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August 29 2017

ICO Alert Report: Enigma Catalyst

ICO Alert Report: Enigma Catalyst

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A Message from ICO Alert

Last week a coordinated phishing attempt was conducted that siphoned contributors funds away from the Enigma Catalyst ICO. This was another case of a well respected ICO falling victim to bad actors in the cryptocurrency space. A few days ago, Guy Zyskind, co-founder and CEO of Enigma, posted a blog post, detailing the recovery steps Enigma will be taking to continue towards success for their ICO and project.

We’re fortunate to have had the chance to discuss the incident with the Enigma team, and believe their response sets a great example for the community. The first “Post-Hack” Q&A helps answer questions regarding the hack, and more information about the project itself can be found in the second “Project Details” section further down.

What is Enigma Catalyst?

Data is the 21st century’s most valuable currency. It moves markets, builds businesses, and saves lives. We are constantly generating and organizing data, learning from data, and creating with data.
But despite its significant role in our economy, data remains consolidated in the hands of a few large organizations. For anyone but those entities, it is not fungible or tradeable. Facebook and Google have built vast enterprises around collecting, monetizing, and hoarding consumer data. Other successful companies have built businesses on consolidating financial data, location data, medical data, and so on.
At Enigma, we want to re-think how data is shared, aggregated, and monetized in a way that maximizes collaboration. We believe, like any currency, value is maximized when it can be openly exchanged. That’s why we are building the Enigma data marketplace protocol — a marketplace for data that is decentralized, open, and secure. With Enigma, data sharing will be revolutionized in the same way that Bitcoin has revolutionized payments.
We realize building marketplaces of any kind is a very hard task and requires a strong use case from the beginning. With Catalyst, we are creating an initial use-case for the Enigma protocol. Catalyst allows anyone to build their own crypto hedge fund by consuming financial data from our data marketplace and using our backtesting and trading strategy development tools. We have two whitepapers outlining Enigma and Catalyst, both available on our website.
Our goal for our token sale is to build a strong, broad, and committed community that’s interested in both the Catalyst product and the long-term Enigma vision. The funds we raise will go towards developing our product, community, and data marketplace.
— Tor Bair, Head of Growth and Marketing at Enigma Catalyst

Pre-sale Information
The pre-sale is now closed. The team raised $20,000,000 even with successful phishing attempts from bad actors (read “Post-Hack” Q&A below for more information).

Crowdsale Information
The crowdsale will begin on September 11, 2017 and run until September 21, 2017. There is a hard cap of $30,000,000, which, if reached, will end the crowdsale immediately. The $30,000,000 hard cap includes the $20,000,000 raised during the pre-sale (i.e. $10,000,000 worth of ENG available during the crowdsale).

There is a minimum investment of $60 and no bonus/discount is available during the crowdsale.

Token Distribution Information
There are 100,000,000 ENG being created and 50,000,000 will be available to purchase (includes pre-sale amount sold). ENG tokens are ERC-20 tokens and only Bitcoin or Ether are accepted for contribution.

Tokens will be distributed within 3–4 weeks after the crowdsale has been completed.

Allocation
There are a total of 100,000,000 ENG being created that will be allocated as follows:
— 50,000,000 ENG: Available across the pre-sale and crowdsale
— 25,000,000 ENG: Distributed to the community for ecosystem incentivization
— 25,000,000 ENG: Retained by Enigma

Use of Crowdsale Proceeds
60%: Product and technology development
15%: Blockchain research
10%: Operations
10%: Marketing purposes
5%: Legal and administrative costs

Team
Guy Zyskind, Co-founder & CEO
Linkedin
Guy is an instructor for MIT and a Research Assistant at the MIT Media Lab. He has held the role of CTO at two separate startups and holds a master’s degree from MIT, where he did his thesis on blockchain technology.

Can Kisagun, Co-founder & CPO
Linkedin
Can has previously founded and run two startups and held the role of business analyst for McKinsey & Company. He holds a master’s degree in business administration from MIT.

Tor Bair, Head of Growth and Marketing
Linkedin
Tor was most recently a data scientist at Snap, Inc. (Snapchat) and has four years experience as a derivatives trader. He also holds a master’s degree in business administration from MIT.

