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Apr 2019

IoTeX

Stable Outlook

Token IOTX

Tags Internet of Things

Price(USD) 0.010749

Market Cap(USD) 27.14 Million

Rank 146

Analyst | Jincheng Xu

TokenInsight provides customized service such as project code analysis and project community analysis, etc. For more information, please contact bd@tokeninsight.com or visit tokeninsight.com

AAA AA A BBB BB B CCC CC C D

Low Risk Moderate Risk Large Risk High Risk

BB

0.0000

0.0036

0.0072

0.0108

0.0144

0.0180

2019-01-29 2019-02-18 2019-03-10 2019-03-30 2019-04-19

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TokenInsight Inc. hereby makes the following statement in connection with the issuance of the rating report:

1. There is no relationship between TokenInsight Inc. (including TokenInsight Rating Project Team Members, and Review Committee Members) and the subject of this rating would affect the objectivity, independence, and impartiality of the rating.

2. The project team members of TokenInsight Inc. take their due diligence obligations seriously and have a good reason to ensure that rating reports followed the principles of objectivity, truthfulness, and impartiality.

3. This report is an independent judgment made by TokenInsight Inc. in compliance with applicable laws, regulations and reasonable internal credit rating processes and standards, and there are no changes in rating opinion due to improper influence of the rating target or any other organization or individual.

4. All information contained herein is obtained by TokenInsight Inc. from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical errors as well as other factors, however all information contained herein is provided ‘AS IS’ without warranty of any kind. TokenInsight Inc. checks verifies, as necessary, the authenticity, accuracy, completeness, and timeliness of the information relied upon in the rating report, without making any representations or warranties, express or implied, as to authenticity, accuracy, completeness, timeliness and feasibility and appropriateness for any commercial purpose.

5. The inclusion of a credit rating or secondary market price analysis in this rating report should and can only be interpreted as an opinion and not as a statement of fact or a recommendation to buy, sell or hold any token.

6. The risk ratings indicated in this rating report are valid from the date of issuance of this report until the date of the next adjustment; at the same time, TokenInsight Inc. will periodically or irregularly track the ratings of the rating recipient to determine whether to adjust the credit ratings and will publish them in a timely manner.

Limitations and Disclaimers

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01 . MARKET OVERVIEW The Internet of Things (IoT) was first introduced in 1999 as a new concept, referring to the connection of various non-standard devices to form computer-operable networks. Many studies have focused on "smart machines" and "smart devices" before, but now, researchers are trying to include more functionalities, and make devices more intelligent and efficient by giving them some computing and data transfer capabilities. Since the initial concept of the Internet of Things originated, its connotation has extended from simple RFID tags, machine data collection, and other technologies, to industrial data collection and processing (Industrial Internet of Things), smart home devices, smart medical and health detection systems and other application scenarios. Forbes pointed out in a report at the end 1

of 2018 that the market value of the entire IoT industry rose from $110 billion in 2017 to $151 billion in 2018; a whopping growth rate of 37%. Moreover, the report also predicts that the market value of the IoT industry will exceed $1.5 trillion by 2025.

Although the industrial Internet of Things and smart home devices have been used in the assembly lines and everyday life, there are still bottlenecks seen within the large-scale production and application of IoT devices. Two common problems are hardware constraints (manufacturing costs of sensors and terminals, power consumption, functionalities, etc), and costly infrastructure (current networks are still expensive and transmission rates are not high enough).  However, with the advancement in hardware devices and the implementation of 5G networks, this part of the limiting factor is gradually disappearing. It is important to note that other major pain-points seen in the IoT industry such as user data privacy, the monetization of user data, the scalability of the current network, and so on need to to be addressed. These are the areas where blockchain based IoT projects, like IoTeX currently targeting.

02. PROJECT ANALYSIS

Blockchain in blockchains architecture; Roll-DPoS consensus mechanism; Unique privacy-preserving technology

As a decentralized application development platform for the Internet of Things, IoTeX has proposed its own blockchain solutions to current problems such as low scalability, user privacy, high operating costs, and low usability. Companies such as IoTeX that pain-points associated with the Internet of Things industry can be seamlessly solved by implementing blockchain technology due to its innate characteristics; such as immutability, transparency, and decentralized mechanisms. On this basis, IoTeX has employed its “Separation of Powers” methodology, designing its “blockchain-in-blockchain” structure and the Roll-DPoS consensus mechanism to improved the processing capability of their blockchain system without sacrificing decentralization and security. Also, they have developed lightweight privacy protection technology and unique decentralized trusted computing hardware to protect users' data and behavioral privacy.

