A Comprehensive Research on Enigma

Project Background

Blockchain today faces two major problems:

1. Lack of privacy — data on a public blockchain is accessible to anyone who has access to the public address. This makes it impossible to store sensitive information, such as healthcare records and secure company information, on the blockchain.

2. Scalability — in a traditional blockchain, all nodes must process every transaction in the network — severely limiting scalability. For instance, at its peak, Ethereum can process only 15.6 transactions per second (tps) which is 10,000 times slower than Facebook.

Enigma is a decentralized computing platform with guaranteed privacy, launched to solve the above-mentioned problems. The Enigma network uses secure multi-party computation (SMPC) which computes data queries in a distributed manner. Unlike traditional blockchains, each node only contains random pieces of data and does not have access to all the information in the network; they process small subsets of computations and does not process every transaction in the network.

This unique feature of Enigma allows nodes to process and hold small amounts of data; no single node will have access to all information, thereby maintaining privacy while increasing scalability. Enigma can potentially reshape many industries including (but not limited to): personal data; healthcare and genomics; credit; and Internet of Things.

Enigma currently has 15 core team members and eight additional advisors, of which there are four senior software developers and five software developers. It is a project created by Massachusetts Institute of Technology (MIT) graduates and researchers, incubated at MIT Media Lab.

Team & Advisors

Enigma Team

The two co-founders — Guy Zyskind and Can Kisagun — have founded multiple startups and have adequate experience in managing Enigma. Zyskind has authored several cryptocurrencies academic papers, including “Decentralizing Privacy: Using Blockchain to Protect Personal Data”, which is one of the most commonly cited papers in the blockchain space. He was the Chief Technology Officer at Athena Wisdom (now Endor), an MIT Media Lab spin-off company involving Big Data Analytics and Network Science.

The team consist of members with strong technical background, equipped with big data and software development experiences. They also have a strong background in quantitative trading, with some of the members being algorithmic traders themselves. Victor Grau Serrat is a senior developer at Enigma with fifteen years’ experience in software development that includes developing electronic medical records with JavaServer Pages, firmware engineering of WiFi drivers in embedded systems using C for high latency networks, and interactive online ads programmed in Flash and ActionScript.

The Enigma project is based on Zyskind’s master thesis in MIT which has been downloaded over 100,000 times and has appeared in 10 different citations. This further illustrates the academic prowess of the team.

In addition, the team has a very impressive advisory board with the likes of Professor Alex Pentland — Director at MIT Media Lab –, Justin Lent — former director of hedge fund development at Quantopian — with other top names, of which Alex Pentland is a famous computer scientist and the director of MIT Media Lab. Pentland is one of the most cited authors in computer science, with a H-index of 125 — indicating that Pentland is an extremely influential and credited figure in the computer science industry. In 2011, Forbes named him one of the world’s seven most powerful data scientists along with a founder of Google.

Development & Roadmap

Enigma Roadmap

Enigma made a major step forward in development as they deployed the Enigma Data Marketplace on the Ethereum testnet. The contract has been submitted for auditing and will be fully functional on the mainnet once the audit is complete. Moving forward, Enigma plans to enable truly decentralised dApps to be built on its protocol that has an enhanced privacy feature.

In 2018, Enigma will introduce ‘Discover’ which brings in the concept of ‘Secret Contracts’. Secret contracts enable dApp developers to include sensitive data in their smart contracts without moving their data off-chain. As part of the last step of Enigma’s roadmap, ‘Defiant’, in 2020, plans to separate Enigma away from other networks. That means that Enigma tokens will be migrated away from the Ethereum network into a native coin in the Enigma network. As of now, the Enigma team has been consistently meeting the targets of the roadmap. If the team does meet the targets of their latest roadmap, Enigma could potentially be one of the most successful projects in the blockchain space.

Tokenomics

ENG is a utility token that has three use cases: 1) a security deposit to ensure the integrity of the network; 2) fees to store and buy data on the platform; 3) gas (fees) for any computations on the network. ENG tokens, being utility tokens, are not subjected to federal securities regulations; where failure to abide to these regulations could result in costly penalties and threaten to derail a project. As the U.S. Securities and Exchange Commission ramp up on their investigations on ICOs and cryptocurrencies, organisations that issue security tokens would potentially face major business disruptions from SEC enforcement actions.

