The Ravencoin Report $RVN

A Cypherpunk Platform for the Decentralized Asset Market

by Stillman and Xavi

Fundamentals check:

Website: https://ravencoin.org/

White paper: https://ravencoin.org/Ravencoin.pdf (Ravencoin); https://ravencoin.org/wp-content/uploads/2018/03/X16R-Whitepaper.pdf (X16R Algorithm)

Working Product: The X16R Algo is working and Ravencoin started the genesis block on January 3, 2018 (the anniversary of the launch of Bitcoin in 2009).

Roadmap: https://github.com/RavenProject/Ravencoin/tree/masterhah /roadmap (The asset support development is currently in progress together with the storage of metadata, followed by the rewards system that will allow the payment in RVN to holders of an asset, the creation of unique assets on Ravencoin, a messaging service to token holders and a voting functionality.)

Technicals (as of 07/15/2018):

Market Cap: ~$17,000,000

Total Supply: 21,000,000,000 RVN

Circulating Supply: ~1,230,640,000 RVN

Today’s price: 0.00000225 BTC / $0.014

ERC20?: No, Ravencoin is a code fork of Bitcoin and an open source Proof of Work project without premine that is being mined since January 3, 2018.

Mining algorithm: X16R

Block reward: 5,000 RVN

Block time: 1 minute

Blocksize: 1MB

Pitch

“Satoshi Nakamoto described Bitcoin as an implementation of Wei Dai’s bmoney, designed to afford users more control, security, and privacy than more centralized systems. A design with the potential to prevent violence and discrimination, given the holder of Bitcoin remains private. Ravencoin aims to continue this implementation by focusing on assets other than cash, providing a platform that users can easily issue assets they control under the rules they establish on a secure blockchain. […] The solution is to create a Bitcoin-like system that is fully asset aware.”¹

Cypherpunks write code. We know that someone has to write software to defend privacy, and since we can’t get privacy unless we all do, we’re going to write it. We publish our code so that our fellow Cypherpunks may practice and play with it. Our code is free for all to use, worldwide. We don’t much care if you don’t approve of the software we write. We know that software can’t be destroyed and that a widely dispersed system can’t be shut down.”² Eric Hughes, Cypherpunk Manifesto

Introduction

In times of overpriced ICO evaluations, centralized governance models, scammy premine masternode coins and ASIC miners bringing consensus models to their knees, one could argue that Ravencoin is a quintessential representation of the cypherpunk ethos that lies at the heart of the first wave of cryptocurrency experimentation and expansion. There was no ICO done for RVN. The original circle of developers did not premine it. It is a Proof-of-Work network that is open source and aspires to be truly decentralized. It is an idea expressed in a whitepaper and translated to code. Ravencoin does not plan for masternodes or staking and as a code fork of Bitcoin, it relies on the sturdiness of a network architecture that has been tested and proven for more than nine years. Lastly, Ravencoin’s innovative X16R algorithm is designed in a way that makes mining it with specialized chips (application-specific integrated circuits, or ASICs) especially difficult, hence setting the network up to stay decentralized in the future.

The Headline of The Times on January 3, 2018, and the Ravencoin genesis block (As shared by @Ravendev on twitter: https://twitter.com/ravencoindev/status/948966283881545728)

Ravencoin is not a cryptocurrency devoted to the transfer of value in form of money like Bitcoin is. What we are looking at here is a protocol allowing for the issuance of tokens that are a digital representation of assets. There are no smart contracts involved in this process like you would see on chains like Ethereum. In fact, the process resembles second layer solutions for Bitcoin like Omni (the former Mastercoin) or Counterparty. Unlike Bitcoin however, Ravencoin is integrating this functionality directly into its protocol. While Bitcoin was not built for the recording and timestamping of asset transfers (it is possible to use it that way but there is a danger of losing the information with certain kinds of transactions), Ravencoin is designed with this use-case in mind and realizes it in a very elegant and focused fashion.

Security Tokens — On the Edge of Innovation

Cryptocurrencies are a relatively new asset class, and as such, the developments in the space are fast, impactful, and come without warning. Around this time last year, everyone and their mother was talking about utility tokens, through which startups are able to generate large amounts of capital in exchange for future access to their product or service. Security tokens, on the other hand, are tokens which are backed by real assets, say, equity, or a share in a company. Legally speaking, Security Tokens are forms of securities and are therefore subject to the regulations governing traditional securities in the investment space. So, in a more detailed sense, what is a tokenized security? Why could an investment in security tokens prove to be more lucrative and reliable than one in utility tokens? What are the implications for the crypto space? Why should you care?

A visualization of token value by Argon Group. Securities would range in the top right section of this graph.³

As aforementioned, one major subcategory of security tokens is comparable to shares in a company on the stock market. Investors buy tokens on an exchange, in anticipation of future revenues increasing the value of the company and/or dividends being paid out when sufficient revenues are achieved. Regulatory bodies determine whether or not a cryptocurrency token represents a security through the Howey Test⁴, derived from a court ruling in 1946, which asks a handful of questions: is there an investment of money? Is there an expectation of profits from the investment? Is the money invested into a common enterprise? Are the profits resulting from the efforts of a third party? If the answer to all of these questions is yes, you are looking at a security, and that has regulatory implications for the issuing company, which has to comply like any traditional share-issuing company.

