OCC: Hello Diana and thank you for taking the time to give us this interview. Tell me a bit about your company’s business model.
Diana: We’re called zkSystems and we’re developing a scalable Layer One DLT protocol which provides computationally weak devices with the possibility to outsource computation and storage to a public peer-to-peer network. We target smart factories and smart cities with lightweight devices such as sensors and gateways that lack hardware resources. With our solution we can attach them to a large infrastructure of nodes to outsource computation and storage directly. Lightweight devices can take part in the system via light clients. This way, we can automate data streams as opposed to the cloud; we can also do it in a hardware-efficient way as opposed to edge computing.
OCC: Could you also talk a little bit about your roadmap and plans for the near future?
Diana: We’re finishing our MVP by the end of October, and in the beginning of November we’re going to start building a use case – a consumer IoT platform on our DLT for a telecommunications company. We also have planned to raise capital after we finish our MVP. Further milestones include product optimization and team expansion.
OCC: What suppliers are you in most need of but cannot find in Berlin?
OCC: Why would you say there’s a problem in the market with developers?
Diana: Finding developers in Berlin is a problem in general. The market is tight right now – the local tech startup industry has been growing very fast. Investment has been flowing into Berlin, meaning that many startups are all fighting with each other for developers. When recruiting developers for a DLT or blockchain projects, an additional challenge is the fact that a very specific skill set is required. For example, the developers we’re currently looking for at zkSystems should ideally code in Rust and C++, understand zero-knowledge proofs and have background in distributed ledger technology.
OCC: Do you know anything about STOs? What’s your stance on the rising trend of STOs?
Diana: Initially, companies would offer security tokens only because of the legal constraints in case they are not qualified to offer utility tokens. But more and more projects opt for security tokens because they are legalized and regulated. With utility tokens, there is a high degree of legal uncertainty and projects have to operate within a grey zone. Yet, on another note, for some projects it doesn’t make sense to offer any tokens to be used within their system. This is when security tokens act as a legitimate fundraising instrument.
OCC: What are the three main risks associated with launching an ICO?
Diana: I would say the first major risk is the legal regulation when companies offer utility tokens. It’s a grey zone and many factors are unclear. There are discussions in terms of VAT – for example, whether or not companies may have to pay VAT on the money that they collect in exchange for the tokens. A second risk is international law and the legal way to sell tokens to citizens from different countries. Yet another risk could be image damage because for many people – especially for some parties/entities on the conservative side – ICOs are a sign for scam or short-lived speculation. I know some VCs who don’t want to invest in projects that are doing an ICO. There are also some corporates who don’t work with ICO startups either.
Last but least, one of the major risk factors is the fact that a big chunk of tokens is bought by people who will most likely speculate and HODL. They’re not using the tokens to use the system, which may destroy the incentive model. In many systems, such as ours, users are not supposed to HODL – the system is meant for people to use our token. This way, the token can always maintain a relatively low value, flowing in and out of the system.
OCC: What are some possible scenarios post-ICO? What do you predict will happen with zkSystems following a potential token sale event?
Diana: In case we do choose to do an ICO, we hope to attract people to use our system and get some exposure. We hope to leverage ICO’s marketing part toward community management. One of the major reasons an ICO would benefit us is to build up our community, empowering people to stand for our product and use it. This is what we ultimately hope to get out of an ICO. Of course, the funding part is an added benefit because it would help us further develop the product.
OCC: What is your preferred technology stack?
Diana: We’re building our system in Rust. We’re using zkSNARKs for zero knowledge proofs (verifiable computation) and Asynchronous Byzantine Fault Tolerance (aBFT) consensus. We hope to contribute to optimizing these tools, so that we can make them accessible to people and persuade them to build applications.
OCC: In your opinion, how can companies make sure their tokens get listed on an exchange?
Diana: It’s difficult. Being part the blockchain community I have also invested in a few cryptocurrencies – like most DLT enthusiasts. The whole process of buying a token is, however, very tiresome. It is often necessary to register on different exchanges and transfer from one exchange to another before one gets the token one wants. I know that listing is very expensive, and that’s certainly a problem. There are a few good initiatives such as Gnosis and other decentralized exchanges where it seems to be easier, or not as expensive. They’re democratizing this field, so I hope more projects like those will come up.
The zkS protocol provides computationally weak devices with the possibility to outsource computation and storage to a public peer-to-peer network. Verifiable computation based on zero-knowledge proofs ensures that storage and computation can be outsourced in a reliable, private and efficient way. The protocol is based on a new generation of asynchronous byzantine fault tolerant consensus algorithms with high throughput of transactions. This, combined with sharding, enables the zkS protocol to scale both vertically and horizontally. Based on these technical features, the zkS protocol has the potential to form the fundamental infrastructure for IoT, AI and augmented reality.