High Performance Blockchain

12.05.2018

TL;DR. Ecology:4. Technology:5. Decentralization:4. Valuation:8. Rating:5/10

Introduction

(Update 2018-11-12: Please see the semi-annual ratings review of HPB here.)

High Performance Blockchain (HPB) is an interesting blockchain project that utilizes software and dedicated hardware to accelerate the processing of transactions, possibly resulting in scaling the network's capacity to a million transactions per second. Scaling is the main problem that the project has taken on -it is quickly apparent when reading the whitepaper. Mainnet has a planned launch in Q2 2018, so the HPB tokens have meanwhile been issued on Ethereum with the ERC20 token standard. At time of writing, a public testnet has been launched.

Although the focus is on high transaction throughput, the HPB virtual machine is designed to through a plug-in mechanism support other virtual machines as well. This means that smart contracts built for Ethereum or NEO can be slightly adjusted to work on HPB as well, indicating an attempt to capture dapp activity avert to high transaction fees.

The project held a two-phase ICO during the summer of 2017, and it mostly went completely under the radar on platforms like Reddit or bitcointalk.org since it was conducted mainly from a Chinese webpage. A Singaporean foundation was established in 2017.

The initial total HPB supply is 100M according to the whitepaper. Furthermore, a 0-6% annual issuance is adding to the supply; the exact number depends on the number of high contribution nodes, or hcnodes, that are participating in the block creation process. Some hcnode participation criteria are: possession of a certain amount of HPB tokens, adoption of the BOE (Blockchain Offload Engine) hardware acceleration engine, and finally a necessary large bandwidth capacity to handle network traffic. It all can be likened to master nodes with correct dedicated hardware (initially distributed by the HPB team) and with a good internet connection.

Of the 100M tokens, only 28M are right now officially circulating on the market while most of the rest are locked for certain periods. 4M are allocated to marketing initiatives and these seem to be the only unlocked HPB tokens other than the official circulating supply. 20M are allocated to the founders. 18M are allocated to community initiatives, like dapp building. 12M are held as a reserve. These 50M tokens are all locked and will be released continuously over the next years. And finally, 18M are locked since they could not be issued to Chinese crowdsale participants after the decision by PBOC to ban ICO's.

Ecology

The HPB subreddit is not very active, with sometimes days between each post. When inspecting the token contract address, BD Ratings conclude that there is not much token activity either, with around 100-150 transactions occurring per day. Since mainnet is not yet launched, this is just a proxy of economic activity for the project; the number of transactions will very likely increase once the blockchain is live and stakeholders can utilize it for the purposes it was built for.

This blockchain is generalized in its design so it is in a way aiming for a broad ecology of usecases, where focus is on the need for a high transaction throughput. It is also one of the few (maybe only one) projects that is close to mainnet launch and that also uses dedicated hardware in its scaling approach, and this makes it unique for the time being. To really establish itself as a future protocol of value, HPB needs this deep integration to different branches of the broader economy. The market will in the coming years experiment with where smart contracts make sense and where they don't, and HPB might manage to deliver useful products before other larger decentralized blockchains manage to scale enough. Mainnet is probably being launched very soon. When it is, and it can prove that scaling is successful while keeping centralization under strict control, HPB will get a bump in its Ecology rating.

It is rather disappointing to see the HPB team elaborating on how the token will grow in value. There is no way for them to know for sure the value will increase, and all they do is to expose the project to possible regulation as well as negative community reactions should the value not appreciate enough. One thing that the team hasn't done which is a net positive in the long run is conducting aggressive marketing. No marketing efforts worth the name has so far been seen even though funds have been allocated for this purpose. The attempted scaling through hardware will be marketing enough as it is a take not seen or even talked much about. The kind of short sighted profit-myopic communities some projects build with marketing is not what is successful in the long run.

Grade: 4

Reasons: Generalized high throughput value protocol. Low community activity. Mainnet not yet launched.

