There seems to be a lot of confusion regarding what Banyan Network (BBN) aims to achieve on Reddit, Telegram, and elsewhere. Unlike other projects such as Bottos (click here to read our analysis), Banyan doesn’t aim at creating a marketplace where businesses exchange data for fees. In contrast, Banyan proposes companies to fuse (merge) their proprietary data with the data of other providers – providing them with improved analytics. The BBN token will be used as a pure utility token, used for the process and the computation of this data, with the help of DApps, to extract added value from data which in isolation does not have much usefulness. Simply said, the network will enable databases from different sources to merge – providing more insightful information to businesses.
Banyan Network is a data value network that aims to use blockchain technology to unlock the power of data, by breaking down the silos (isolated databases) that various industries currently suffer from. The problem is that nowadays, data is not liquid and does not flow from one entity to another in a flexible manner. This is caused by the fact that many corporations, having access to large proprietary databases, are reluctant to share them due to the investments being made in data acquisition, as well as not wanting to provide an edge to the competition. However, some companies which might be willing to share their data do not have the possibility to, due to regulations such as data infringement laws, etc, and other variables. A blockchain-based platform might enable these businesses to share their data in a trust-less and transparent environment, where both regulators and companies would know the source of the data and who is using it.
For instance, a bank might have the records of everyone’s transactions; however, they know little regarding the factors that led to the transactions. By combining the bank’s data with the data of a telecoms company, the fusion of both data sets would enable the bank to be aware of what led to the purchase (such as someone’s recommendation, online advertisements, or the length of the call before the purchase) enabling more targeted marketing for credit services. The telecoms industry could also benefit from having the bank’s data by knowing exactly what and where their client purchased something, enabling the company to propose tailored contracts to their customers. For instance, if a client travels a lot, the company might be able to see that many purchases have been made abroad and propose a travel plan directly to its client. The fused databases could further be merged with other sources such as a retailer’s information. By aggregating all these data sets, consumer spending can be analyzed in a surgical manner – providing greater analytics to businesses but also to governments (especially given the fact that Banyan Network is a Chinese-based project).
Despite data fusion being at the center of the project, Banyan will not only fuse the data together but will play a role within the complete value chain of data integration – collecting, cleansing, integrating and creating applications (DApp); with the latter being the current focus of the team. Some of the future DApps are: a scoring system, a market (providing information regarding the data supply, recommendation for metrics to be used, etc). The first DApp, already in its pilot phase, is the Multi-Trust Connector. The application will enable the tracking of data sources – crucial for compliance purposes, and to avoid ownership infringements. The team will release an update regarding the pilot within 2 weeks (Begining of April).
Ref: Banyan Network’s Whitepaper
At first, the data fusion will be done manually; however, it is a time-consuming and a hazardous task due to data integrity (modification of data). The team will, in a later stage, integrate an AI component into its protocol in order to automate the process. To train the algorithm, the team will first train the AI with mature data and later will enable it to process data on its own.
The benefits of blockchain in the Big Data industry are numerous. First, it prevents unauthorised copies and modifications to be made (helping to maintain data integrity). Secondly, it enables high capacity storage as many participants in the network can host data which is encrypted, therefore not readable and kept private. Thirdly, it enables high throughput computation that office computers might not be able to handle. Also, blockchain technology enables the retention of ownership as the ownership of the data can be specified each time the data is being exchanged as the owner ID can be written on top of the data itself within a metadata tag.
Team and Partnerships
The project employs 40 people with many having worked in Big Data. The founder of UnionPay Smart (click here to read our summary of what UnionPay Smart is) is one of the core team members, and the founder of HPB, a blockchain using a software-hardware mix to increase TPS throughput, is an advisor to the project, and lastly, the CEO of China Unicom’s Big Data department is an advisor as well.
The team has plenty of experience in the Big Data industry, especially in China, with most of them having worked at UnionPay Smart. Much of the team coming from the Big Data industry is an advantage, as they not only understand the problems that the industry faces more than anyone else, but also have a network of contacts within the industry.
