Xtrabytes — Saved from the Gutter

25.04.2018

TL;DR. Ecology:3. Technology:2. Decentralization:2. Valuation:5. Rating:3/10

Introduction

(Update 2018-10-25: Please see the semi-annual ratings review of Xtrabytes here.)

Xtrabytes (XBY) was born out of the Bitmox ICO in early 2017. The ICO was a scam and the user BitmoxBlockchain that posted the initial bitcointalk.org announcement thread quickly disappeared after the funds were raised. XBY price at ICO was initially 250 satoshi , and after the scam accusations the price crashed to 1 satoshi (1 satoshi = 0.00000001 BTC). After some time as an abandoned project, it was resurrected by user borzalom and CCRevolution, two disappointed Bitmox investors.

The coin was initially mined with Proof of Work but now runs on what the team calls Proof of Signature (PoSign). Under PoSign, blocks are signed by something similar to master nodes, although the project calls them STATIC nodes and stresses that the structure is different. Worth noting is that all STATIC nodes has to sign the block before it is confirmed to the chain. The stated reason for this is that it adds security as any node that continuously fails to sign correctly would be identified and blacklisted. VITALS is a network interconnecting all online STATIC nodes. And lastly, PULSE relays messages between nodes. Even though the coin initially was a Bitcoin clone, it should soon have an independent code base developed by borzalom.

There are 650 000 000 XBY in existence; they were all created at genesis block. After the post-scam reboot, there was no premine. Additionally, there is no block rewards and in that sense no inflation. Instead, Xtrabytes has an incentives model that focuses on transaction fees. Transaction fees were initially 100 XBY, was lowered to 50 XBY during the summer of 2017, and was in January 2018 lowered to 1 XBY as the value of XBY increased.

There are three levels of nodes, where the level 1 nodes are demanding the highest deposit of 500 000 XBY (initially 1 000 000 XBY). Level 2 nodes (not yet live) will demand a deposit of 250 000 XBY and lever 3 nodes (not yet live) a deposit of 125 000 XBY. The number of existing STATIC nodes are in the hundreds. They are collecting transaction and module-hosting fees in the form of XBY. Given the high number of nodes, a considerable amount of XBY are locked up, reducing circulating supply.

A new utility token called XFUEL was introduced in October 2017 as a means to financially support developers and community helpers. It can be used as an optional "stake" for the STATIC nodes instead of locking the full XBY amount in there. A decentralized exchange, X-CHANGE, is being developed and will make XFUEL more liquid.

Next upgrade of the protocol is called Zoltchain. That code has not yet been released for the public as the developer team is waiting for patent approval.

Ecology

The XBY reddit community is active. It is however at time of writing not very optimistic in there as news about filed patents is delayed. The community is waiting for updates on pending development. Number of transactions on the network seems to be very low.

The general roadmap of the project seems to focus broadly on many different things, like decentralized storage, smart contracts etc. It is ambitious and from an ecology point of view it is a positive aspect of the coin.

The individuals resurrecting the scam project Bitmox were themselves scammed. It may or may not show poor judgement, but to their defense, it seems the Bitmox source code was open source which is often not the case with ICO scams. Though it must also be said that open source code was by no means unique; many other ICO's at that time shared the code base. The resurrection thread is worded in a way that encourages scammed investors to recover lost investments through coin appreciation. BD Ratings is not fond of such wording from developers and think emphasis should be on the code quality and future utility, not price or investment gains. CCRevolutioncontinues in many early BCT posts to focus on the XBY price.

One thing that is a bit concerning is that the main developers and coordinators of the whole resurrected project have chosen to stay anonymous despite the initial scam that was going on before they took control. BD Ratings doesn't generally judge anonymous developers to be a negative thing, but in this case it is concerning that the issue is not addressed better. The developer borzalom is claimed to be public about who he is, but his name (Zoltan Szabo) is extremely common in Hungary and there are no links to Facebook, LinkedIn etc. Given that the coin was born out of an exit scam, it ought to have much more transparency in the ID of developers and community leaders, as well as the code.

Grade: 3/10

Reasons: Low transparency. Quite small community overall. Community infighting regarding the patents. Price focus.