Victor Grau Serrat, Senior Software Engineer
Linkedin
Victor most recently founded Colorful Ventures, a social venture capital firm focused on building and investing in early-stage social enterprises in emerging markets and developing countries. He has been involved in a similar focus as a co-director of “D-Lab” at MIT, a network of innovators that aims to enrich the lives of those living in poverty.

Conner Fromknecht, Software Engineer
Linkedin
Conner has worked as an engineer for Box, a publicly traded cloud content management company. Most recently, he was the head of cryptographic engineering at a startup. He holds a master’s degree in computer science from MIT.

Social Media
Twitter: www.twitter.com/enigmampc
Telegram: t.me/enigmacatalystANN
Slack: slack.enigma.co 
Facebook: www.facebook.com/enigmacatalyst

Post-Hack Q&A

ICO Alert: To give our readers some context, what are the summary results of the phishing attempt that happened last week?

Tor Bair, Head of Growth and Marketing: We were recently targeted by scammers directing users to a fake pre-sale site where they solicited funds and private keys. In all, over $500,000 in community funds were lost to the phishing attempt. Our community was instrumental in handling Slack and warning people of the phishing attack, and we are grateful for their help in containing the impact.

ICO Alert: We imagine it was a pretty rough time for the team. What were your thoughts when this happened? Can you give us a glimpse of the process you went through from discovering the attack to coming together as a team to continue forward in launching this project?

Enigma Catalyst: The Slack community first brought the attack to our attention almost immediately. Our first action was to take the website down and change all passwords to any critical systems. That is likely what mitigated most of the attack, as at that point people in the community were aware that this was a phishing attempt. All e-mails were sent from a fake account that didn’t belong to the company.
Enigma has worked tirelessly since the hack to resolve all security vulnerabilities from Slack, social channels, and our landing page. It’s truly been a complete team effort, with the full Enigma team, our partners, our community, law enforcement, and other parties working to ensure the safety of our community and our company.

ICO Alert: What extra security measures are being taken now to ensure this does not happen again?

Enigma Catalyst: Going forward, we’ve announced the following security measures:
1. Strong, different, random passwords for each account–whether held by an employee or official communication channels for the company
2. Two-factor authentication for all such accounts
3. Weekly password rotation and daily rotation in the week leading to the token sale
4. Proper access control management and compartmentalization
5. Integrating third party solutions such as DDoS protection and MetaCert for Slack
We have taken additional, as yet unannounced security steps as well. For our September 11 crowdsale, the Enigma team will conduct a live stream to ensure all communications are reliable and can be cross checked. The token crowdsale itself has always been secure, as it takes place through a different system entirely from the systems that were previously compromised.

ICO Alert: What is the status of the ICO now (new launch date? postponed? etc.)?

Enigma Catalyst: Our token sale has not been postponed. In fact, we’ve recently closed our pre-sale after hitting our cap of $20M in contributions. Our pre-sale was significantly oversubscribed, and we have had to turn down additional interest in order to ensure the full participation of our community.

ICO Alert: What steps is Enigma taking to help those affected and why?

Enigma Catalyst: Enigma is deeply sorry for the pain experienced by those who lost funds to the scam attempt, and we want to make sure that no one in our community that was a victim to this well-coordinated phishing attack is financially hurt. We recently announced that we will restore funds to everyone that lost money in this recent scam attempt after our token sale concludes. We are continuing to help our community identify and avoid phishing attempts so that no further funds are lost to malicious actors.

ICO Alert: Your blog post mentions you’re tracking down the stolen funds, where are you in this process? Do you know who/what group stole the funds and will you be pressing charges if possible?

Enigma Catalyst: We are currently working with law enforcement and a special cyber crimes division to track funds and the scammers. As the investigation is ongoing, we cannot announce anything additional at this time.

ICO Alert: Enigma is not the first, nor will it be the last, project that has this issue. Do you have any recommendations for projects launching ICOs in the future. Additionally, how can users protect themselves?

Enigma Catalyst: First and foremost, always educate your community. We made multiple announcements prior to the scam attempt that no money should be sent to anyone for any reason prior to our crowdsale date, and we provided guidance for identifying phishing attempts. Token sales should take every security precaution from day one, including those we’ve mentioned here, and you should ask that your community do the same. We’re currently working with other token sales, both previous and upcoming, to establish clear best practices and share learnings.

