Dusk Network is a privacy protocol that advances bulletproofs technology and uses this zero-knowledge cryptography in order to remove the middlemen from regulated markets while maintaining regulatory compliance. The firm aims to lower the barriers to entry and capital requirements for issuing security tokens.
While it is clear that Ethereum and other blockchain protocols do not satisfy the requirements of the regulatory market, a number of Security Token Platforms have arisen that work around the underlying blockchain’s limitations. These solution providers operate a platform that has specific requirements, fees and costs for using it. Dusk Network is creating a blockchain protocol, by the likes of Ethereum, that is compliant with regulatory requirements and provides a Digital Share token standard that can be used by anyone, at any time, from any location.
By removing the middlemen, Dusk brings the cost down of raising capital through a Security Token Offering. This is in turn opens up the market route for the small and medium sized enterprise which was previously locked. The firm coordinates an EU-focused consortium bringing together businesses, regulators, and financial institutions to create a viable security token market.
The security token market is very young but still a few problems are quite noticeable:
- Current STO solutions ignore privacy requirements and build on fully open ledgers.
- These propositions are centralized, and resort to off-chain middlemen.
- This in turn prevents scalability, and secondary market adoption.
- STO platforms and incubators generally charge way too much and offer too little.
STOupdates got in touch with Pascal Putman, Business and Project Manager at Dusk Foundation to know more about how the firm aims to lower the impact of middlemen in the industry while lowering down the barriers to investment and for the launch of security tokens. Read the following interview to get a deep insight into the vision of Dusk Foundation:
Tell us about main idea and vision behind the project briefly.
Dusk Network was conceived to offer value to the real world and not to simply build something that was convenient technically. The past year a lot of applications have been built to enable the issuance of Security Tokens. These applications are usually built on Ethereum, but on occasion also on Stellar and EOS. Whilst these platforms are battle tested, they are built to host a wide array of general applications and are not build specifically for the intended use case: to issue and trade Digital Securities. In practice this means that all sorts of mediation (through off-chain registrars – which implies there is a middleman) is reintroduced.
Through the technological advancements in applying Zero Knowledge cryptography (Bulletproofs) we have managed to build a scalable solution called Dusk Network that provides auditability and compliance, whilst providing confidentiality. This unlocks two initial use cases. One pertains to payments, where it is apparent that there is a great need for confidentiality. And two, in the ecosystem of Digital Securities we see a great need to lower the threshold to issue, purchase and sell securities. By disintermediating this ecosystem, we streamline the process and drive the total cost of issuing Digital Securities down significantly. Furthermore, Dusk unlocks various Digital Security related use cases not previously possible.
Why does the market need a project like Dusk and what problem does the project commit to solve in real life?
There is a lot of demand for Digital Shares, both by issuers, for whom its often a more cost-efficient way to attract funds, and by investors that are looking for quick settlement and cost-efficiency or those who have had little to no access to tangible assets and who can now purchase fractionalized ownership. Of course, there are many more advantages to using Digital Securities as opposed to traditional securities. As a facilitating blockchain platform, what sets Dusk Network apart from Ethereum, Stellar and EOS is that Dusk is build whilst ensuring that all requirements of Digital Securities are built into the blockchain protocol. This translates to an extremely fast, scalable and private blockchain that is engineered to satisfy regulatory compliance. The importance of confidentiality in the Digital Security ecosystem is oftentimes overlooked, yet it makes a lot of sense when you consider the need for trade secrecy and prevent investor collusion and market manipulation.
Dusk Network offers such a solution through the combination of new consensus mechanism called Segregated Byzantine Agreement (SBA) and Bulletproofs. And in contrast to other infrastructures used for Digital Securities, Dusk Network solves all of this on-chain at the protocol level, which unlocks fungibility, scalability, speed, and auditability.
Who will be mainly benefitted by the project?
By opening up our blockchain to be used by anyone, we are drastically reducing the cost of issuing Digital Securities and thus unlocking a previously unattainable route for the small and medium sized enterprises and opening up the securities market for retail investors who will now be able to buy (fractions) of shares they otherwise couldn’t afford.