The blockchain system structure designed by IoTeX is as follows:

https://www.forbes.com/sites/louiscolumbus/2018/12/13/2018-roundup-of-internet-of-things-forecasts-and-1 11

market-estimates/

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‣ Figure 1 The Hierarchical Structure of IoTeX Source: IoTeX

At the top level is the “governance layer” (“Gravity Chain”). The main functions of the governance layer are node elections, voting, and proposals. The “gravity chain” that exercises governance functions is still under development. IoTeX currently relies the Ethereum network to perform governance functions such as the election of supernodes.

Under the “governance layer” lies the “orchestration layer”, which executes the decision-making of the governance layer through a “root chain”. The “root chain” is capable of transferring digital assets, executing contracts, and interacting with sub-chains. These basic functions are fundamental to a blockchain system, and will be implemented first on the mainnet, which has been launched earlier this year. The "root chain" of IoTeX will utilize a Roll-DPoS consensus mechanism. This is a new consensus mechanism that has been improved from various other PoS and DPoS consensus mechanisms currently in operation, as explained in detail in this report down below.

The foundation layer is known as the "operational layer" and "execution layer" that perform more specific functions. Considering the characteristics of IoT application scenarios, IoTeX uses the mainchain-subchain structure to achieve large-scale applications. Users can customize, deploy, and anchor sub-chains based their own needs. At the same time, the calculation and consensus of the subchain will be completed through the supernode pool; this design provides subchains with the same level of security as the mainchain without sacrificing system performance. IoTeX distributes amounts of computation to each layer through a decentralized design to avoid putting burden on the network from a large number of connected IoT devices. As a common way of improving scalability, IoTeX is combining their subchain with Roll-DPoS in a new innovative way, which not only achieves the loose coupling of business logic but also provides certain advantages to performance and security. The overall design provides a new concept within the blockchain industry.

Regarding the Roll-DPoS consensus algorithm applied in IoTeX, each supernode that wants to participate in block production needs to submit an application first. Supernodes that meet the application requirements will win a certain number of votes, and will be selected by the system at the beginning of a block generation cycle to form a node pool, and participate in the block generation. After a node pool is formed, the system uses randomly generated signals from the previous cycle to select the nodes participating in the next block generation, and each node chosen by the signal will be sorted in order to take part in this process. After each new block, the system will reach a consensus on new blocks through a three-stage PBFT consensus mechanism within the node which the block is created. At the end of each epoch, the block attributed note will use the BLS threshold signature method to generate a random beacon for the next epoch.

By using Pedersen's DKG protocol, ESPCA signature, BLS group signature, and other technologies, Roll-DPoS can use the signature private key, which is encrypted by a series of random numbers that will change based on each epoch, and in return network security and consensus efficiency will be greatly improved. The Roll-DPoS consensus mechanism enables higher TPS (more than 1,000) and

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improves system security while reducing the influence caused by the centralization of existing DPoS mechanisms.

As for privacy protection, IoTeX improved Monero's DKSAP protocol and proposed the DKSAP-IoT protocol for connected IoT devices, which have shown to save computing power by 50%; this is important for IoT devices that have limited computing ability and need to save energy. Secondly, IoTeX's proprietary intellectual property, self-designed and low-power trusted hardware SDK is expected to soon pre-launch. This low-power trusted computing device will be distributed throughout the world, working with the IoTeX blockchain to produce low-computing, high-net-worth trusted computing tasks. The supported applications include private version ERC20 tokens, digital asset blind auctions, and data-based user portraits.

Development progress meets expectations, code quality is fairly high

The IoTeX project began in May 2017. Since the release of their testnet in the second quarter of 2018, IoTeX has been developing expeditiously, and its pace is in line with its development roadmap. The Mainnet alpha has beed launched in late April. Currently, there are 58 supernodes as delegates. The network is running stably. The first sub-chain, Avochain is also currently under development, and will be used to support trusted computing and privacy applications available later this year.

According to TokenInsight’s observation on the IoTeX open source repository github/iotexproject/iotex-core, IoTeX's code submission is very active, and code quality and originality are good.

‣ Figure 3 Static Code Analysis of IoTeX Source: TokenInsight Dashboard

Distribution of IOTX token is transparent, circulating supply matches schedule

‣ Figure 2 IoTeX Roadmap for 2019 Source: TokenInsight

Checkpoint Event

Q1 delegate vote, Mainnet alpha launch, token swap

Q2IoT DApps and smart devices integration; low power dissipation trusted hardware SDK pre-launch

Q3Mainnet beta: privacy enhancement; first subchain (avochain) launch

Q4 Mainnet GA

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IOTX token is not available for public sale. According to official information, the distribution and unlocking schedule is shown in the table above. According to CoinMarketCap, the total supply of IOTX is 10 billion and the current circulating supply is about 2.5 billion, which is in line with the officially published supply curve.