For investors, this represents a new way of navigating the crypto space: Buying a token no longer implies having access to a future service, whereby one uses the token to access the platform of the issuing company. Buying a token can simply imply making a savvy business investment, with expected profits, just like on the traditional stock market. This development certainly represents a disruption with respect to the current scheme and should be welcomed by the crypto space, as security tokens offer advantages over utility tokens, for both issuers and investors. Utility tokens⁵ are still technically exempt from securities laws. However,the SEC has made it clear that certain utility tokens may eventually be classified as security tokens. This is best exemplified by the ongoing dispute with Ripple regarding their XRP token.

In addition, under the regulatory framework it is actually easier for issuing companies to release security tokens than utility tokens through an ICO, despite the implications of liquidity, limited access to investors, etc. Startups would simply avoid future legal troubles (and costs) by issuing tokenized securities, avoiding the murky waters, and making life easier for everyone. Most people in crypto are of the impression that issuing securities has to be incredibly difficult in the United States because so many startups took a shortcut and avoided it. In reality, since the “Jumpstart Our Business Startups” (JOBS) Act from 2012 that included an exemption to allow a form of equity crowdfunding, offering securities is a relatively simple and straight-forward process.⁶

The growing popularity of security tokens is also a normal development in a growing asset class like cryptocurrency; it’s a significant improvement over its predecessor, and is also a response to regulatory uncertainty posed by officials who don’t understand the crypto space. Security tokens are like a way of saying, “if you don’t let us play our game, we’ll beat you at yours”. The growth of this new form of investments also adds legitimacy to the growing crypto space, and may serve to attract outside investors who aren’t necessarily keen on the traditional purchasing of cryptocurrencies like Bitcoin or Ethereum.

Security tokens represent a familiar friend from the financial world, merged with the technological improvements and higher future potential of cryptocurrencies. The development of decentralized exchanges, or DEXes, which in the future may be combined with digital wallets, would provide total financial independence and sovereignty to anyone with a mobile device and access to a network. The decentralization would also aid investors by avoiding high brokerage fees; this, in combination with the ability to invest in fractions of cryptocurrencies (impossible with fiat currency and traditional stocks), opens the financial world to billions of people in developing nations. Security tokens are a major step in the democratization of global finance.

As you may have noticed, Bitcoin has been declared dead once again. Since its inception in 2009, Bitcoin has “died” several times already, and today the crypto space has reached a period of despair, angst, and uncertainty once again. All jokes aside, while it is already widely acknowledged that crypto is here to stay, traditional cryptocurrencies have taken a serious hit in valuation this year. For investors looking to enter the crypto space, or existing crypto investors who want to divest from traditional cryptocurrencies and diversify, security tokens represent a very enticing opportunity. There is far less speculation involved in investing in security tokens; research in a company’s value proposition, whitepapers, roadmaps, and conferences all serve to properly educate investors sufficiently to make a decision as to whether a security issuing startup has the potential to sustainably grow in the future, even in the midst of a volatile general market. One can’t say the same for established cryptocurrencies like Bitcoin, where far more intuition, experience, and technical analysis are needed to determine whether the present is a good time to buy, sell, or hold. Security tokens represent a step up from utility tokens, especially with the current state of platforms that are not scaling well enough for most of the utility tokens out there to have any actual utility. Many investors have been buying utility tokens as a sideways means to have a stake in these future companies and many utility tokens will eventually fail. Tokenized securities are going to help the space grow and attract more investors. They will serve as a reminder to naysayers that the crypto space is becoming more versatile, more organized, and more ambitious.

Now, it is important to note that while Ravencoin is designed for the offering and transfers of securities, RVN itself can not be considered a security. This has been discussed in depth by Douglas J. Pepe, a partner with Joseph Hage Aaronson LLC in New York, who is also a member of the Ravencoin community. According to Pepe’s analysis, not only does RVN pass the aforementioned Howey test, it also holds up against a set of six illustrative questions brought forward by the Director of the SEC’s Division of Corporate Finance, William Hinman, in a very recent speech on June 14. Pepe comes to the conclusion, that “Ravencoin is a community-based protocol consisting of code and users. No person or entity controls, promotes or markets it. It was created without any fundraising, premine or ICO. RVN purchasers do not invest in an enterprise; they acquire RVN so they, or someone in the future, can use it to create blockchain assets. It is a direct fork of the Bitcoin codebase and is modeled after Bitcoin, which SEC representatives have made clear does not meet the Howey test. RVN bears none of the hallmark’s of a security.”⁷ This is especially significant as the majority of utility tokens on coinmarketcap will struggle to pass these tests and therefore will encounter turbulent times when it comes to their listings on exchanges in the United States or on those that have close business relations to the United States. Ravencoin is a project conceived in the United States and was obviously designed in a way to make it easy to comply with the regulations in place.

