Public Distributed Ledger Networks Market Assessment Disclaimer The information, statements, statistics and commentary contained inthis report have been prepared by PwC from material provided by Hashgraph Consortium and publicly available material.PwC may, at itsabsolute discretion andwithout any obligation to do so, update, amend or supplement this document. PwC does not express an opinion as to the accuracy or completeness of the informationprovided, the assumptions madeby the parties that provided the informationor any conclusions reachedby those parties. PwC disclaims any andall liability arisingfrom actionstaken inresponseto this report. PwC disclaims any and all liability for any investmentor strategic decisions made as a consequence of informationcontained inthis report. 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PwC Confidential information for the sole benefit and use of PwC’s client. 2 Table of Contents Page Executive Summary 4 Notable Events 5 Technologies 6 Technology Comparison Categories 10 Distributed Consensus 11 Performance 14 Fairness 15 Security 16 Programmability 18 Governance 19 Closing Remarks 20 Technology Comparison Summary BC 21 Technology Comparison Summary DAG 22 Appendix – Building on DLT 23 PwC Confidential information for the sole benefit and use of PwC’s client. 3 ExecutivIntroductione Summary InFast 2008 forward Bitcoin two was years launched: and the areality remarkable of micro innovationpayment thatdata, lends generate itselfd tofro securingm many a fair sharethousand of globals of networked industry &device medias, interest. will be voluminous. Its success in Curren creatingt paymen a trusted,t networks decentralized,are publicin no wapeery designe-to-peedr financial to be ableecosysteto accommodatemhas directlthisy newchallenge level dof and serviceinsom demand.e way changed the landscape of payments. Money as we understand it,capital raising, supply chain and manyDuringothers the same asset two transfer years markets we are tradingare being borderless materially digital disrupted. securities with the current clearing and settlement platforms unable to cost effectively handle the Atchange the same in service time it requirements. is widely acknowledged Across developing that the speed nations, of innovation telco based since Bitcoin’s arrivalmarketplaces has bee nhaveso impactful handed 1.5tha billiont new regulatoryunbanked humansframework accesss are to required digital financialto accommodate themservices., many of which are invarious states of progress. However,for allof itsbrilliance there are inherent limitations in the applicability of the Bitcoin innovation. New at scale technology services are required and so the question is, are blockchains Theseor DLTslimitation going tos havesolve give for thisn ri se newto an demand?entire Distributed Ledger Technology (DLT) industry with an often open and common goal to solve for. The industry iswell funded, in2017 for exampleSpeed o,fovecommitr US$s 900mto immutablecame from recordtraditionais key tloVC th efund services to bextensibilite investedyinandover 290 initiatives.therefore succes In thes samof anye yeaofr,th ovee newr USnetworks.$5.6 bn in Having funds were this as raised a working via Initial assumption Coin Offerings (ICOs)we conclude and allocated that proof to a-o leastf-wor 435k blockchai initiatives.n-base 2018d networks iscontinuin are ggoing this trend. to be limited, mainly due to their consensus method (as featured later), in where they take and Thekeep entire market Blockchain share. This or DLTleadindustrys us to focus is too on extensive the more torecent cover market in a single entrants report; and our objectiveconclude is tha tot focus using on directed a core comparisonacyclic graphs of (DAGs)the public and DLTnot networksblockchains andwil theirl tak econsensus the algorithms.lead in this spaceWe also as analysethey have, the in key theory, characteristics a superior involvedconsensus in type the thesefor managing networks such as performancescale, throughput,, consensus latency,, security and in, fairnesssome cases, and security.governance. PwC Confidential informationinformation for for the the sole sole benefit benefit andand use use of of PwC’s PwC’s client. client. 4 Notable Events accelerating as more investment pours in 1991 2011 2017 • First Work on • Litecoin ICO mania Secured Blocks 2015 Tezos ICO ($232) issues July 2013 IOTA Whitepaper Bitcoin cash fork Bitcoin Gold fork 2008 • Ripple XRP • Launch of NXT • Blockchain Concept paper 2018 • Telegram ICO 2016 reversal • DAO Launch • EOS governance issue 2014 • DAO Theft • IOTA governance 2009 • Emergence of Blockchain 2.0 • Ethereum Governance issue issue • Bitcoin • Adoption of Smart Contracts • Multiple Bitcoin • Swirlds whitepaper Launch • 50 Million NXT Theft forks off ERC20- • Bitcoin Governance like contracts 1999 • Launch of NEO 2012 issues • First introduction of • Launch of NEM • Hedera Hashgraph • Peer Coin • Linux Hyperledger the PBFT algorithm public network Foundation launch PwC Confidential information for the sole benefit and use of PwC’s client. 5 Technologies Public DLT networks hold the promise to revolutionise commerce. They We distinguish public from private (“permissioned”) DLT networks; will provide for the seamless creation and execution of complex financial private networks are deployments of DLT technology where the contracts at a scale that runs nations, whilst also making practical participating entities are known to each other in advance and form a extremely small payments at tremendously high volumes characteristic of relatively stable closed user group, either divisions within an individual the Internet of Things (IoT). All this will be possible in a robust, company or a consortium, and although in some cases the same underlying decentralised, and trusted manner, without intermediaries and often technology may be used in both private and public deployments there are without any human involvement at all. typically additional concerns with a public deployment, which faces a more dynamic and high-risk environment. Leading private (enterprise) DLT Historically, parties to commercial agreements and exchanges have technologies include IBM Hyperledger Fabric, R3 Corda, Digital Asset, and maintained their own independent records; frequently this leads to Ripple. discrepancies and the need for a time-consuming reconciliation process. In many cases a trusted third-party may operate as an intermediary to Whereas purely private DLT networks are relatively simple to define by facilitate the transactions, but in turn extract a fee. All such overhead their closed nature, there are degrees of openness that may be associated represents a barrier to efficient trade. In contrast, a trusted, dynamic, real- with networks that have the ambition to be a public utility. time consensual view of mutual transactions would eliminate much of this overhead. At the most open end of the spectrum are networks like Bitcoin and Ethereum, where there is no control over who joins and they are close to an Until DLTs entered the fray, the likely implementation of this would have anarchy, albeit with behaviour incentivised through game theory and been a cloud-hosted database with appropriate business logic and access individual gain; these represent a strong appeal in some quarters and an permissions; such systems have been built by consortia, where the equally strong antithesis in others. These are truly “permissionless”. economic and political drivers are overwhelming and the operating cost can be borne by the enterprises involved, but the technical and legal costs In a more middle ground are networks that are open to join, but where and complexities for such single-point solutions are often prohibitive. some of the functionality is retained to a more limited group of nodes; this may be a transitory situation to guarantee stability as the network grows, In contrast, nascent public DLT networks provide an infrastructure and in or a more permanent feature. some cases framework for the construction of trusted distributed applications, driving down both implementation and operational costs. Further on in the spectrum are networks where membership is nominally open to all, but is controlled by a governing body of some form. One could In this report we examine eight public networks and their various argue that this is closer to the consortium model, but the key point from associated technologies. our perspective is that the intent is to allow anyone to operate a node so long as they meet basic fitness criteria. We have therefore chosen to include in this report networks on the whole spectrum above with pubic utility ambition. PwC Confidential information for the sole benefit and use of PwC’s client. 6 Technologies Blockchains, as the