‣ Figure 5 IOTX Distribution Schedule Source: IoTeX

‣ Figure 4 IOTX Token Distribution and Vesting Schedule Source: TokenInsight

Distribution Vesting Schedule

Private Sale: 24% 6% distributed every three months (2018.5-2019.5)

Community Reward Programs: 6%

2% distributed immediately (May 22, 2018). Remaining tokens unlocked and linearly distributed over the course of 3 years, with quarterly distributions.

Team: 15%

The detailed unlock schedule start date varies based on each respective employee's join date. The first distribution of team tokens will be in February 2019. Vested over the course of 4 years after join date (varies by employee):6-month cliff, monthly distributions.

Ecosystem: 30%

1.5% distributed immediately (May 22, 2018). Remaining tokens unlocked and linearly distributed over the course of 3 years, with quarterly distributions. 12% locked/reserved for Roll-DPoS mining, commencing in February 2019 after Mainnet Alpha launch.

Foundation: 25%2.1% distributed immediately (May 22, 2018). Remaining tokens unlocked starting Feb 2019 and linearly distributed over the course of 3 years, with quarterly distributions.

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03 . COMMUNITY POPULARITY

Recent community activity is rising

According to TokenInsight's observation on IoTeX community data, although the number of IoTeX Telegram group members has recently decreased, the proportion of active users in the group and the number of conversations have increased; at the same time, its official Twitter tweets are posted more frequently. Through analyzing its Twitter community members, TokenInsight found that 84% of its Twitter respondents were personal users and KOL, and the overall sentiment was neutral.

‣ Figure 6 IoTeX Community Activity Source: TokenInsight Dashboard

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04 . TEAM INFORMATION IoTeX's team currently has about 30 employees, located in the United States, China, Europe, and other places. The founders and core members have strong academic backgrounds and excellent background experience in their professions. This provides strong support for the development of their project. In addition, the investors in this project include Draper Dragon, DHVC, 8Decimal Capital and many other renowned investors. These top tier firms also attributes to the endorsement for the quality of the IoTeX project.

‣ Figure 8 IoTeX Investors Source: IoTeX

‣ Figure 7 Information of IoTeX Core Team Members Source: IoTeX

Member Information

Rullen Chai, Co-founder

Ph.D and Research Scientist in Cryptography at UWaterloo. Head of Crypto R&D at Uber, Security Engineer at Google. 8+ years of experience in cryptography and blockchain.

Qevan Guo, Co-founder

Ph.D in Machine Learning and Computer Vision at National University of Singapore. Engineering Manager and Research Scientist at Facebook. 20+ publications/patents.

Jing Sun, Co-founder

Founding partner of Sparkland Capital, focusing on Frontier Tech, lead 40+ investments and innovations in blockchain, security and IoT. Board director on numerous companies.

Xinxin Fan, Head of Cryptography

Ph.D in Cryptography at UWaterloo. Sr. Research Engineer at Bosch Research. 14 years of research and industry experience in information security and crypto. 40+ publications/patents.

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APPENDIX ‣ Appendix 1 Symbols and Definition of Risk Ratings

AAAThe technical foundation is extremely solid, the status of operations is extremely stable, the extent of influence on the project by unfavorable changes in the environment or un- certain factors is extremely small, and risk is extremely low.

AAThe technical foundation is very solid, the status of operations is very stable, the extent of influence on the project by unfavourable changes in the environment or uncertain factors is very small, and risk is very low.

AThe technical foundation is solid, the status of operations is stable, the extent of influence on the project by unfavourable changes in the environment or uncertain factors is relatively small, and risk is relatively low.

BBBTechnical feasibility is very good, the status of operations is stable, influence on the project by unfavourable changes in the environment or uncertain factors exists to a certain extent, and risk is controllable.

BBTechnical feasibility is good, the status of operations is relatively stable, the possibility of influence on the project by unfavourable changes in the environment or uncertain factors exists to a relatively large extent, and risk is basically controllable.

BTechnical feasibility is moderate, the status of operations is relatively stable, the possibil- ity of influence on the project by unfavourable changes in the environment or uncertain factors exists to a very large extent, and risk is to a definitely limited extent controllable.

CCCThe technical foundation or idea has certain problems, the application scenarios are lim- ited, the project is susceptible to influence by uncertain factors, both internal and external, and has relatively large risk.

CCThe technical foundation or idea has considerable problems, and application scenarios are highly limited, which makes for a project that has few internal or external factors to consider in the context of sound development, and carries a very large risk.

CThe technical foundation or idea has substantial problems, and lacks deliberation upon possible application scenarios. The token has almost no usage value, and the project suffers from extremely large risk.

D The project is riddled with problems and carries an extremely high risk of failure.

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