A theoretical physicist by background, Ivanov graduated from Moscow State University in 2001 having studied in the Theoretical Physics faculty and subsequently at Leipzig University. He was involved in programming automated trading ‘bots’ for the international forex markets and took an early interest in electronic currencies. He was learned about bitcoin in 2012 and soon became involved in the Nxt community.
Nxt, like Waves, was an early ‘2.0’ platform. It allowed anyone to create their own blockchain tokens, trading them on a ‘peer-to-peer’ exchange. “It was trail-blazing, remarkable really and well ahead of its time. Unfortunately, it also had some problems.” reflected Ivanov, CEO and founder of Waves.
Nxt was indeed ground-breaking, but suffered from a series of issues. One was simply that it was of its time, like MS-DOS versus the later Windows, or MySpace versus Facebook.
Ivanov said: “Its features were powerful, but not always user-friendly. It was possible to create your own blockchain tokens – much like launching your own bitcoin – and trade them directly with other users on the built-in exchange, with no assistance or interference from third parties. But it was slow – it was impossible to guarantee that a trade would occur in real-time – and it cost the user to place an order, not just when one was executed.”
He added: “Moreover, everything traded against the platform’s own internal currency, NXT, rather than one asset trading against the other. It was as if a forex platform forced a trade to take place in two stages, via a third currency: USD-GBP, GBP-CNY [Chinese Yuan/RMB], rather than USD-CNY.”
Ivanov built several businesses on Nxt, and integrated another he had created. This was an instant exchange service, which would swap one digital currency for another without the need to sign up and use a regular exchange.
“Cryptocurrency was complicated, and it needed tools to make it easier to handle,” he said. Coinomat, as the service was called and launched in 2013 by Ivanov, was the first instant exchange of its type, though the idea was later popularised by ShapeShift.
The dealbreaker came when a series of changes was made to the Nxt platform that broke backwards-compatibility, forcing those who had built businesses on it to fix their software to accommodate the updates.
“The developers were visionary, but they did not always understand what businesses needed. We could not risk impacting end-users like that,” he said. “It also had limits in terms of transaction volumes…there was only so much the system could handle, which meant businesses would not be able to grow on it.”
Nxt ultimately evolved into the coming Ardor platform, which solves many of these problems, but by then Ivanov had moved on – recognizing that the only way to find the ideal blockchain platform for mainstream business use would be to create it himself.
The Big Splash: Waves Platform
In his years in the cryptocurrency world, Ivanov had built up a solid reputation through the businesses he had launched. And, it seemed that the obvious way to fund his new blockchain platform was to leverage this through a crowdsale – the standard way of kickstarting a project in the crypto world.
Ivanov named the platform Waves, a nod to his background as a physicist and the recently-discovered gravitational waves predicted by Einstein a hundred years earlier.
Waves would focus squarely on mainstream adoption. Its interface would be as straightforward and familiar as a mobile banking app; it would take only a few clicks to launch your own tokens; it would be as lightweight and fast as possible, and would not impose any unnecessary technical hurdles upon users. Well, that was the theory and the blurb.
Like Nxt, it would have a peer-to-peer exchange, but it would be possible to trade anything against anything, with no delays.
The idea was to create the perfect platform for crowdfunding, and for moving fiat money – dollars, pounds, euros and other currencies – onto the blockchain, so that it could be used more efficiently than the banking system currently allows.
As Ivanov put it: “We already have money. USD, GBP, EUR – even bitcoin. Unlike other cryptocurrency platforms, we are not looking to recreate or replace money. Rather we are looking to enable existing forms to work better.”
Waves’ ICO, the crypto term for an Initial Coin Offering or crowdfund, came on the heels of several other major projects. The most recent, called Lisk and headed and led by CEO and tech visionary Max Kordek in Berlin, had raised $5.5m in bitcoins. We had incidentally met last November in the German capital after I attended an event in a hotel beside Berlin’s amazing Zoological Garden for a face-to-face meeting near the iconic Kaiser Wilhelm Memorial church.
“We hoped to match that. And, at the time, it was pretty optimistic. Ivanov remarked. But the cryptocurrency community grasped the potential of the Waves platform and as the ICO progressed, the bitcoins kept coming in. By the end of June, Waves had collected almost 30,000 bitcoins, then the equivalent of $16m. Only Ethereum had collected a comparable amount.
Money does not solve everything of course, and the software behind the Waves platform was hit with delays in its early stages.
As Ivanov explained: “We were building on an existing piece of software that was designed to make it easy to launch blockchain applications. Unfortunately, it turned out it wasn’t fit for purpose. We had to rewrite it from scratch.’ What compounded the problem was that Waves was written in Scala.”
He added asserting: “It is the best language for this kind of application, very powerful and it enables us to create something that scales to large transaction volumes but is still fast.”
But Scala developers are in short supply and even $16m could not produce the required developers from out of thin air. “There are some problems you cannot fix just by throwing money at them,” he said.
Riding The Waves
Whilst a small proportion of the 6,000-strong community who had invested initially in Waves reacted by trolling the bitcoin forums and spreading misinformation, legitimate businesses were already taking an interest and soon building products around the increasing functionality that the platform offered.
Incent, a Sydney-based outfit that realized the blockchain was the perfect solution for the ineffective loyalty sector, crowdfunded $1m and launched its tokens on Waves last year.
A team of international scientists who had developed a technique for recovering zirconium dioxide, a key industrial commodity, from waste materials, created ZrCoin, the first ever commodity-backed blockchain option.
There has also been a Russian political party, spearheaded by the billionaire Boris Titov, chairman of Partiya Rosta and Russia’s business ombudsman, launched Upcoin – a tool to engage the party, reward contributions and even to vote securely at a distance.
“We have hit the point at which we can see blockchain adoption going mainstream in the coming years,’ posited Ivanov, adding: “The technology is more and more mature, the economic circumstances are right, and people are starting to realize that this is about far more than the geeks and drug markets that were part of the early bitcoin world.”
And, as Ivanov confidently remarked: “Of course, the better we do our job and the easier it is to use, the less people will realize they are using it. It will just be there – under the surface – making life easier.”
Blockchain enthusiasts are constantly claiming that these technologies will hit mainstream use cases in the near future. And, 2017 is the year that many pundits contend that the blockchain and its associated technology will go mainstream. Based on the growing adoption by businesses of the Waves platform, this year looks set to be the year they are at last right. Here’s hoping.