Kelvin Long, the founder of UnionPay Smart is a core member of the project. Additionally, they have the CEO of the Big Data department of China Telecom as an advisor. We already covered UnionPay on the website, in one of our HPB updates (click here to read the overview) so won’t cover it here. China Unicom, the third largest telecommunications company in China by market share which generated USD 20 billion of revenue in the first half of 2017 [modern_footnote]3[/modern_footnote].
On the crypto partnership side, Wang Xiao (Bob Wang), the founder of HPB, is an advisor to Banyan. Banyan’s CEO mentioned that a DApp on top of the HPB blockchain will be built once the network is mature. As a reminder, the HPB blockchain will be particularly useful to process thousands of transactions per second and to process real-time dashboards. Additionally, both companies work within the same office, in Shanghai, therefore, lots of cooperation between both companies are made. The fact that blockchain specialists are advising the project is encouraging as the teams lack employees on that aspect. Additionally, Banyan is partnered with Sentinel Chain (which is partnered with VeChain as well). This partnership will provide data from Sentinel’s unbanked users to Banyan’s users (especially banks). Regarding Loopring, not much has been divulged yet.
As of now, not much is certain regarding the extent of the partnerships between Banyan Network, China Unicom, and UnionPay. However, the fact that prominent figures of the Big Data department of both companies are on board is reassuring. However, not knowing the extent of the partnerships, it is hard to put a metric on the true value these have for BBN, as both companies may be on board to explore and gather information on how blockchain technology can be used, only to later create their own private chains.
Economic Model
One of the primary negatives we see about the project relates to the economic model. As of the time of writing, the team is vague regarding the type of utility the token will have within the ecosystem. Already mentioned above, it is worth repeating that the token will not be used to buy and sell data, but to enable processing and computation within the DApps.
The few certainties we have is that firstly, the token will be a pure utility token; it will not produce GAS nor will reward node holders with coins, as all tokens have already been minted. Secondly, BBN tokens will be used for governance purposes, with the need of locking tokens in order to have voting rights. Thirdly, one will need to deposit BBN tokens in order to be able to access the network. Lastly, Data providers will receive tokens, once a certain amount of their data has been used by other users. However, for none of those “utilities”, metrics have been proposed.
The team states that the ecosystem will be regulated using a Delegated Proof of Stake (DPoS) consensus mechanism; however, without coins being rewarded to node holders, we do not see the incentive one would have to hold a node, leading to security questions. It leads to the problem of the 51% attack; as nodes have no incentives to secure the platform. This tells us that most than likely, the platform will be centralised – which removes the trust factor that blockchain technology brings in.
There is a maximum supply of 1 billion tokens, with 136 million currently in circulation. However, a minimum of 400 million coins will be supplied by the beginning of September, 120 million tokens released on the 3rd of June 2018, and the remaining 160 million by September 3rd – meaning that in 7 months, at current price, the token will be valued at USD 57mio – all else being equal. The release of these token raises the question of asset depreciation, as the price of the token would have to increase by 3x in order for its value not to be diluted.
Potential
The team has clearly stated their growth strategy. First, they will create DApps to be readily usable by businesses and create a user base for the future protocol. Secondly, they will build the protocol, in which AI will be used for data processing, instead of the manual fusion of data. Thirdly, they will create an open-source ecosystem which will serve as a data marketplace. The team not trying to burn bridges and having clear milestones to achieve is highly positive.
Additionally, despite the current focus being to develop DApps on the Ethereum blockchain, the team aims at exporting these DApps to other protocols such as NEO and High Performance Blockchain (click here to read our HPB analysis). With the ecosystem still being in its infancy, it is hard to know which blockchains will prevail in the future. Having scaling strategies for usage is important, and demonstrates that the team looks towards having working DApps on the blockchains that are being used.