Technology

The initial codebase is from the Bitmox launch, which itself shares code base with multiple projects. The resurrected Xtrabytes project hard forked in early 2017, repairing some aspects of the code to get a functional coin going. There has however been no GitHub commits for a couple of months, at time of writing.

Part of the code is no longer open source due to patent filings. The core developer borzalom has promised to make that code public again as soon as they have patents. There is no way of knowing if they will keep their word or not, and the aspect of closed source for a cryptocurrency is generally shunned. The patent was thought to be delivered in the very beginning of 2018, but has apparently been pushed forward, explaining some of the total price collapse since all time highs.

The chain can process many transactions per second due to the STATIC node system. How these nodes work under the hull is still a so called trade secret, as that code is not yet public. The in-progress code of Zoltchain, the technology that the team tries to patent, is described as revolutionary by the developer. BD Ratings can't extend a high rating to something that is unverifiable at the moment. If the code is released later and the chain can process a huge number of transactions per second while staying decentralized, the rating will be much higher.

One stated benefit of the STATIC node system is that as there are no PoW miners; the chain can't break by miners just pointing their rigs elsewhere. This seems to BD Ratings as a bit of a fallacy. Having a STATIC node running does not mean that value has to be pointed to the Xtrabytes blockchain. The node owner can just break the node, send the XBY to an exchange and sell them.

Another fallacy is demonstrated here, where an Xtrabytes representative thinks a 51% attack is impossible with PoSign, just because all STATIC noes need to sign a transaction. If a malicious party controls 51% of all active STATIC nodes (by setting up new ones and DDoS others), this entity should be able to blacklist other minority nodes that "behaves bad". The lead developer borzalom has also made questionable claims that since Xtrabytes dos not run use PoW, unlimited resources mean nothing from a 51% attack point of view. He does not elaborate, and BD Ratings is of course certain that unlimited resources do threaten the Xtrabytes consensus protocol as it would a regular PoS protocol.

Related to the above described PoSign nodes is the whole supply and demand issue. As the project launches level 2 and level 3 nodes in the future, even more XBY will be "locked up" in STATIC nodes instead of being freely traded on the market. In fact, it seems more than half of the supply will be restricted in this way. There is no obvious game theoretic problem with this approach, but it does resemble an artificial attempt in increasing the XBY price by limiting supply. The total amount of XBY stuck in nodes should be set with the optimal network security in mind, not with the XBY price. Ironically, the price would follow general chain security anyway, so a myopic focus on extreme supply restriction is just short-sighted mismanagement.

Regarding transactions per second, Xtrabytes seems to aim for 10 000 or so, vastly more than what Bitcoin or Ethereum manage. The XBY community has to start asking themselves whether this is due to technological breakthroughs, or, more commonly, through a centralized node or second layer system. The lead developer can't specify the details as it is still a trade secret. In a FAQ from 2017, borzalom claims unlimited scalability, without presenting any details on how he found this holy grail.

Grade: 2/10

Reasons: Can't verify parts of code base due to it being closed source. Strange security claims.

Decentralization

The fact that CCRevolution and borzalom are applying for patents reveals what kind of philosophy the project has with regards to open source code.

Xtrabytes uses a trusted setup. This is a grave misunderstanding of how a public blockchain should be structured. Building a consensus algorithm that makes trust in the different nodes essential leaves us with the same thing many cryptocurrencies are trying to break: transfer of value over a trusted network. The eternal question is who decides which nodes are to be trusted. The project is also looking for a CEO, presumably to the newly started (LLC) company. This cements the verdict that Xtrabytes care too little about decentralization. The goal of a public cryptocurrency ought to be being trustless, not trust acquiring.

CCRevolution self-imposes veto power for him and borzalom. This is a form of centralization that must diminish in the future if the network should be robust over a long period of time.

Another manifestation of centralized decision making is the XFUEL token. It seems to be issued at the whim of the leadership to pay for simple, outsourced development tasks. This is in effect a dilution of the value of the Xtrabytes chain.

Grade: 2/10

Reasons: Few developers in general. Full dependency on an anonymous developer who claims to have revolutionary code going on.

Valuation

Grade: 5/10

Quite simply, a valuation of USD 40M is quite low compared to many other coins with similar or worse fundamentals. Xtrabytes is an innovative project since it tries to build a completely new code base.