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How Catalyst will help us build a next-generation data marketplace

Some people in our community have asked us how Catalyst — a platform that enables anyone to start their own crypto hedge fund — relates to our original Enigma vision of creating a safe and open data marketplace. It is important for us to clarify our direction for the community as we approach our token sale on August 21. We want you to be our allies and partners in achieving these goals for the future of data.

This is the first of a two part blog post explaining the connection between Catalyst and Enigma, as well as shedding some light on our grand vision. The second part will discuss our data marketplace protocol in more detail.

Data as Value

Over the past decade, data has become the most valuable digital asset. Some of the largest companies in existence base their core operations, not to mention revenue, on the consumption and analysis of massive data sets. Companies like Bloomberg and Thomson Reuters have built an empire of companies around data aggregation: the two companies have combined revenue of more than USD20 billion.

There are numerous very successful companies that are built on monetizing data their customers produce. In the financial realm, Yoddle and Plaid are great examples. Elsewhere there are location-data driven companies like Foursquare, not to mention tech giants Facebook and Google, which primarily collect and monetize data.

But, despite its significant role in our economy, data remains consolidated in the hands of a few large organizations. For anyone but those entities, it is not fungible or tradeable.

With the introduction of the Enigma whitepaper back in 2015 (at the time, a research project at MIT), we’ve set a single goal to break down data silos and enable data sharing. We believe that to achieve this goal, a single, open-source protocol for a decentralized data marketplace needs to exist, where data can be openly exchanged in return for incentives.

We are not alone in this belief — within a couple of months our whitepaper has been downloaded more than 100,000 times, earning it press coverage in esteemed news outlets. Further, we are fortunate to have some of the best VCs in the world supporting us in achieving this vision, including Floodgate (early investors in Lyft, Okta), Flybridge (early investors in MongoDB), Digital Currency Group and Pantera (top investors in the blockchain and cryptocurrencies space).

This is a lofty goal, one that will take years to fully materialize. But if done right, here is what we could achieve:

More open data will be available for research.
More people and organizations will reap the benefits of selling and controlling their data.
Data’s value would become explicit, as opposed to implicit (which is the case today).
Data sharing could be revolutionized in the same way Bitcoin has revolutionized payments.

Getting to the Future

At Enigma, we’ve spent a long time discussing how we can achieve our mission, both internally and with our community. It became clear to us that building a technology alone, while intellectually stimulating, is likely to fail. This is a recurrent theme we have seen in the crypto space — projects with impressive technology spend too little time thinking about building a useful product and getting mass adoption. This is risky, as token prices right now are driven mostly by speculation, instead of generating real value. Value is what is necessary for the crypto market to become self-sustainable.

Since technology in and by itself is not enough, we needed to come up with a product that people would love and use immediately — one that intrinsically requires a data marketplace to function. Historically, financial data is the most valuable data. Top hedge funds like Citadel, Two Sigma and Renaissance spend tens of millions of dollars every year on high-quality data. That’s partially why two mammoths in this space, Bloomberg and Thompson Reuters, have grown to such prominence. Furthermore, these funds employ primarily data scientists and create their edge through data and research. Our contributors and advisors have lived and flourished in this data-driven environment. While data- and research-driven quant trading has been the winning formula in traditional markets, such robust tools do not yet exist for the crypto market.

This is how we came up with Catalyst — a platform that gives quants all the tools and data they need to start their crypto hedge fund — which people can later invest in. Being a nascent field, crypto data today is not standardized. While most of it is open, it is scattered, hard to mine and very time consuming to obtain. This problem spans beyond quants and encompasses the entire ecosystem. For example, at MIT we had several ongoing research projects around usage of cryptocurrencies, which required many weeks of data collection. We often wondered why no easily accessible data-sets exist.

We have so far interviewed around 40 quants from top shops like Citadel and Two Sigma. More than 70% of people we spoke to are extremely interested in applying their quant trading know-how to crypto but just don’t have robust tools to do so. We have advisors who run their own active crypto-trading hedge fund. It took them six months to build a product that they felt comfortable using to drive the fund’s investment decisions. We believe this difficulty remains a significant barrier to entry. Tying together all these pieces, we are convinced we are focusing on a real and immediate use case.

We hope this also explains the reasoning behind our naming. Enigma was, and still is the name given to the decentralized data marketplace protocol. It is also the name of the company behind it. Catalyst is the first application to encourage adoption of a decentralized protocol that we hope would one day hold the long-tail of data on the web. As the name suggests, Catalyst is meant to speed up the adoption of this protocol.

Finally, ECAT (Enigma Catalyst tokens) is the protocol token that is linked to sharing and exchanging data. In the early days, ECAT would also be used to incentivize adoption, but longer-term the token would extend beyond the Catalyst application and would be used in all applications serving data in the decentralized data marketplace.

We hope this post was helpful in alleviating any confusion some may have had about how Catalyst interplays with our big vision — to build a data marketplace for the web. This is an ambitious mission, but with the support of our community, the guidance of our advisors and a stellar team — we’re confident we can achieve great things. In the next part, we’ll discuss the data marketplace in more technical details. Until then, we welcome everyone to join our Slack and Telegram and post any questions, comments, or discussions you may have.