DigitalNote — The CryptoNote Shapeshifter


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


(Update 2018-10-09: Please see the semi-annual ratings review of DigitalNote here.)

DigitalNote (XDN), earlier DarkNote, earlier duckNote, is an open source privacy focused cryptocurrency based on CryptoNote technology and so uses the CPU-efficient CryptoNight Proof-of-Work algorithm. CryptoNight is widely used, for example by more well-known coins like Monero. duckNote itself launched 30th of May 2014 and was a fork from Bytecoin, the original CryptoNote coin that most likely was founded by the developers of said algorithm.

The privacy focus manifests itself by supposedly anonymous transactions as well as in-wallet encrypted messaging. DigitalNote also has a deposit feature from its wallet, where users can lock XDN for a specified period of time and earn a small amount of interest.


A newcomer might wonder why a coin has needed a rebranding twice so far during its lifetime. The answer is almost always obfuscation. It is the opinion of BD Ratings that rebranding is a sign of weakness; it is a focus on appearance rather than writing good code. For a coin to have two or more rebrands in just a couple of years is quite uncommon, and probably hurts the unit-of-account property, among other things, that is essential for money.

Looking at the DigitalNote block explorer, not much activity is to be found. There are around 1000 transactions per day, and that seems to include the issuance of new XDN. In reality, far less is actually happening on the chain.

On the DigitalNote subreddit it is rather silent, with coin holders asking around if the project is dead or not. One update was recently released out of the blue, but does not hold much new information. What seems to be the official Twitter handle is inactive as well with the last tweets from late 2017 informing of a strange new crowdfunding campaign. The initiators, seemingly part of the DigitalNote team while independent from the core developers, called it an ICCO - Initial Crowdfunding and Coin Offering - and it is supposedly a fund of community-contributed XDN lots (each holding 100 000 XDN) that are then sold forward on HitBTC at a 100-200% premium. The premium was also agreed upon by the community to increase each week.

The question is, why would anyone, person or corporation, want to buy at such a premium instead of just buying directly from the exchanges that list XDN? Logical or not, the XDN price went up between 400-1000% shortly after the ICCO announcement was posted, and this was praised by the initiators as proof of the ICCO being a stroke of genius. The large amounts of collected XDN, repackaged as now even more expensive lots, were however not met with the enthusiasm everyone hoped for, resulting in just a handful of XDN lots being sold on the exchange during the first week. As the second ICCO week arrived, the ICCO initiators seems to have realized that a value proposition was missing (no shit) and that it did not matter what fixed price they set for XDN lots as long as it was over the market price. This conundrum was now repeated by the core developers who promptly suggested either listing the XDN lots on more market places, or conducting some marketing. While the team was pondering what strategy to enact, contributors became more and more impatient as only 0.1% of their XDN (locked up in the ICCO vehicle) had managed to attract buyers. As the third and last week of the ICCO started, no more sales had been conducted, and the lot price had a premium of around 500%. Around 15% of total XDN supply was locked up on HitBTC, with neither the exchange nor XDN developers responding. The coins were finally released on the 18th of July 2017.

It is worth noting that at the start of this insanity, a DigitalNote news source popped up and started writing about the ICCO as well. This fact is interesting because of the timing; why did this web page not exist before in the coins multi-year history? To BD Ratings, this looks like a some kind of scheme but it is hard to put the finger on what the people involved tried to achieve. The ICCO announcement sure pushed the price of XDN up a lot, and supply was temporarily locked up, yet there is no proof anyone profited greatly. But all in all, skepticism is essential here as the DigitalNote team is pseudo-anonymous. Finally on this issue, it is not exactly clear how intertwined the ICCO initiators were with actual XDN developers. There seems to have been multiple communication issues between the two, yet the ICCO was pushed on multiple platforms (Reddit, announcement thread, that must have been owned by the core team.