The Ravencoin community can answer to the SEC so confidently for two reasons: The chain is built on a proof-of-work consensus mechanism and it has been launched in the most egalitarian and fair way possible. The project was announced on October 31, 2017 and spokespeople of the community presented it on social media and on several conferences before mining started in January of 2018. While only about 70 miners were mining blocks in the beginning, after the first week that number had increased to more than 4,500. Never did a single entity exceed 15% of the hashpower in these early days. With 1.32 Th/s currently devoted to the network, Ravencoin sits at about 1/10th of what we see on, for example, Ethereum Classic.⁸ That’s a very healthy number for a coin ranked 315 on coinmarketcap. One could even say it is astonishing, especially since the price in USD has been hovering around all time low for some time already. Larger mining pools like Nicehash⁹ have recently added the X16R algorithm to their portfolio. But why, apart from the future use-case, are miners so enthusiastic about this project?

Example of a the final 8 hex digits of a Blockhash that would lead to a new sequence of algorithms used for the next block (in this case cubehash -> shabal -> echo -> blake -> blake -> simd -> bmw -> simd -> hamsi ->havite -> whirlpool -> shavite -> luffa -> groestl -> shavite -> cubehash) from the X16R whitepaper.

One of the key parts of the vision behind the project is its egalitarian philosophy. Not only the launch of the project but also the continuing distribution of RVN is supposed to be as fair as possible. Preventing mining from being dominated by huge operations that rely on ASICs is a major challenge in that regard. Ravencoin offers a very clever solution to the ASIC-resistance problem where “there is not only consensus of the hash of the block but also consensus of what Proof of Work to use for the next block.”¹⁰ Developer Tron Black tells the story of how they came up with this model in an interview with Seeking Alpha: “One idea, which was great, but technically unfeasible was to change the algorithm every few months. The danger is that when the algorithm switches, it goes to an algorithm with fewer miners, or too many miners making it difficult to keep the difficulty in a reasonable range to have a reliable block time. While eating dinner before a Bitcoin meetup that gathers at Peace Coliseum, Joel and I were trying to reconcile these issues when we came up with a solution which uses the information from the previous block, and is random enough to make it challenging for custom circuitry. Since none of the algorithms are particularly difficult to implement in silicon, and a silicon controller could be written to use the previous hash to determine the sequence, the algorithm is tricky, but not impossible to make into an ASIC.”¹¹

While full ASIC-resistance is not possible and resistance has to be seen as a spectrum as ASICs can also be built on a spectrum from “most efficient” to “most flexible”¹², Ravencoin managed to come up with one of the most ASIC-resistant algos to date. Another advantage they have is that they are ready to adjust the algo should somebody come up with an ASIC for the X16R, therefore deterring actors who are thinking about going down that route further. After all, developing an ASIC is a considerable investment of time and money, even more so if you want it to be flexible.¹³ Still the ASIC game is being played by powerful actors who can offset their development costs by selling their units to the public and it is theoretically possible for them to react to hardforks within the span of six months. Ravencoin has a lot of flexibility here to give any ASIC-producer a good run for their money. According to the roadmap, they can cycle in or add other algorithms like Equihash, Ethhash or others to the X16R algo.

General Token Utility and Possible Types of Assets

Now that we presented the base for the system and discussed why it could prove to be much more stable and reliable than a) PoW chains that are less ASIC-resistant and b) many of the way less decentralized ICO-projects out there, it’s time to properly examine the use case that we think will play a major role in how the next wave of innovation in the blockchain industry will unfold.

Token issuers will be able to create representations of fungible, limited and unique assets on the Ravencoin chain. Its core feature is “the reporting of who owns what”¹⁴ and the transfer of control over an asset to someone else, with an asset being “just a limited quantity of a unique symbol, and transferable to any Ravencoin address”¹⁵. Ravencoin will allow for the creation of unique asset names which is not possible with smart contracts on Ethereum (demonstrated by the oftentimes confusing amount of copycat contracts in the Ethereum blockexplorer that you see for most altcoins). For an amount of 500 RVN, users will be able to issue a token and set the following variables:

Slides from the Ravencoin meetup (https://docs.google.com/presentation/d/1xoTxgcqc53PuOlLdkpPmwWhdIs_H4IALzu4gAe2-c2Q/mobilepresent#slide=id.g3675b7a47c_0_141)

After issuing such a token, it is possible to add “sub-tokens” to the tokens you created, which costs another 100 RVN that will be burned like the 500 RVN before. Developer Tron Black likes to use the example of a Lemonade stand, where one could offer LEMONADE tokens to sell shares in the business and pay out future dividends in RVN to holders of the LEMONADE token. A sub-token called LEMONADE/COUPON could be reated to promote the stand with coupons for a glass of lemonade.

Using this basic architecture and the option to create so-called “unique tokens” that we will discuss in more detail below, tokens can represent one of the following things and more: