- August 13, 2019
- Posted by: STO Search & Filter
- Category: Blockchain, Privacy, Smart Contracts
It brings us great pleasure to collaborate with The Dusk Foundation’s Jelle Pol on this informative piece on The Dusk Network. In this interview we dive into understanding the need for privacy within security token blockchains, smart contract programmability, Dusk’s blockchain interoperability, exchange listings, and differences over current STO blockchain solutions.
A Brief about Dusk (Preface)
Dusk Network is a privacy-oriented blockchain protocol featuring Segregated Byzantine Agreement to provide privacy, programmability, and contract auditability.
Dusk is built by a team of entrepreneurs, engineers and researchers with technical experience at Amazon, TomTom, Mozilla, Reaktor, and blockchain backgrounds (Zcash, City of Zion, NEO Research, etc).
Dusk Network is currently in testnet phase and aims to be a blockchain protocol designed for easy deployment of programmable Zero Knowledge dApps, thus becoming the backbone of an open, permissionless and global privacy-oriented dApp ecosystem.
The Project aims to remove technical barriers that have hindered mainstream issuance and trading of products such as security tokens. Compliance, auditability and privacy are built into the open, permissionless Confidential Security Token Standard (“XSC”). Preface via Binance Research.
Exploring The Dusk Foundation [INTERVIEW]
Q: Please kindly elaborate on the function of privacy within Security Token lifecycle, what elements of privacy can users expect from the Dusk blockchain and that is currently being overlooked in current security token uses.
A: The lifecycle of a security can roughly be split up in the following phases; proposition, issuance, management, and trading. The last two can run indefinitely run in parallel. I will leave out the proposition phase as there is little tokenization benefit beyond to assist the thought process, this is really the phase where you think about the type of company you are and what security proposition you bring, be it equity, a bond, or a revenue sharing mechanism for example.
So firstly, issuance. Privacy here is relevant because you are onboarding investors whose personal information needs to be checked via various KYC/AML processes, and where the outcomes of those processes feed directly into a smart contract governing the eligibility and restrictions of your asset owners. However, to comply with GDPR or equivalent data privacy legislations the personal information of these people should not be stored on chain. The use of zero knowledge cryptography to store the outcomes of mandatory processes like KYC is a novel way of proving regulatory compliance whilst also safeguarding personal information.
A second example is in the trading sphere. On the secondary market there are a myriad of reasons why privacy is often demanded by regulators. A good example is to prevent market manipulation, or to protect a venture’s trade secrecy. On fully transparent ledgers it is often the case that over time addresses are all mapped out and belong to known parties. In the case of investment firms this gives away critical information about their portfolios. Additionally, bad actors can deliberately make their addresses known to attempt price manipulation by moving assets around to signal buy/sell intent. Having your portfolio held privately towards the outside world, but still able to adhere to regulatory requests, is a big adoption requirement for the financial industry.
To achieve both of these examples, and various lifecycle functionalities, we needed to embed smart contracting functionalities on top of a privacy-oriented consensus layer. Dusk Network is the world’s first programmable and confidential security protocol. Paraphrasing our lead cryptographer, it combines the privacy of ZCash with the intelligence of Ethereum.
Q: What elements of smart contract programmability does Dusk aim to incorporate on the blockchain?
A: We’ve already released our first Security Token Standard dubbed XSC, which stands for Confidential Security Contract (short XSC). As, the Dusk VM is a zero-knowledge-based virtual machine. You can deploy any decentralized program for which you pay the required gas. Our first token standard release XSC is the “abstraction” on top of that, which provides the smart-contract interface for issuing, transacting, and managing security tokens. Our latest XSC specifications clearly outlines the functionalities that can be configured for a security token minting. Using XSC companies can digitize securities whilst complying with applicable legislation and restrictions. XSC is intended to be for STO’s what ERC-20 was for ICO’s.
Q: What additional benefits will the dusk blockchain bring to issuers over the currently popular Ethereum and Tezos blockchains?
A: Ethereum is one of the most well-known cryptocurrencies, and fulfills an important role in the wider ecosystem as a general purpose smart contracts platform. It is a fully open ledger, where transaction finality is achieved after >6 blocks, and at the moment it uses Proof-Of-Work, which is energy costly, slow and difficult to scale.
Tezos is designed for safety, uses Proof-of-Stake and onchain governance by their validator nodes. In the current Tezos protocol, 30 confirmations (~30 minutes) may be considered a good rule of thumb for transaction to be considered final.
Dusk Network offers instant settlement finality, which means that transactions are final as soon as the block is added to the block chain. This feature is very important for security token trading, because there can never be a dispute about who owned a security at any point in time. Furthermore, the availability of on-chain privacy while satisfying auditability and compliance requirements is the biggest advantage.
Q: What interoperability can we expect from the Dusk network?
A: Designing for interoperability across protocols is key, and you can expect a sophisticated interoperability approach from Dusk. To put it in perspective, reconciling (private) permissioned blockchain networks at scale is infeasible, because it requires approval from the federations governing them, and leads to power structures we want to avoid. Conversely, the permissionless domain treats interoperability as an important maturity requirement, which matches our industry view.
Interoperability has a lot to do with scalability. If we take an educated guess into the future outlook of digital securities we expect a rich ecosystem with various tech providers. We are already preparing to integrate with various platform providers that operate on layer 2, such as fundraising platforms and the like. In parallel we work closely with the large blockchain protocols to keep abreast of the technical direction everybody is heading. This ensures compatibility down the line. Finally, we are looking to interoperate with traditional financial infrastructure as well, as that is the real industry anchor to optimize.
Q: Most recently Dusk Network announced listings on Bitfinex, Bittrex International, Binance DEX, Binance and Ethfinex; Can you share any additional information on your approach to engage with the crypto & security token community?
A: We try to involve our community as much as possible every step of the way, an example is the recently released public Testnet Shin (殉星). Our goal with Shin is for the community to engage with our technology and provide feedback on the quality, function, and overall experience of the protocol. See more details on how to participate in the network by for example running a node here. Additionally, we are working to bring down the barriers to partake by building towards a full browser node experience, where Browser nodes are the first step in this journey. We bolster our development community on Discord and invite you to join the Dusk Network Discord to meet them and be a part of the conversation!
We strongly believe in open-source development as well, and releasing code alongside good documentation is part of that. We have released multiple research documents and code documentation including a ZeroCaf Package, with additional SDKs coming up to promote a seamless developer experience both for current blockchain developers and cryptographers.
Currently we are running several marketing efforts, as we continually look for ways to involve our community even further in the Dusk Network. Increased engagement is planned through live coding sessions and meetups in the EMEA region.
Moreover we release monthly development updates, and announcements on other development achievements once we are able to share them. You can subscribe to our Newsletter here.
Q: When can we expect issuers to mint security tokens via the Dusk blockchain?
A: Real deployment of security token smart contracts will occur naturally upon mainnet release, however, there are already propositions on schedule to issue security tokens on Dusk that are heavily involved in the upcoming months of testing on our testnet. Once public, you will not only see STO’s held by SME’s looking to raise funds, but also larger traditional finance players that want to issue a blockchain based asset.
Q: Where can we learn more about The Dusk Network?
A: I recommend subscribing to the following links:
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