As the dust from the ICCO debacle started to settle, and no response came from XDN developers, rumors stated that XDN team members migrated to a new DigitalNote fork called UltraNote and abandoned DigitalNote. It is true that UltraNote started around this time, and the author of that thread was earlier involved in DigitalNote. BD Ratings can however not estimate to what degree core developers migrated as well but it seems UltraNote is a more or less inactive project.

Finally, there are some serious allegations against most CryptoNote projects, with Monero being the main exception. These allegations are somewhat credible given the evidence provided (yet much more damning of Bytecoin among others), and with the other red flags in this Ecology section, it can be concluded that people should stay far away from this coin.

Grade: 2

Reasons: Community inactive, close to being dead. Signs of fraud and of developers moving on to other projects etc.


There are no GitHub commits since August 2017 which is worrying. Regarding CryptoNote as technology, it is widely accepted as a solid code base and has been somewhat vetted by seasoned bitcoin developers like Gregory Maxwell. It was designed, however, to be ASIC resistant. Baikalminer seems to have come up with an ASIC miner which has forced many CryptoNote coins to discuss potential hard forks away from the consensus algorithm. DigitalNote seems to have no plan of any hard forks.

In February 2017 Monero developers discovered the "infinite inflation" bug in CryptoNote. They promptly patched Monero in secret, and proceeded to contact all CryptoNote based coins on the 17th of April 2017. More than 1 month later, DigitalNote seems to have applied the patch as well, after many other projects had done just that.

The XDN deposit feature was mentioned earlier. Curiously, BD Ratings has not found any specification of who or what pays this interest. It is not part of any staking mechanism for sure. The fact that it is hard to find who is paying for these deposits and why is a symptom of gullibility among the community, which seems to read it as free money and swallow the concept whole. This complete lack of explanation of the deposit structure also hints at a developer team that does not properly understands incentives and game theory. It is obvious for BD Ratings that this has to be explained in the same places as where the XDN deposit feature is written about.

Without digging too deep in to the issue of completely private transactions (it is very complicated technology that BD Ratings is not yet in a position to opine strongly on), it is still of interest that DigitalNote completely rejected the path Monero took in 2017, with Ring Confidential Transactions. Ring CT technology combines the solid peer review of ring signatures (that DigitalNote uses) with newer Confidential Transactions technology developed by cryptographer Gregory Maxwell. Given the much larger Monero developer base and lack of strong criticism against Monero from well known cryptographers, it can be concluded that refusing to update the way anonymous transactions work is not a positive sign.

Grade: 2

Reasons: Solid code base. No GitHub development activity. Possibly outdated anonymity technology.


DigitalNote seems to have had a quite fair launch, with CPU mining resulting in some decentralization. It was fair in the sense that everyone could theoretically see the public announcement thread. With regards to initial inflation however, there are some things to consider. During the first month, XDN block rewards (every 4 minutes) were 320 000 coins. This number was then reduced by 50% every month and is today 150 XDN. Compare this to Bitcoin's 50% block reward reduction every 4 years. The high initial inflation ensures that early adopters will own the majority of the coin supply. BD Ratings has a rather neutral view in general on this issue given the launch itself is fair; too extreme issuance discrepancy like in this case may not be optimal, but there will always be a vast number of people with no knowledge of what coins suddenly are up for grabs.

The small, almost non-existent team lowers the decentralization grade substantially as it vastly increases the risk of having to depend and trust on single individuals.

Grade: 3

Reasons: Mining rewards heavily skewed towards coin launch. Small team.


Valuation of USD 52M is not reasonable when no developer seems to be working on the otherwise fundamentally weak project. Compared to the most famous CryptoNote based coin, Monero, the valuation is very low. Monero however has a large community as well as developer base and is without question the leading CryptoNote coin that contends the throne for an anonymous transaction network right now. What Bitcoin and Ethereum will introduce in the coming years with regards to anonymous transactions remains to be outlined.

Note that circulating supply was used to calculate market capitalization as inflation is minimal and total supply will not be reached in more than 70 years.

Grade: 3

Reasons: Way to high given the actual coin fundamentals.