ICO Alert: Do you have any other announcements to make at this time?

Enigma: Please remember to join our communities to stay on top of all Enigma announcements and ensure you are receiving authentic communications from the team. We make all major announcements across all channels.
Twitter: www.twitter.com/enigmampc
Telegram:
t.me/enigmacatalystANN
Slack:
slack.enigma.co (currently not accepting new registrations)
Facebook:
www.facebook.com/enigmacatalyst

Project Detail Q&A

ICO Alert: There are two separate projects inherent to the overall Enigma Catalyst project. What is the difference between Enigma and Catalyst and how do they function together with the ENG token?

Tor Bair, Head of Growth and Marketing at Enigma Catalyst: Enigma is creating a decentralized, open, secure data marketplace that allows people, companies, and organizations to contribute and consume data. Subscribing to a data source is managed on-chain, including rewards and penalties, which are exchanged using our ENG token. The data itself, its storage and transmission, lives off-chain. In that sense, the blockchain acts as the controller of the network while the off-chain network handles everything else.
Catalyst is our first product that will build off of the Enigma marketplace. Catalyst empowers users to share and curate data and build profitable, data-driven investment strategies for the cryptocurrency markets. As Catalyst builds on the Enigma marketplace, ENG functions as its native token. The strength of the Catalyst product and community will help us expand the broader Enigma data marketplace.

ICO Alert: The team has mentioned they have quants interested in applying their trading knowledge to cryptocurrency, but haven’t had the platform to do so yet, until now. What kind of barriers to entry are there for regular users (e.g. those not currently associated with hedge funds or skilled in the use of large amounts of data used for trading algorithms) to use the platform?

Enigma Catalyst: Catalyst drastically reduces the main barriers of entry to algorithmic trading by providing access to good data, strategy backtesting tools, the ability to execute, and a strong community to learn from. We have a growing dev community that is supporting new users on the Catalyst platform, in addition to the Enigma team. Our goal for Catalyst is to democratize tools not just for experienced quants, but anyone looking to take a quantitative approach to trading the crypto markets.

ICO Alert: Most of the team has an affiliation with MIT in some way. Is MIT or the MIT Media Lab a partner/investor in this project?

Enigma Catalyst: We all know each other from our time at MIT as researchers and graduate students. MIT is an early investor in Enigma and Enigma also has advisors from the university such as Prof. Alex Pentland of the MIT Media Lab.

ICO Alert: Recently, the SEC came out with some further guidance for cryptocurrency regulation. How does this affect Enigma Catalyst project?

Enigma Catalyst: According to the legal advice from our excellent lawyers, ENG is a utility token and it does not constitute a security. We have complied and intend to comply with all guidance from regulatory bodies. For more information, refer to our lawyer Marco Santori’s tweets on utility tokens.

ICO Alert: One of the main applications for Enigma is a data marketplace. It seems important for this data marketplace to have a lot of data available for those interested in using it. Has the team secured or planned for partnerships with large data curators in order to ensure the platform is robust? What is the strategy behind attracting those with data, as well as those that want data, understanding there is a bit of a “chicken and egg” scenario with projects that require a similar network effect to succeed?

Enigma Catalyst: Catalyst is being built to solve this very problem. With Catalyst, we are creating an engaged community of quants (data consumers) who will gain an edge by consuming data sources. They capture value from this consumption through Catalyst contests or through live trading. Our goal is to acquire 25,000 users before the end of Q1 2018. In addition, we are also in conversation with institutional funds to use the platform. Enigma will be the data provider in this initial growth stage. Enigma will also be providing its own data sets and strategies for use by the community. When we achieve our growth goals, we will have fixed the demand side of our marketplace and be in a very strong position to attract companies in the crypto space which want to monetize their data.
Working with partners will be important for acquiring robust and unique data sets to use on Catalyst, as well as broadening our user base. The token crowdsale also helps ensure that our community is incentivized to participate in the growth of our marketplace and platform. Our early traction with our community has already allowed us to attract interested partners, but we have no further announcement at this time. Stay tuned!