Dusk Network is service provider agnostic. Anyone can compete with its solutions and products and the issuer is not forced to select from a select few providers
What is the progress of project so far in terms of prototype, partnerships, GitHub commitment etc.?
We just launched our restricted Devnet in December 2018 and are planning to release our Testnet Q1 2019. The code will be made public in sections after going through a rigorous formal verification and security audit process. In the end all our code, as well as any IP developed, will be released open source under MIT license.
On the business side of things, everything goes extremely well. We’ve officially announced the first STO (€21 million) to be launched on our platform and more are to follow. On top of that, we are formalizing strategic partnerships to build the whole ecosystem around the STO industry in the EU.
Regulations are the major hurdles for firms in the security token space, how do you plan to offer a regulatory compliant platform?
Overall the EU countries have a somewhat similar way of dealing with securities and although issuing a certain type of Digital Security may be easier in one jurisdiction than it is in another, the information available is growing by the day. At this moment regulations don’t seem to be the biggest hurdle. The biggest hurdle is to increase the adoption and trust of the ecosystem’s users.
Every day we are working to earn that trust, and we are doing it by building a protocol that allows for flexibility and to satisfy the needs of the issuers, the regulators and the investors alike. To give an example, we are integrating compliance parameters and restrictions into wallets and tokens, and transactions. Furthermore, we have already identified the need for confidentiality – without it a regulated market place will succumb to market manipulation and collusion – which is why we are developing the XST (anonymous security token) standard that companies can use to issue Digital Securities.
On top of that, the legal process to issue Digital Securities in the Netherlands is taking shape and validates what we are building. We are also closely working with multiple research institutions and forming partnerships with organizations that all contribute towards the compliance of the platform.
When can we expect the Dusk mainnet to go live and what are your plans for future?
We are on the verge of releasing our TestNet which is marked for Q1 2019. Our mainnet will follow soon after, although at the start the functionalities will be brought out step by step. We expect to be able to create XST tokens in Q2-Q3 2019. Once that functionality is live, we will continue delivering additional features and upgrades to the network. Dusk will be the first privacy blockchain driven by a Proof of Stake (POS) consensus algorithm that offers unprecedented speed, scalability and features. Improving the code and protocol will be the ongoing mission of Dusk Foundation for the foreseeable years.
What is the main challenge you are encountering at the moment while working in the STO industry?
The main challenge is to keep focused and deliver finalized pieces rather than jumping into all of the exciting opportunities that are thrown at us. We are laser focused on getting mainnet released and building a Digital Securities Consortium in order to help SME’s and other companies to launch their STO. In order to do that, we sometimes have to say no to other exciting opportunities, which is a luxury we are happy to have.
With the ICO craze going down every day, what expectations you have for the growth of Security Tokens or STO industry?
The utility that Digital Securities unlock are real and have huge real-world potential. To put it differently, Digital Securities are an aspirin, and not a vitamin. It is without a doubt that the STO ecosystem will grow to replace some of the current non-digital methods of issuing securities. It also has great potential to form a bridge between the traditional and the utility token world.
What is your vision for Dusk, where do you see the platform in next 5 years?
Dusk Network will be the leading protocol to launch STOs in the EU and will be a thought leader for future digital asset classes. With our extensive research arm, the close contact we already have with top notch universities, and all the talent that are entering the blockchain industry, great things will emerge in the coming years.
Anything you would like to add for the community?
We want to thank our community for their active contribution and support these last few months. 2019 will be a big year and we hope to build out the Digital Security Ecosystem with each and every one of you!
Notable Points to Summarize things up:
- Dusk Network is the first protocol that satisfies the entire STO regulatory framework on-chain, at a fraction of the cost.
- It is decentralized, automated, and extremely convenient for any size organization.
- Dusk’s tech allows it to be the basis for a real secondary market
- The platform is confidential & compliant. Dusk features flexibility for both regulatory and user requirements
To know more about Dusk Network. Visit:
- Website: dusk.network
- Medium: https://medium.com/dusk-network
- Newsletter: https://dusk.network/#subscribe-section