The most undervalued coin in the market?
In this article, we will be analysing Enigma to explain why we believe it could potentially be one of the best long-term holds in the market right now.
Disclaimer: None of the above is financial advice. Always do your own research and invest only what you can afford to lose. This article is NOT sponsored in any form.
YOU WILL LEARN:
What Is The Enigma Catalyst Project ?
Is Enigma Catalyst A Good Investment?
Why We Believe Enigma Could Be A Big Project
How To Buy And Store Your Enigma Tokens
- What Are Enigma & Catalyst?
- How Will Enigma Work?
- Are Enigma Solving Real Market Problems?
- Are Engima Tokens Linked To Platform Success?
- Team & Roadmap
- Selling Points
- Barriers To Success
- Extra Points
- Where To Buy & Store Enigma Tokens
- Follow Future Posts
1. WHAT ARE ENIGMA & CATALYST?
The first thing to state here is that there are two current elements to the Enigma project:
Therefore, we will begin by giving a brief explanation below:
What Is Enigma?
Enigma is a protocol designed to allow for the secure collection and distribution of data; a data marketplace.
Sounds confusing, right? Don’t worry, we’ll give a simpler explanation below:
Every day, your data is collected by companies (data brokers) who then sell it on to other companies. For example, let’s say a clothing company decides they want to release a new marketing campaign.
In order to make sure that their marketing is tailored to their customers, they will pay a data broker to gain information on the customers.
This information ranges from as simple as favourite colour up to more intrusive information.
With this extensive information on you and other customers, the clothing company can put together a highly accurate marketing campaign and sell more items. In return, the data brokers receive payment for the information.
Enigma attempts to disrupt the industry by posing the following question:
Why don’t we own our data? And why aren’t we getting paid for our data that we wish to share; why do data brokers get paid instead of us?
And that is where they introduce the data marketplace.
Essentially, Enigma will be a data marketplace i.e. a location where regular people like you and me can choose to sell our data.
We would choose the exact pieces of data about ourselves that we wish to sell – and the data you don’t wish to – and we would set the price.
In other words, Enigma aims to put us back in control of our data and allow us to make profits from it.
Enigma Is The Foundation
In order to understand the two elements of this project – Enigma and Catalyst – it’s important to understand that Enigma, i.e. the data marketplace, is essentially the foundation.
The following question can then be asked:
‘What Can Be Built On This Foundation?’
In the long-term, the data can be used for many different purposes and there could be hundreds of applications.
Currently, the Enigma team are building the first application which is known as Catalyst.
What Is Catalyst?
So, we’ve established that Enigma is a data marketplace where users can sell their data. Now, we’re going to move on to discuss Catalyst.
After all, without an application built on Enigma’s foundation, who would buy the data in the first place?
Catalyst will be providing a platform where people can build their own quantitative funds.
This statement above probably raises more questions than it answers so we’ll break it down further:
What Is A Fund?
A fund can be thought of as simply a collection of investments e.g. let’s say you buy shares in Apple, Google, Facebook, Snapchat plus several other companies and bundle them all together. Collectively, they form a fund.
This is beneficial to users as it allows people to buy shares in a massive range of companies without having to buy individual shares in each.
Hopefully, this explains briefly what a fund is and now we can move on to what a quantitative fund specifically is.
What Is A Quantitative Fund?
To keep it simple, we’ll describe a quantitative fund as a fund which buys and sells shares based on computer models.
For example, you could build a fund which buy Bitcoin every time it decreases by over 5% in a day and sells it later when Bitcoin increases over 5% in a week.
In other words, the fund manager dictates rules for the fund to buy and sell certain shares and the fund automatically carries this out.
Quantitative Funds Are Growing
Looking at the image above, it’s clear to see that quantitative funds were virtually non-existent just 25 years ago. In the past decade, however, they have been growing rapidly and now take up a considerable portion of funds overall.
It’s for this reason that Catalyst could be an incredibly useful and profitable application of the Enigma Protocol.
