Etherparty Analysis: Complete Analysis
For the analysis of Etherparty, I have posted several smaller parts where I focused on one or two areas. I've done this mainly to get more focused discussion in the comments and to be able to deliver content on a more regular basis. In addition, I think the posts were easier to read. Now that I've finished the analysis, it's time to publish the full post. I will also be posting a short summary next week.
Links to previous parts:
What is Etherparty (FUEL)?
As Etherparty itself puts it:
"Etherparty intends to create a platform and value-add services that allow any user to access smart contract and blockchain technology, without requiring specific technical knowledge of either."
So what are smart contracts? A smart contract is, in essence, an automated digital contract between two or more parties. The terms of the contract are pre-programmed in the contract. This allows two parties who do not necessarily trust each other to interact without needing a third (trusted) party.
Clearly smart contracts are the future. However, there's a big problem: complexity. Smart contracts on the Ethereum platform are written in Solidity. This poses a problem as Solidity, or any programming language for that matter, is far too complex for a typical user. There's no way lawyers will learn Solidity just to write digital contracts.
This is where Etherparty comes in. Etherparty allows users to create smart contracts without any technical knowledge of programming, blockchain or crypto. Etherparty does for smart contracts what Wordpress does for web sites. It intends to be a one stop shop - only Etherparty will be needed to create a smart contract. Apart from creating contracts by yourself, users will be able to buy pre-made contract templates from a marketplace.
Etherparty is built on top of the Ethereum network. Smart contracts are executed through the Ethereum Virtual Machine (EVM). In the future, Etherparty intends to be blockchain agnostic and support other blockchains as well (such as Bitcoin).
The Etherparty application has three subscription tiers. Users in the lowest tier will be able to execute one or two contracts per month. The second subscription tier offers a higher limit and more functionalities and the third tier increases upon the second. The white paper does not specify which functionalities are available for each subscription tier.
What is the Etherparty token?
In order to execute contracts, FUEL is needed. FUEL is the platform's native validation token. Etherparty mentions that:
"Because the price of FUEL may fluctuate, we will peg contracts to a fixed amount of USD, and adjust the amount of FUEL required to execute the smart contract based on this fixed price."
This is really strange to me. If you're going to charge a fixed amount of USD for the use of contracts, why bother with a crypto currency? I strongly believe that in order for a cryptocurrency to succeed, it must be fundamental to what the project is trying to do. Do you really need FUEL in order to purchase contract templates? Would it not be possible to buy templates and execute contract using ETH?
The total supply of FUEL tokens is one billion and a hard cap. Etherparty mentions that:
"Tokens that are used on the platform will go back into the platform supply. We will provide a service for users to purchase FUEL from this supply."
However, there's no mention who will be the owner of these tokens. Do they go to the Etherparty team? Who will users be buying the FUEL from?
Sadly, the white paper contains only about half a page on the FUEL token. Consequently, some critical questions remain unanswered. Hopefully the Steemit community will be able to provide more information. Additionally, I might reach out to the Etherparty team to get these things cleared up.
Where can I buy FUEL?
FUEL will be available on the Etherparty platform in the future. For now you can buy the tokens on exchanges. Binance has by far the largest volume at about 97% of total volume.
Where is the project currently?
In their community updates on Medium, Etherparty gives some updates regarding partnerships and various events they've hosted or participated in. However, there's not many updates regarding the progress of the project and they rarely refer to the road map as shown in the white paper. This makes it hard to judge whether the team is on schedule.
In the white paper, Etherparty divides future development over three releases, named Release 1, 2 and 3. Release 1 was scheduled for Q4 of 2017 and included development on:
- Backend Systems
- Frontend Systems
- Authentication & Authorization
- Network Organization
- Cloud
Beta testing is started in 2017 and is currently on-going. Users can register for the beta version on the Etherparty website. In the December Community Update it's mentioned that mainnet release is planned for Q1 of 2018.
Since the white paper was not clear on whether Release 1 would be on test net or main net, we can not conclude whether the team is on schedule. Either the team is right on schedule or behind on schedule by about three months.
What's in store?
Release 2 (planned for end of Q2 2018):
- Mobile App
- Notifications
- Contract Templates & Library (crucial for contract marketplace)
- Oracle System (integration of APIs)
Release 3 (planned for end of Q4 2018):
- Additional development on Frontend Systems
- Additional development on Mobile App
- Enterprise Solution (advanced features)
- Team & Team Features
Some important goals that Etherparty has mentioned elsewhere in the white paper, such as becoming blockchain agnostic, are nowhere to be found in the road map. Similarly, there is no mention of releasing on test and main net. It would be good for would-be Etherparty investors if Etherparty released a more detailed road map and referred more to the road map in their community updates.
The Etherparty Team
On their website, Etherparty lists 24 people (and 1 dog) under 'Team'. However, 5 of those 24 people are 'Advisors'. This is important to note because they are not actually team members - they do not actually work for Etherparty. You can take a look at the LinkedIn pages of the people listed as Advisors and you'll see that they haven't even listed Etherparty on their LinkedIn pages. I think it's slightly misleading that Etherparty lists these people under the heading Team, although this seems to be common practice in crypto.
