Xtrabytes — Update I

25.10.2018

TL;DR. Ecology:2 (3). Technology:2 (2). Decentralization:1 (2). Valuation:3 (5). Rating:2/10 (3/10)

Six months have passed since the BD Ratings review of Xtrabytes. Here is how that prediction has turned out so far.

2018-04-25: USD 0.094057, Satoshis 996.

2018-10-25: USD 0.033694, Satoshis 523.

The initial ratings article ended by reporting that the Xtrabytes community was impatient for patent news. Since then, the community have continuously inquired regarding this issue, with very few answers. Apart from the patents delay, the Xtrabytes team have continued development on the different parts of the code that make up a new mainnet.

In August 2018, it was revealed that a CEO and COO had been appointed to the company behind Xtrabytes (with the same name). They seem to not have had much cryptocurrency experience prior to these positions but are currently dealing with the patent issues, among other things. None of the now 8 filings are yet completed. Also worth noting is that a new block explorer launched recently.

Ecology

Since the last article, the Xtrabytes team has launched a bounty program, including what they call a "marketing blitz". The program is not referring to bug bounties in any way, but instead focuses on spreading awareness on social media. This is as always a bad thing to do before the full features of the mainnet have been completed. Marketing efforts may at best push the price up temporarily, creating some extra volatility for something that is not even ready.

Another firm step in the wrong direction is taken by the team when they push out really bad (and for cryptocurrency technology totally irrelevant) trading advice in the form of a couple of Technical Analysis articles on how to trade cryptocurrencies.

Generally, the Xtrabytes community is dormant, with just a few posts per week on the subreddit. On-chain activity is really low as well, with just a few dozen transactions per day.

Grade: 2/10.

Reasons: Low activity overall. Bad type of marketing.

Technology

Some updated information on STATIC nodes was released and sheds at least some more light on how they work. The article published by the Xtrabytes team pushes the narrative that Dash-like masternodes is a second generation blockchain technology, while STATIC nodes is a third generation blockchain technology. This narrative is not really honest as most new types of consensus mechanisms have a trade-off between efficiency and decentralization. The article's description of the STATIC node system is also rather diffuse and it is not explained exactly how for example 51% attacks can be invalidated. It also does not explain in what way a STATIC node needs to be trusted, which is stated as one of the benefits.

Parts of the code base are still closed source, and Xtrabytes has so far shown no intention of changing this fact. The narrative that team members push about a lead developer being a genius (they actually use this word for borzalom) is just too much considering how important the patents are for the team. If this developer is indeed a genius, the project need not worry very much from competitors copying code. No serious cryptocurrency project have ever fallen behind due to straight up plagiarism. It has never happened and teams should stop worrying about it to the degree that they even refuse to make code public.

Grade: 2/10.

Reasons: Still closed source. Focus on patents rather than being clear about how the network will function.

Decentralization

In a general blog post about decentralization, it is rather bizarre to see the Xtrabytes team criticize Ethereum for being too centralized. The team lacks any self consciousness in this regard as it seems to wave away the fact that the Xtrabytes company is currently patenting blockchain technology. Also, as brought up in the initial ratings article, the two co-founders of Xtrabytes still have veto powers when it come to the development roadmap, and they both rarely engage with the community anymore. In the CEO announcement, the Xtrabytes consensus mechanism term, Proof of Signature, is trademarked. This is plain ridiculous.

But all in all, what really crushes the Decentralization rating is the fact that the project is still closed source, and the team still can print XFUEL tokens at a whim; these tokens are then subsidized to act as STATIC node collateral.

Grade: 1/10.

Reasons: Strong, centralized leadership pursuing patents.

Valuation

The centralization erodes most value of this blockchain. It is simply not interesting to store value on a blockchain that may change because a CEO or a single lead developer say so. The project is still worth around USD 15M, and relative to many other projects it is not much. Most other projects, however, at least have some far-reaching goal of decentralization. BD Ratings sees a very small probability of Xtrabytes actually producing the revolutionary code they are now patenting, followed by a road to decentralization and safe value storage. It is not going to happen.

Grade: 3/10.

Reasons: Extreme centralization.