Technology

The HPB project is very interesting in the sense that it is built with one main purpose: scaling. Most other blockchains are built for slow but secure and uncensorable transactions, for privacy, for smart contracts etc. Scaling is urgently needed, otherwise there will for sure be a high-fee environment during the next wave of adoption. Such an environment delays adoption considerably as many simple usecases like remittances or regular payments quickly become uneconomical. Scaling through hardware- and dedicated software solutions is indeed a very interesting attempt that has not been explored in the same detail yet as has second layer solutions like Bitcoin's Lightning or Ethereum's Raiden.

There will surely be pitfalls with this approach - scenarios maybe even hard to predict before they actually occur - but it is worth experimenting with should the result be scaling with an acceptable decrease in decentralization or security. One possible issue could be some design error in the dedicated hardware that causes problems for the chain. Error in software can be patched and urgently distributed to miners/nodes, while hardware introduces a more critical time component.

The HPB GitHub is not very active, but there is some development mainly on a testnet. One explanation is that development occurs also on private repositories, and the code is then published on GitHub in batches. There seem to be multiple developers working on the code. When inspecting the subreddit there is clear evidence of continuous development and testing, and the running testnet seems to show promise according to anecdotal evidence. There is no block explorer yet so the testnet activity has not been verified.

According to sources, there will be no transaction fees on the HPB network once it go live. Instead, a higher-than-average inflation will keep nodes up and running to process the transactions. One issue that immediately comes to mind is that free transactions is an attack surface for malicious parties, unless there is some kind of DDoS protection in the node software for example.

Grade: 5

Reasons: Working testnet, soon mainnet. Hardware scaling solution.

Decentralization

Concerning token distribution after ICO, only 28M seems to have been issued to investors. An additional 18M are locked as the contributed funds were refunded to Chinese investors after the PBOC ICO crackdown. The fate of these 18M tokens are quite important; if the HPB team were to burn them, it would decentralize the project considerably, however there might be plans that we don't know about to allocate them to the Chinese investors if PBOC changes course with regards to Chinese ICO policy. Most likely is probably that the team will keep them as a locked strategical reserve, to be released if funds dry up. That leaves 54M tokens in the hands of the people behind High Performance Blockchain, though a majority of these are probably held by the non-profit foundation. It is important that the team proceeds to lower their token concentration once mainnet is launched, by for example paying for audits, paying new developers, setting up bug bounties, arranging community initiatives etc. For long term growth of the network a high degree of decentralization is necessary, and the amount of tokens the team have hinders this as tokens are indeed needed for establishing hcnodes.

Both the hardware and software needed are or will be open source. The HPB team seems in this regard to have understood the long term importance of open sourcing the project. Since the hardware is open source, it takes the dent off any centralization aspect of the fact that HPB produces said hardware. The whole hardware issue demands careful consideration so that no entity in the long run will be able to consolidate power over the network. One example of this would be the distribution of dedicated hardware during the chain's first few months; it has to be conducted in a fair way that does not concentrate hcnodes to a few individuals.

HPB also has a CEO, which likely increases centralization of the project.

Grade: 4

Reasons: HPB token concentration. Possible issues with hardware centralization. Project is open source.

Valuation

BD Ratings takes in to account locked tokens to reflect a true valuation of the HPB Network. A vast majority of all HPB tokens will be tradable in the foreseeable future, and since this ratings analysis has a long term perspective on things it is logical to include all of the supply. To be conservative, the locked 18M tokens that initially were allocated to Chinese investors are included in the calculation as well since the HPB team has the power to release them in the future. This leaves us with a HPB valuation of USD 326M at time of writing. While the number seems high, it is 0.1% of the total cryptocurrency valuation, and since the project is quite unique with its hardware scaling attempt, the long term value of HPB can possibly be much higher. A mainnet launch, an increase of the size of the community and a decrease of some centralization properties might catapult the project to at least the top 50.

Grade: 8

Reasons:Unique approach to scaling. The chain could be very useful if it launches and the the team works on the centralized aspects of it.

Disclaimer: The writer owns HPB.