I was going to mention that the team is actually quite big and that with six developers, they have a lot more people working on the project compared to other crypto's. Then, while researching the team's LinkedIn pages, I found a company called Vanbex Group. Take a look at their About / Team page, doesn't it look familiar?
I then found this article on the Vanbex Website:
The Vanbex Group is pleased to announce the closing of its seed round of financing for the development of blockchain-based products, including Etherparty, the company’s easy-to-use smart contract creator. Vanbex raised CAD 500,000 (USD 365,474), in line with the company’s target for its initial seed round.
In short: Etherparty is one of the blockchain projects started by Vanbex Group. Vanbex Group seems to be the employer as opposed to Etherparty itself and people working at Vanbex Group get assigned to the Etherparty project and presumably other projects as well. A similar concern came up while analysing Request Network. The team seems to be quite big, but we can be sure that they're not all working full-time on the Etherparty project.
How is Etherparty funded?
As mentioned earlier, Etherparty had received 500.000 CAD in seed funding from Vanbex Group in June. Then there was a pre-crowdsale of FUEL tokens in September and a crowdsale in October. A billion FUEL tokens were created and allocated as follows:
- 80% was sold in pre-crowdsale and crowdsale
- 10% reserved by the company for beta testers, strategic partners and community incentives
- 5% sold directly on the platform
- 5% distributed to the Etherparty team
Compared to other projects, the percentage allocated to 'community' is quite small. Where Request Network is trying to build an ecosystem and get others to develop extensions on their platform, Etherparty is trying to build it all themselves. In a way, this makes sense because the way the FUEL token is structured, there's no incentive for Etherparty to get others involved (since FUEL tokens don't get burned or used, so the circulating supply will always be 1 billion).
Looking at the funding, I strongly get the feeling that Etherparty chose to create the FUEL token not because it was necessary for users to use their application, but because it would make raising funds much easier. Raising funds traditionally from a crowdfunding or a series A would likely results in much less funding than by creating a token and selling it in a crowdsale.
Economics: Supply of FUEL tokens
When Etherpart started, one billion FUEL tokens were created and sold (through pre-crowdsale, crowdsale and on the platform/exchanges) or distributed. This is a hard cap, meaning that no more FUEL tokens will be created.
Fuel tokens are used to buy, create and execute smart contracts. The tokens are paid to Etherparty themselves (and potentially other users who create templates) and are sold back on an internal marketplace. Unless Etherparty holds on to the tokens (which they have not indicated they'll do), there's not really any reason for the token to increase in value.
The price for a smart contract on the Etherparty platform is fixed USD amount. The price in terms of FUEL tokens will fluctuate as the FUEL token price fluctuates, but in USD the price remains fixed. This is good for its users since they obviously don't want the price of a service to change every day. I expect users to buy FUEL tokens only right before they need them to pay for the services. It's not clear whether Etherparty will immediately resell the tokens or hold on to them for a while.
It would be good if Etherparty releases some statement on their strategy with FUEL tokens they receive from customers. Something like a lock-up period would create more confidence with investors as it would align the interests of Etherparty with the interests of investors.
Competitors
Notable competitors of Etherparty are:
BlockCAT:
BlockCAT lets anyone create, manage, and deploy smart contracts on the Ethereum blockchain with just a few clicks. No programming required. Select from our catalog of pre-built contracts, or design your own with a drag-and-drop interface.
Agrello provides an AI powered interface allowing you to build smart contract-based legal agreements on the blockchain. No coding or legal skills required.
Both of the competitors listed above have their own token, CAT and DLT, respectively. In order to do a proper competitor analysis, I'd have to go through the same steps as I did with Etherparty in this series. I won't do that for now, but I'll put it on my backlog for future posts.
Project
✔ Brings smart contracts to the masses
✔ Built on the Ethereum network
Token
✗ Only needed for buying Etherparty services
✗ Etherparty could just charge ETH instead of FUEL
✗ Token likely created to get more funding
Road map
✔ Potentially on schedule for mainnet release in Q1 2018
✗ Not clear where the team currently is in terms of progress
✗ Important milestones are missing from road map
✗ Lack of details
Team
✔ Relatively large team, including a decent number of developers
✗ Advisors are listed under team, making it look bigger than it really is
✗ The team is largely (potentially completely) from Vanbex group
✗ Unclear how much time Vanbex allocates to the Etherparty project
Funding
✔ Backed by Seed funding from Vanbex
Economics
✔ Hard cap
✗ FUEL tokens received by Etherparty could potentially instantly be resold on the market
✗ Etherparty has not released any strategy with regards to FUEL obtained from users
✗ Tokens are never removed from the supply
Competitors
✔ Number of competitors seems to be limited
✔ Etherparty seems to be ahead for now
Conclusion
Taking the above into consideration, I will not be making any investments in FUEL. While I have a lot of confidence that Etherparty as a project will succeed, I don't think this will translate into gains for its token investors. Etherparty might sell a lot of subscriptions, but this will not necessarily translate into a high price for the FUEL token. In addition, some critical information to assess the progress and economics of the token seem to be missing or withheld.
Note that the above are my personal views only and not investment advice. It is meant for information purposes only.
Please consider upvoting and resteeming my posts!
Thanks!
-longcat