BridgeCoin — The Bridge that fell in Disrepair

06.04.2018

TL;DR. Ecology:2. Technology:2. Decentralization:2. Valuation:3. Rating:2/10

Introduction

(Update 2018-10-01: Please see the semi-annual ratings review of BridgeCoin here.)

BridgeCoin is a Scrypt-based proof-of-work cryptocurrency that also takes the hybrid form of a security like token due to the coin holders' right to 50% of CryptoBridge's profits. CryptoBridge on the other hand is a decentralized exchange that runs on top of BitShare's Graphene blockchain and thus fees on that exchange are payed in BTS (BitShares) and not BCO (BridgeCoin). Ratings of security- and utility tokens are currently on hold at BD Ratings. However, the coin-like aspect of BridgeCoin warrants an analysis. It is worth noting that the ratings below focus almost exclusively on the coin aspects, not the asset/security.

The BridgeCoin genesis block was mined in July 2017, and in the end of that same year all 27 000 000 coins had been mined in a way that sought to ensure a fair coin distribution. There was a hard fork in November 2017 to reconfigure coin issuance due to a bug. The bug would have resulted in more than the maximum number of coins coming into existence. But other than that event, no serious disruptions hit the network during the mining period.

Ecology

With regards to ecology fundamentals, coin usage is of great interest as it is arguably the first building stone in bringing value to a cryptocurrency. The community around BridgeCoin is small, with both Reddit and the announcement thread on bitcointalk.org being quite inactive. Users are asking questions that are left unanswered for days. BD Ratings also fails to find evidence of high BridgeCoin transaction activity. Assuming their own block explorer is correct, there are only a few transactions per day on the network.

Higher activity levels are seen on CryptoBridge, with seemingly regular but small payouts from trading profits as well as a Discord channel. However, comparing this decentralized exchange (DEX) with all the others that lately have started operating is not within the scope of this analysis. What can be said about the exchange though is that it holds an answer to the question where all the BridgeCoin community activity has gone. Utilization of the BridgeCoin blockchain has all but died off completely, as has just been confirmed in the analysis. Any BridgeCoin already trading on the BitShares based DEX however is part of a more active CryptoBridge community. BD Ratings take this activity into account since the two platforms are so intertwined.

As soon as Ether and ERC20 tokens can be traded on CryptoBridge, the utility of that platform and indirectly BridgeCoin will increase somewhat. The timeframe of this happening is apparently in the very near future.

Grade: 2

Reasons: Small community. Few coin transactions. (High competition with other decentralized exchanges.)

Technology

The BridgeCoin source code seems to be copied and modified from that of Litecoin, which means most code is Bitcoin Core. The Scrypt based proof-of-work algorithm as well as the Bitcoin codebase are thoroughly battle tested. With regards to the CryptoBridge DEX however, it runs on top of the BitShares network and thus inherits any technical risk from that platform.

Staking of BCO started at the 1st of December 2017 but is actually not part of the block building process. Staking is done to get parts of DEX trading profits; the network itself still runs on proof-of-work. One incentive misalignment is the now removed subsidization of miners. A low hash rate means the network is under threat of double spends and/or transaction censorship. As a comparison, BridgeCoin has almost zero hash rate while Litecoin sits on around 200TH/s. BD Ratings see evidence of this incentive malfunction in the fact that the BridgeCoin blockchain sometimes comes to a complete halt for several days even. If this construction is unintentional, it speaks about the team's unawareness of what fundamental properties a blockchain must have to run in a near trust-less manner. If it is intentional, it rather indicates that the team either thought transaction fees would be enough to uphold the network, or a more plausible explanation that the blockchain was not needed once most BCO traded on the BitShares-based CryptoBridge DEX. The fact that essentially no one seems to talk about this in the official bitcointalk.org thread or on Reddit is mind-boggling, and either way the failure of maintaining the main blockchain can be very inconvenient for coin holders that have not already moved the coins to some exchange. It also sets a possibly lucrative barrier to staking competition as BCO need to be staked from CryptoBridge itself.

With regards to GitHub repositories, no activity is seen since November 2017 when looking at the BridgeCoin repo itself. This fact is in line with the state of disuse the main blockchain seems to be in. There is activity from mainly two developers on the CryptoBridge repository though. Since CryptoBridge utilizes the larger BitShares network, it inherits also some of the good properties from there, like the fact that BitShares has more core developers and probably a safer network in general.

Grade: 2

Reasons: No miner subsidies while at the same time having to transaction fees to speak of. Development of main chain dead. Uses tested code from other, larger projects.

Decentralization

The launch seems to have been conducted in a fair way with the announcement on bitcointalk.org. Nothing was pre-mined and no funds where collected through crowdsale or ICO. This is a bit interesting because the main selling point of BridgeCoin is the profit sharing property described earlier, which would actually make an (IPO-like) ICO quite fitting.

There are more exchanges running on top of the BitShares network like CryptoBridge. However, CryptoBridge claims to be the only truly decentralized one and thus has a long term advantage. BD Ratings has not confirmed this but has seen no proof debunking the claim of exchange decentralization.

The right to 50% of profits does not include any say whatsoever in how CryptoBridge should be developed further. BCO coins only give the right to profits. This is an aspect of the coin that is centralized. However, incentives are in one way aligned between developers and other coin holder in that they all, supposedly, hold BCO and they all profit from CryptoBridge trading activity.

BridgeCoin seems to be affected by decisions made by the BTS Committee. This is not optimal as it introduces exogenous risk to the BCO ecosystem. The BitShares blockchain behind CryptoBridge can process up to 100 000 transactions per second. This alone indicates heavy centralization as other decentralized blockchains can process far less throughput than that. The dependency introduces centralization risk to BridgeCoin. Also, as the BridgeCoin blockchain are almost non-functional due to lack of miners, it introduces even more dependencies on the BitShares network.

Grade: 2

Reasons: Fair launch. Platform running on BitShares makes it dependent. Holding BridgeCoin give no right to vote on CryptoBridge development.

Valuation

As of 2018-04-06, a 47M USD valuation is of course low when compared to Bitcoin or Ethereum. Though when compared to the outlined weaknesses of the basic fundamentals it is still too high. Even with hypothetical high trading volume on CryptoBridge in the future, the aggregated fees and subsequent profits are a long way from explaining the current valuation. Today's volume is minimal. The hybrid structure of BridgeCoin also makes it a bit difficult to compare to other coins but since the conclusion is that the coin is in certain ways broken, we can just leave it at that.

Grade: 3

Reasons: High valuation considering the base protocol is more or less broken.