As Banyan Network is a Chinese project, the team have stressed many times that their focus, as of now, is the Chinese market (therefore, do not expect Amazon, Google, or any western businesses to join the network anytime soon). To us, it is an advantage given the fact that fusing data makes sense only when the data is derived from the same consumer base. Having a Chinese source merging with a French one doesn’t add any real value to either database. Additionally, with the project aiming at aggregating data from many Chinese sources, we do see the potential for use by the Chinese government as they would be able to gather detailed information in regards to their citizens. We are not making a judgement on whether or not the system should be implemented, but the ranking system of its citizens that China has just passed is a great opportunity for Banyan Network and blockchain services in general within the country.
On the downside, we do not see the protocol being used by companies already aggregating a lot of information from different sources, such as Tencent or Alibaba, nor their subsidiaries. Without the phone wallet/application of those two conglomerates, it is nowadays hardly possible to live in Chinese tier-1 and tier-2 cities as some services require payments solely through these applications (even things like doing laundry at the laundromat). Therefore, this duopoly already has vast information about citizens, to an even greater extent than Google in the West. For instance, they have transaction records, purchase and loan information, stock market investment data, location (as they integrate Didi, the equivalent of Uber in China, and bike-sharing, into their applications), and much more. To them, joining the network would mean sharing their data with the competition, with higher costs than benefits resulting from the integration.
However, the fact that Banyan will enable further unlocking of the value of data, we believe that for companies operating in industry-specific businesses (such as telecoms, healthcare, banks, etc.) Banyan will be of great utility. Clearly, we see why UnionPay is interested in the project. WeChat and Alipay are disrupting the banking environment in China and are aiming at grasping higher market shares and bypassing traditional banking services. The same could be said by China Telecom, as more people use WeChat for calls and messages rather than traditional mediums. Given the fact that these two monoliths have access to more data and across a wide range of industries, they are already in an advantageous position. By using Banyan Network, China Unicom, Baidu, and others might be able to join forces to fight against these two monoliths, target consumers, and regain market-share, or at least, maximise the value of the data they possess.
Figure: Alipay’s app services (click to enlarge)
Final thoughts
We see a high value in aggregating/fusing data between different sources; however, the team will need to employ strong marketing efforts to attract companies to join the network. The project clearly aims at big Chinese companies focusing on just one industry. Obviously, conglomerates will be less inclined to share their data as this would dilute one of their competitive advantages.
Despite the project having many interesting aspects, the downside is that there are many unknowns. There is no GitHub, the partnership with UnionPay is said to be under NDA (however, the presence of Kelvin Long is reassuring, as is the presence of Zhenjun Li), and the economic model is still not specified – no information has been provided on the incentives of both securing the network and holding the token. Additionally, without an economic model, it is impossible to factor the way demand and supply would function as built-in mechanisms might decrease the number of tokens needed to perform a process. Given all these issues, we believe that entering BBN at the moment would be highly speculative (more than the market itself).
Given the many uncertainties, we will not invest in BBN at the moment, especially given the fact that we are in a bear market. There are many less risky projects which we believe may have substantial gains in the short-medium run. The fact that within the next 6 months 400 million BBN tokens will be on the market is not reassuring either, as it means that the token would need to appreciate by 300% in order to retain its current value. We will follow the project closely and will update you on a constant basis regarding the sentiment we have on Banyan Network as we clearly see the benefits of what they intend to do.
Disclaimer: We do not hold BBN.
As always, this is not financial advice. This article is based on personal opinion, and we invite everyone to read Banyan Network’s white paper, available on their official webpage before investing. Do your own research, and consult a financial advisor if needed.
References:
(1) China Unicom Official Website, Financial reports. Retrieved from: http://www.chinaunicom.com.hk/en/ir/reports.php
(2) Reddit, Banyan Network AMA. Retrieved from: https://www.reddit.com/r/BanyanNetwork/comments/85vvhh/banyan_network_goes_beyond_union_pay_smart
(3) Transactions made on China Mobile network. Retrieved from: http://www.kpcb.com/internet-trends (slides 19).