In fact, we would argue that funds built on Catalyst have the potential to be the best in the world due to a very simple but powerful reason; users will provide their own data which, in theory, makes it 100% accurate and reliable.
Currently, many funds are built on historical data plus data provided by third party companies who are liable to inaccuracies and mistakes.
Who Will Be Able To Use Catalyst?
This is a very important point and is one which elevates the Enigma project above many others in the Cryptocurrency space;
The funds built on top of the data from Enigma don’t have to be specifically used for Cryptocurrencies. Instead, regular fund managers will be able to use this data to improve on their own regular funds.
Considering the gargantuan size of the financial markets, this project has an incredible potential for growth… assuming that they are able to correctly carry out their project plans!
We’d also like to highlight that regular users can create their own funds on Catalyst also. The alpha version of the project has already been released and you could even try it yourself if you wished.
Warning: Please bear in mind that this is an Alpha version so there could potentially be unresolved bugs in the code. Therefore, we can’t recommend anyone download any associated software.
How Large Is The Industry?
We don’t wish to discuss too many more positives about the project in this section or it will soon begin sounding as if this article is sponsored which it 100% is not – we are receiving zero financial reward and haven’t even invested into the project ourselves although we soon will be after discovering the potential behind the project.
However, we do wish to draw a brief comparison with a similar and existing company – Bloomberg.
In 2014, Bloomberg amassed a yearly revenue of $9.4 Billion as a company collating and presenting financial data. This demonstrates the potential size of the Catalyst marketplace.
On top of this, Bloomberg is focused specifically on financial data. While Catalyst will also be operating in a similar field, this could just be the first of many applications built on top of Enigma.
As a result, the potential market is virtually limitless with data fast becoming one of the most valuable resources in the world.
2. HOW WILL ENIGMA & CATALYST WORK?
As we’ve already described, the Enigma protocol will be a data marketplace and Catalyst will be the first application built on top of it. Therefore, we will describe the two in separate sections:
How Will Enigma Work?
The process will be relatively simple; users will simply list their selected data onto the Enigma marketplace and choose the price at which they wish to sell it.
Sellers will have full control over which portions of their data they wish to sell and which they don’t. As such, more sensitive data can be retained by users.
From the buyers perspective, the process is pretty straightforward also; they will sift through data on the marketplace and decide who’s data they wish to buy.
All data will be stored off-chain utilising ‘secret contracts’ in order to provide sufficient privacy and scalability.
How Will Catalyst Work?
Catalyst will be a platform for people to build quantitative funds using the data from the Enigma marketplace.
Therefore, these fund managers will obviously first need to buy data. In order to do so, they will use the process as we’ve described in the Enigma section.
In order to begin building their quantitative funds on the Catalyst platform, we believe that the process will be the same as building any quantitative fund i.e. users will input their computer models in order to direct the fund in how to buy and sell.
Users will be able to backtest their strategies also i.e. they can test their model on historical data to assess how successful their fund would have been if it has been running previously.
3. ARE ENIGMA SOLVING REAL MARKET PROBLEMS?
Yes. Hopefully, if you’ve read the sections above, it will be pretty clear that Enigma are solving real market problems. However, we’ll expand on this further below:
#1 Problem – Data Inaccuracy
When companies buy data from data brokers, they must rely on the data being accurate and reliable. However, because this data has often being collated from many different sources to create a profile of an individual, it can often be inaccurate as the different sources can provide contrasting information.
In fact, because data often doesn’t have a name attached, data brokers use computer models to predict how likely it is that two profiles gathered from different sources are from the same person. This can lead to profiles of different people being added together which results in an entirely fake profile.
# 1 – Enigma’s Solution
With the Enigma protocol, users will be selling their data directly. Therefore, data purchasers can be confident that this information is 100% accurate and reliable.
#2 Problem – Data Ownership
Currently, we don’t own our data. Data brokers gather our data from questionable sources and sell it on for profit.
# 2 – Enigma’s Solution
Enigma aims to put us back in control of our own data so we can choose which data we wish to sell and which we wish to keep private. From the data that we wish to sell, we make profits instead of data brokers.