ENG is essential for the entire Enigma ecosystem to run. It is an incentive scheme based on fees rather than mining rewards, where nodes are compensated for providing computational resources to process transactions. A full node — a program that fully validates transactions and blocks — is required to provide a security deposit, preventing the integrity of the network to be compromised. Masternodes exist in the Enigma network; which have increased capabilities as compared to ordinary nodes and usually requires a sizable investment to run. In exchange, operator of a masternode is rewarded with portions of the block rewards and this is said to be a lucrative business. To be an operator of a masternode, interested miners must lock away a large number of ENG and set up a server to process transactions for the Enigma network.

Compared with Dash’s (DASH) masternode, users must deposit 1,000 Dash coins as collateral and invest a huge amount of computational power (Static IP) to become a masternode. In return, these users will earn 11% return approx. on their 1,000 Dash deposit. Based on these figures, we estimate that Enigma masternodes will possibly require a deposit of 10,000 ENG, with a similar reward structure compared to DASH.

Competitors Analysis

Enigma’s competitors are not necessarily privacy coins. This is because privacy coins are focused primarily on transactional privacy, whereas Enigma’s main vision emphasizes on data and computational privacy. Hence, although both types of projects share similar views of privacy, they actually have different end goals.

Keep Network may be Enigma’s closest competitor, as it introduces a new privacy primitive for initiating smart contracts on public blockchains. Keep enables secure storage and usage of secrets, as well as supporting infrastructure such as the keep market and token. However, Keep is still in its infancy phase and does not have any plans (to date) for a data marketplace of dApp development. Based on the analysis of Enigma’s competitors, we deduce that if Enigma can execute its strategy smoothly and build upon its first mover advantage, then it will definitely be in an advantageous position against any new entrants in the market. Moreover, as more data sets are added onto Enigma, its users will become more accustomed to its protocol, making it more challenging to switch to different platforms. This would result in Enigma becoming more established as a platform.

X-Factor

We believe ENG can revolutionise many industries due to its enhanced privacy and scalability. Companies would not need to build a private blockchain to store sensitive information on the blockchain and can simply build their dApp on top of the Enigma network in the future. This makes Enigma a compelling alternative to private blockchains where companies can store sensitive data on a public blockchain.

ENG has huge potential as it could potentially disrupt key industries such as: data marketplace, genomics data, artificial intelligence in healthcare data, credit assessment; all these industries have an addressable market value ranging from $50bn to $100bn. Enigma presents the most compelling opportunity in blockchain and we are bullish on ENG tokens in the long run.

Conclusion

In recent developments, Enigma has gained considerable attraction when it featured on CNBC’s Crypto Trader on 7 June 2018. The mainstream channel has a huge follower base and has raised significant awareness for the project amongst both online and television viewers. This provides a positive, short term catalyst for ENG. Additionally, Enigma and Zilliqa had arranged a co-meetup on 15 May 2018, suggesting that Enigma has future plans to deal with the scalability issue through the use of sharding. Enigma plans to launch its secret contract 1.0 by this month, with several exciting plans in the pipeline and is poised to make its presence known in the crypto space.

Also, ENG seems undervalued when compared to cryptocurrencies — such as Monero (XMR) and Zcash (ZEC) — that focuses on privacy. ENG has a relatively modest market capitalisation of $100,009,562, as compared to Monero (XMR) and Zcash (ZEC) that have market capitalisations of $2,024,725,902 and $827,260,908 respectively.

Based on the huge potential that Enigma possess in terms of the market capitalisations that it intends to disrupt, coupled together with the lack of serious competitors within the space of computational privacy, we are highly bullish of Enigma in the long run. At its current price of USD 1.39, (as of the time of this report) we believe it is undervalued and forecast a rise in price in the future.

*This research was done on 14th June, partnership with Intel were not announced yet at that time. The recently announced partnership further affirm our positive view on Enigma.