ICO Alert: Understanding that data is one of the most valuable components to successful trading, why would data curators (those with data) be interested in sharing it/selling it to those in search of the data? Is there a “break-even” point of sorts that the team has identified in order to successfully incentivize data curators to share their data?

Enigma Catalyst: Giving the option to license curated data sets means opening up a new revenue stream for data suppliers, as well as growing the value of the data for the community. We see two main kinds of data providers: i) individual data curators and ii) companies in the crypto space. With companies, the argument is simple: investment is not their core competency. With individual curators, the space becomes more interesting. First of all, the skills required to create data sets and the skills to trade (based on signals) are quite different. In quant funds, the people who create the data sets, who do the research and who actually trade are different people. We believe our model will have a similar structure. People who are strong traders might not share their data sets, but others will. This is the beauty of free markets. If the incentives make sense, individuals will act. If not, they won’t.

ICO Alert: The Catalyst portion of the project is aiming to implement a decentralized exchange, while other cryptocurrency projects are strictly focused on decentralized exchange. How will the team be able to manage and produce what are essentially two large projects (Enigma and Catalyst), that both seem to require a full team’s attention?

Enigma Catalyst: Our focus is on building Enigma (the protocol) and Catalyst (the product). The proposal we laid out in the Catalyst whitepaper for a decentralized exchange was more of a call to action for the community to do more work in that area. For Catalyst (and as a result — Enigma) to succeed, there needs to be a better, more scalable exchange solution that allows for high liquidity, availability, and low latency. When we started writing the whitepaper, there was little serious work in that area. We’re glad to see that since then, more projects are focusing on building the next exchange infrastructure. This will allow us to focus on our core product and should also make Catalyst more in demand.

ICO Alert: Users can currently try the Alpha version of the Catalyst platform. What does the Alpha feature/include thus far?

Enigma Catalyst: The Catalyst Alpha includes a Python SDK for developers, where they can quickly test out different trading strategies and see how these perform on historical data (back-testing). In addition, there’s a social web application where developers can share their strategies with others, as well as submit their best work for the weekly Catalyst contest, where traders can win ENG. Currently, the Alpha only supports U.S. Dollar trading pairs with the main cryptocurrencies and our market data is limited to Poloniex. We’re constantly working on extending these, alongside other large features such as live trading.

ICO Alert: What does the roadmap look like over the next 18 months?

Enigma Catalyst: While our Catalyst Alpha is already out, we plan to release an MVP in Q1 2018. This will include our testing API, live trading capability, extended data sets, a web UI / IDE, and a test net of the Enigma protocol. In Q2-Q3 2018, expect single exchange sign-on, the investment platform, community-driven governance and data sets, and ICO trading. In 2019 we will be investing heavily in the Enigma protocol, launching our protocol main net and migrating all Catalyst data sets. We are excited to involve our community in achieving all of these milestones.

ICO Alert: As the last question of all ICO Alert Reports, we like to get the team’s thoughts on the cryptocurrency market as a whole currently, as well as any fun predictions that you or the team may have. What are your or the team’s thoughts?

Enigma Catalyst: We think the space still has a lot of room to grow. Currently, the focus is on big ideas, but we’re slowly seeing a transition to more mature, well-thought out projects that are backed by serious players and teams. This kind of maturity can lead to sustainable growth and real products that deliver value to people. If we had to guess, we won’t be surprised to see crypto markets surpass a cumulative $1 trillion market-cap by 2020. At this pace, maybe even much sooner. But we also expect to see volatility — and opportunity — continue.

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View the Enigma Catalyst Website here.

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References
(1) Enigma Catalyst Webiste, Enigma Catalyst, (2017)
https://www.enigma.co/

(2) Enigma Whitepaper, Enigma Catalyst, (2017)
https://www.enigma.co/enigma_full.pdf

(3) Catalyst Whitepaper, Enigma Catalyst, (2017)
https://www.enigma.co/enigma_catalyst.pdf

(4) Decentralizing Privacy Paper, Enigma Catalyst, (2017)
https://www.enigma.co/ZNP15.pdf

Topics: Blockchain, Cryptocurrency, ICO, Hedge Funds, Fundraising