Analysis of Enigma Catalyst ICO – Data-Driven Crypto Investment Platform - Crush Crypto

Analysis of Enigma Catalyst ICO – Data-Driven Crypto Investment Platform

This article was originally published on 2017-08-14.

Updates on 2017-09-05: In response to the hacking incident on August 20, 2017 and the last minute change in crowdsale terms (50% increase in the total token supply) announced by the team on September 5, 2017, we have updated our recommendation on the Enigma Catalyst ICO. We originally had a positive/positive recommendation for short- and long-term holding and we have downgraded it to negative/neutral. Please see our updated Conclusion section.

Summary

    • Project Name: Enigma Catalyst
    • Token ticker: ENG
    • Websitehttps://www.enigma.co/
    • Whitepaper: https://www.enigma.co/enigma_catalyst.pdf
    • Hard cap: US$45 million (ICO contributors own 50% of total token supply if hard cap is reached)
    • Soft Cap: No soft cap
    • Conversion rate: 1 ENG = US$0.6
    • Maximum market cap at ICO: US$90 million
    • Bonus structure: None
    • ERC20 token: Yes
    • Timeline: September 11, 2017 (please refer to Enigma’s website for most up-to-date information)
    • Token distribution date: Within a month after the sale is complete
Our video summary (length: 6:35, posted Aug 15, 2017)
Our latest update video (length: 4:51, posted Sep 5, 2017)

Project Overview

What does the company/project do?

Enigma Catalyst is an investment platform that enables developers to build, test, and execute micro crypto-funds. Through Catalyst, developers can access Enigma’s decentralized data marketplace protocol and consume valuable crypto-data that can be used in their strategies.

Catalyst allows developers, quants, and experienced traders to easily build, simulate, back-test, and eventually live trade cryptocurrencies using sophisticated programmatic strategies. Regular investors can then invest directly in winning strategies through Catalyst’s system.

However, in order to perform algorithmic trading on crypto-assets, reliable and up-to-date data is needed. Catalyst plans to curate the initial data sets, but in the future, it is expected that most data will be generated by the community in return for incentives (i.e. ECAP subscription fees).

By creating a decentralized data marketplace, investors can subscribe and consume the data while paying a fee to the contributors who provide such data.

To provide a sense of the market size, top hedge funds like Citadel, Two Sigma and Renaissance spend tens of millions of dollars every year on high-quality data. Bloomberg and Thomson Reuters, the two major players in the financial data industry, generated a total of over $20 billion in revenues last year.

How advanced is the project?

The idea of Enigma was first conceived in 2015, when it was a research project at MIT.

In July 2017, Catalyst Alpha was released. You can check it out here.

The minimal viable product (MVP) is scheduled to launch in 2018 Q1. Functionalities include testing API, live trading, extended data sets, and web UI / IDE.

In 2018 Q2-Q3, further functionalities will be added to Catalyst, including investment platform, single exchange sign-on, community driven governance (data sets), and trading ICOs.

Catalyst is scheduled to convert the system to a decentralized one in 2019 Q1, along with eliminating the custodian.

What are the tokens used for and how can token holders make money?

ECAP tokens are used to reward creation by and for the community (e.g. trading strategies, data sources) and are consumed when community members access premium services on the platform. Right now there are two main token dynamics:

  • Primary: ENG is used to access data sources on the decentralized Enigma Catalyst Data Marketplace. Payment is on subscription level.
  • Secondary: ENG tokens are used for incentives to grow and ensure stability of the network. ENG tokens are used to create demand in the data marketplace: Reward tokens are provided to quants with winning strategies. This incentivizes more quants to come on the platform and consume data to refine their strategies and gain an edge.

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Team

Enigma has a team of 5, all of whom have studied in MIT in different departments.

Below are the profiles of some of the team members:

Guy Zyskind, Founder and CEO – serial entrepreneur. Prior to founding Enigma, he was the CTO of Athena Wisdom and Tamkix.

Can Kisagun, Co-founder & CPO – also a serial entrepreneur. Prior to founding Enigma, he was the CEO of Eximchain and Streetdust.

Enigma has backing from VC firms including Floodgate, Flybridge, Digital Currency Group, Converge, Heroic Ventures, and E14 (associated with MIT).

Enigma’s advisors include Professor Alex Pentland, Director at MIT Media Lab, Jacob Gibson, Co-founder of Nerdwallet, Matthew Falk, former software engineer at Two Sigma, Bill Barhydt, CEO of Abra, Josh Lim, Director of UBS, and others.


Opportunities

  • Cryptocurrency investment is gaining recognition rapidly. Demand for financial analytics in the crypto space is surging – especially when institutional money start coming in. Most of the paying customers of Bloomberg / Thomson Reuters are hedge funds, mutual funds, and investment banks.
  • Catalyst has connections to the traditional asset management quant field – the team has interviewed around 40 quants from top quant funds like Citadel and Two Sigma.
  • As the project is focusing on quantitative analysis and data, the MIT background for the team is fitting.
  • Multiple venture capital firms have invested in Enigma, meaning that the company has already passed due diligence of those institutional investors.
  • The project is two years in the making and has an alpha released.
  • The project is open source so anyone can check its progress.

Concerns

  • Since this is a lucrative space, there are a number of other projects working on similar things and compete with them to some degree: Santiment, CoinDash, iconomi, Melonport, and Prism.
  • Catalyst is targeting professional traders and funds, so if cryptocurrency cannot emerge as a legitimate investment asset class, there will be limited demand for Catalyst’s products.
  • The team experienced a major hack 3 weeks before the ICO with the company's website, Slack channel, mailing list all being compromised. This doesn't bode well for a company that is supposed to be tech savvy and speaks volume to .
  • The team increased the hard cap by 50% less than a week before the crowdsale. With the new hard cap being $45 million, the potential is much less than before. It also shows the team's greediness and how they want to attract as much money as possible.

Conclusion

Overall, I dislike this ICO for its short-term potential and am neutral on its long-term potential. The recent multi-channel hack shows the team's weakness in security and execution. Increasing the hard cap by 50% 6 days before the ICO shows the team just want to attract as much funding as possible.

Our thoughts of the tokens for short term and long term are as follows:

For short-term holding

Bad because of (1) the recent high-profile hack, (2) the hard cap being increased by 50% or $15 million days before the crowdsale, and (3) the deteriorating market environment.

For long-term holding

Neutral. The financial data industry is large and the crypto subset is just getting started. With the strong team and awareness of the project, I believe Catalyst has a good chance to succeed. However, the 50% increase in market cap lowered the potential upside significantly.


For more information about the ICO, please visit the following links:

Website: https://www.enigma.co/

Whitepaper: https://www.enigma.co/enigma_catalyst.pdf

Bitcointalk Thread: https://bitcointalk.org/index.php?topic=2052215.0;all

Blog: https://blog.enigma.co/

Github: https://github.com/enigmampc

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