Does ChronoLogic Store Value With Proof of Time?

Every blockchain, every #cryptocurrency project is based on a consensus protocol. These protocols are designed to facilitate group decision making on blockchains where the parties don't know each other yet the best decisions that benefit the entire population of the blockchain can be arrived at efficiently, minimizing trust as a factor. #Bitcoin has proof of work. Other blockchains, like #Nxt and #Peercoin, use proof of stake. #Lisk, #EOS, and #Steem are a few that use delegated proof of stake. Other consensus mechanisms include leased proof of stake, Hyperledger Sawtooth's proof of elapsed time, and practical byzantine fault tolerance, made popular by Hyperledger Fabric. #Steemit, a social media Dapp that sits on top of the Steem blockchain, uses what they call a “proof of brain” protocol that tokenizes content creation. ChronoLogic is the first blockchain to use a proof-of-time consensus algorithm.

I can't believe no one thought of proof-of-time before ChronoLogic. On the surface, it's a brilliant idea, but how ChronoLogic has approached it leaves much to be desired.

Source: Screenshot from the ChronoLogic Network website.

Taking the time-honored principle of the time value of money and tokenizing it, ChronoLogic is tackling very specific use cases for the financial world. Their aim is to build a blockchain where ERC-20 tokens can be created based on real-world finance principles.

The Value of Time

Time is valuable, but what gives time its value? First, it is a natural resource. Unlike other natural resources—such as oil, gold, and water—it has no physical qualities. Yet, it is the most valuable natural resource in existence.

One reason time is valuable is because it is immutable and irreversible. You can't delete time, erase its derivatives, or undo its consequences. It always moves forward and never goes backwards. For these reasons, it is predictable.

Another reason time is valuable is because it is scarce. No one can create more of it, but no one knows how much there is exactly. It could potentially come to an end at any moment.

ChronoLogic's first token experiment is its own DAY token, which is pegged to time so that the only way to create more of it is through the passage of time.

ChronoLogic ICO: DAY Token and TimeMints

Currency has to be minted. Real world fiat money is minted by governments. Bitcoin is minted through mining. The currency of Steem is minted with content creation. Other blockchains use other methods for minting coins or tokens. ChronoLogic uses what they call TimeMints.

The ChronoLogic ICO took place in September 2017. ICO Bench gave it a 2.8 rating out of 5. The ICO focused on an initial run of TimeMint addresses where contributors purchased DAY tokens with ETH. Each contributor purchased from 1 to 333 ETH where each ETH was worth 24 DAY tokens. During its ICO, ChronoLogic sold $7.4 million worth of DAY tokens. That's not very good considering their goal was $13 million.

There are 3,333 TimeMints, minting addresses that create new currency daily. The new currency creation was performed and executed through a smart contract and a MintingAlgorithm. Each 88 day period is called a ChronoEra. That all seems simple enough, but it gets more complicated when you calculate the number of tokens each TimeMint creates. They're not all the same. In fact, each TimeMint has a range from 0.5% to 1% (called ChronoPower). At the end of each ChronoEra, 88 days, each TimeMint experiences a “halving” where the number of DAY tokens on that day are halved. Presumably, this is to combat inflation.

Let's add one more complexity. ChronoPower is determined by where contributors fall in the line up. For example, the first contributor, or purchaser of DAY tokens, starts with a ChronoPower of 1% using the first minting address. The second contributor uses the second minting address and the ChronoPower is reduced by 1/88 of the max. This succession continues until .05% ChronoPower is reached.

Strength and Weaknesses

ChronoLogic's timeline calls for the rollout of the Chronos platform this year, which can be used by financial institutions to implement their own time-based ERC-20 tokens.

According to ChronoLogic's marketing collateral, practical and specific use cases ChronoLogic was designed for include debt management, fixed-income investments where returns are pegged to time, automated payments, airline refunds for passengers based on the number of minutes they were delayed, software packages based on time usage, and freelancers who want to be paid based on the amount of time they've worked. One of the key components to these time-based smart contracts is Ethereum Alarm Clock.

Some of these use cases make perfect sense. I can see debt-based instruments for ERC-20 tokens based on the Chronos platform. What makes less sense is freelance payment based on time worked. The freelancers I know don't punch a time clock. Rather, any freelancer worth his wait in DAY tokens will compete on quality, and that's not a value measured by time.

ChronoLogic has provided for the sale of its TimeMints to other parties. That's a plus as it allows investors an easy exit strategy. But I wonder how valuable TimeMints are going to be on the open market. They probably won't hold much value at all unless ChronoLogic takes off, which is a huge “if” because there are so many competing cryptocurrencies right now that what ChronoLogic is trying to do—provide an easy way for time-based real-world transactions to take place on a blockchain—can easily be implemented by any of the major competitors. The only competitive advantage ChronoLogic brings to the table is being based on Ethereum.

Another issue regarding the sale of TimeMints is a requirement for sellers to hold 8,888 DAY tokens in their TimeMint. Why? Their white paper doesn't say, and I can't think of a solid reason why the seller would need to hold any DAY tokens at all in order to sell their TimeMint, especially since they receive those tokens along with the buyer's bid after the close of the sale.

The built-in mathematical complexity of the DAY token itself is another drawback. Unless a user has studied advanced mathematics, understanding how ChronoPower and TimeMint values are arrived at is an exercise in mental gymnastics. Considering that the intended audience for the platform consists mostly of financial and logistics experts, that's not a huge problem. But if ChronoLogic wants the average freelancer to use its platform, that will be a bigger hurdle.

More of an issue is why there needs to be a DAY token at all. The ChronoLogic premise is that time-based transactions can take place on the blockchain if there is a token pegged to time. Since their intent is to create a platform where users can create their own time-pegged tokens, it seems that the DAY token is unnecessary—unless, of course, they simply created the token to show a practical use case and to use it as proof of concept. But once the proof of concept has been accepted, the DAY token's usefulness is gone.

This could be why the DAY token's value has plummeted to .702835 at the close of the day on September 30, 2018, down from its opening price of $11.76 at issuance on September 25, 2017. One could argue that DAY is just following the same trajectory as the rest of the market, but its high of $27.31 was reach on October 10, 2017, just after the close of its ICO. When the crypto market peaked in December last year, DAY hit a one-month high $8.86. With the exception of a few small spikes, the token has been on a steady decline since then. I don't see its value rising. DAY's market cap peaked at $5.2 million in early February this year. It now sits at just under half a million. Its rank on CoinMarketCap, as of today, is 1,299.

Source: CoinMarketCap

Conclusion

ChronoLogic was founded by a former Goldman Sachs investment banker and a Forbes 30 under 30 entrepreneur. While that experience is valuable for the type of project it seeks to be, it's not enough to propel ChronoLogic to blockchain stardom. Unfortunately, the white paper hasn't been updated since August 2017. With key developments in its timeline that appear after this date, there should be some additional communication about where ChronoLogic is in its development. For instance, there was supposed to be six proof cases completed by the end of last year, but I can't find any mention of them on the company blog other than a partnership with Ethereum Alarm Clock and another one with OneLedger.

ChronoLogic seems to be focused on small improvements to its Chronos platform and minor achievements. Other than that, I can't see any major moves lately. What seemed to be a good idea is leaving me underwhelmed.

This article was written for trivial.co, an analytics platform for tokens on the Ethereum network. If you have good knowledge about a token, don't keep it to yourself. Write for Trivial!