# 3 Problem – Data Privacy
Data brokers collect our data and sell it to companies. As a result, the data brokers and companies they sell to are able to see personal information about us.
# 3 – Enigma’s Solution
Through Enigma’s use of ‘secret contracts’ – smart contracts with extra privacy – the people who buy our data won’t even be able to view it, meaning that you can sell your data and know that your privacy remains intact.
You’re probably thinking:
‘How will data purchasers be able to use data without viewing it’?
The answer is that the secret contracts will allow for data purchasers to run calculations without actually viewing the data.
For example, Catalyst fund managers will be able to create a fund and test it based on their data without seeing data for individuals.
4. ARE ENIGMA TOKENS LINKED TO PLATFORM SUCCESS?
This is another incredibly important point that people often overlook when investing in Cryptocurrencies – is the token price truly linked to the platform usage?
Investing in Cryptos is not the same as traditional investing – when you buy shares in a company, you’re buying ownership. As the company makes increased profits, the share price will increase and your investment value will rise also.
With the majority of Cryptocurrencies, the tokens don’t represent shares.
Therefore, it’s possible for the company to be successful (i.e the CEO and employees get rich) and yet the token prices may actually fall if they aren’t correctly linked to platform usage.
The ONLY factors determining token price is supply and demand on exchanges.
Obviously, supply and demand are affected by many factors but the price all comes down to the combination of these two. Because of this, it is essential to ask yourself the following two questions:
- Demand – Will there be token demand on the exchanges?
- Supply – Will there be excessive inflation hindering prices?
Let’s first look at demand:
What Are The Sources of Demand?
There are some trivial uses of the token such as Enigma’s use of tokens to reward users who can create the best fund strategies. While effective at driving short-term success, this won’t drive long-term price increases so we will be choosing to focus only on the factor which we believe will:
Users will list their data for sale in a price which must be paid in Enigma tokens. As such, any data purchasers will first have to buy tokens.
If the Enigma protocol is successful, there will be an increased demand for Enigma tokens and thus token prices should increase.
The price of the Enigma token is sufficiently linked to the demand for the platform.
Enigma has passed this test.
What Is The Likely Inflation Rate?
Enigma created a fixed supply of tokens meaning a zero inflation rate but this doesn’t mean that new tokens won’t enter the market though.
Instead, we must analyse where these tokens currently reside:
- 50% – Sold in Token Sale and in current circulation
- 25% – Retained for community incentives
- 25% – Retained by the team
From this, we can attempt to estimate an approximate inflation rate. Please bear in mind that the following calculation is based on speculation, not fact.
With the potential of this project, we expect that the team members will not wish to sell their tokens any time soon. As a result, we will be assuming that the 25% incentive tokens will be the only new tokens to enter the market.
Assuming that these incentives are spread over a long period of time, such as 10 years, an extra 2.5% of tokens would enter the market per year.
In the first year, this would cause an inflation rate of 5% and would then decrease year-on-year. This is a relatively low value.
5. THE ENIGMA TEAM & ROADMAP
In this section, we will be giving a brief overview of the team and roadmap. Please check out the Enigma website if you’d like to see a more detailed view.
Pictured above, you can see that the Enigma team consists of 5 individuals, the majority of which are MIT graduates. This alone, carries a certain prestige and this is further strengthened when you listen to interviews of the team members.
The CEO, for example, studied the blockchain extensively during his time at university.
On top of this, the team have accrued a very impressive advisory board with the likes of Professor Alex Pentland – Director at MIT Media Lab -, Justin Lent – former director of hedge fund development at Quantopian – and other top names also.
Overall, it’s pretty clear to see that this is a highly capable team and we have more confidence in them than the majority of projects we review.
While we were unable to find a clear roadmap for the project, we have watched interviews available on YouTube and questioned the team ourselves in order to gather a clear understanding of where the project is headed.
In the past few months, the team have been focused heavily on Catalyst – the first application built on top of Enigma – and have recently released the Alpha version of the platform.
In the beginning of 2018, they plan to continue progression of this application and then shift their focus to continue with the development of Enigma – the underlying protocol – so that future applications can also built, not just Catalyst.
You’re probably thinking:
‘What future projects?’
We will provide a few further potential uses of the Enigma protocol below in a list format to avoid this article becoming too extensive:
- AI On Healthcare Data
- Decentralised Lending
- Storing User Identity
- IOT Data
If you’d like to read more details on these project, check out Enigma’s article here.
6. SELLING POINTS
Throughout the majority of this article, we’ve been giving many reasons why we’re very keen on this project. Now, we’ll collate a few of those reasons into one section:
1. Virtually Unlimited Potential
As Enigma is a protocol for which applications can be built on top of, there is virtually no limit to the number of uses that the Enigma project can offer. After all, data is one of the most valued resources in the world.
2. Very Cheap
At the time of writing, Enigma has a market cap of just $277 Million and a token price of $3.71 which gives it a ranking in the market of number 85 overall.
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7. BARRIERS TO SUCCESS
While the team is highly qualified, they are a relatively small team at just 5 individuals.
Enigma discuss a future where they can offer a decentralised data marketplace. However, in the current stage of development, users will be listing their information on to the Enigma marketplace in a centralised system.
As a result, this leaves users’ data more susceptible to attacks as there is a single, central point of failure.
Our regular readers may have recognised at this point that much of what we have covered sounds similar to our Datawallet review and thus we should include them to ensure this article is comprehensive.
However, while Datawallet is a good idea for a project, we believe that these tow projects are on vastly different scales; Datawallet is producing a cool app, Enigma are attempting to create a foundation for a data marketplace on top of which thousands of different applications could be built.
While we are very positive about the Enigma project as we believe it has incredible potential, readers should be aware that the project is currently in very early stages of development.
Therefore, while the potential rewards could be huge, the likelihood of failure is also increased at this point.
8. EXTRA POINTS
Token Sale Hacking
During their token sale, the Enigma homepage was hacked, resulting in around $500,000 of Ether being stolen from investors. Around the same time, one of our Facebook Group members asked us to look into the Enigma project due to the potential he saw.
Regrettably, we didn’t look into the project because we concluded that a project susceptible to a hacking would not be a worthy investment; particularly with many other options in the market.
Why Is Enigma So Cheap?
We discuss the point above as it ties into why believe Enigma is undervalued; many investors have overlooked this project due to the hacking.
However, we suspect that, once investors begin looking past this, the price could increase dramatically.
9. WHERE TO BUY & STORE ENGIMA TOKENS
Where To Buy Enigma
Where To Store Enigma
Enigma is an Ethereum-based token which means it can be safely stored on any ERC-20 compatible wallets. Our favourite option is MyEtherWallet which you can download via the link below:
For instructions on how to download and install MyEtherWallet, check out the video below (not produced by us)
10. THE CRYPTOGURUS CONCLUSION
We wrote an article recently about Quantstamp during which we described it as potentially the most undervalued Cryptocurrency in the market.
While we think that Enigma may not be quite as undervalued – as it is considerably more expensive than Quantstamp was at the time – we believe that this project is very close in terms of long-term potential.
In fact, the long-term potential for the Enigma project may be higher than any project we’ve reviewed so far due to the overwhelming size of the data industry.
In order to remain grounded and not be overly confident, readers should be aware of two important pieces of information:
- 10x Since December – Enigma has increased 10x in valuation since the start of December. While we still think that the price is cheap, the project is close to all-time highs which is historically a poor time to enter into an investment
- Short-Term Issues – As we mentioned prior, we suspect that many investors have avoided Enigma due to the problems surrounding the token sale. While we believe that they will overcome these problems in the long-term, they could suffer in the short-term as a result.
Overall, we are confident on the future of this project and would consider adding it to our own personal portfolios for a long-term hold.
Disclaimer: None of the above is financial advice. Our decision to add Enigma to our portfolios should not be construed as advice; it is simply our opinions on our own investments.
Investments can go up and down with cryptocurrencies being an especially volatile market. Always do your own research and invest only what you can afford to lose.
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