Cloud storage is a colossal market dominated by a few entities such as Amazon Web Services. The growing popularity of decentralized technologies gave rise to decentralized storage solutions like Filecoin, Arweave, and Sia. However, these solutions have several shortcomings. Some drawbacks are that these platforms do not offer the same level of User Experience (UX) enjoyed by developers using traditional centralized contenders and easy payments. It has been difficult to onboard Web 2.0 developers (or non-crypto natives) to decentralized platforms, and even crypto natives are pivoting to centralized data storage solutions for their dApps.
Arcana Network attempts to address these drawbacks by offering the best of both the centralized world and decentralized platforms to provide application developers with tools to manage data storage and preserve privacy for the users.
Arcana Network is a privacy-centric decentralized data store providing a suite of products to allow developers to build more secure and privacy-preserving apps for their users. The main design goals of Arcana are sovereignty, economic security, ease of use, decentralization, security, privacy, and modularity.
Arcana’s core concepts involve:
- Storage (Proof-of-Storage).
- Identity and access management.
- Non-custodial key management.
- End-to-End encryption.
Arcana’s blockchain is a Proof-of-Stake network based on the Istanbul Byzantine Fault Tolerance (IBFT) algorithm. $XAR functions as the network’s native token and pays for the costs of the consumed computing resources. The project has not yet announced a token offering.
The project falls within the Indian jurisdiction, which has made headlines after banning crypto in 2018. Although the Supreme Court of India reversed this ruling, a new bill is still being discussed.
The project’s company has raised approximately $2.7 million from a prominent group of institutional and individual investors.
Arcana has completed its Alpha Testnet and aims to launch the Beta Testnet.
Our researchers gave Arcana Network a final rating of 57.80%. (Note: The tokenomics of Sui Network are not considered in this rating). The breakdown of this rating is available at the end of this report.
PRODUCT & COMPANY DESCRIPTION
Introduction to Arcana Network
Arcana Network is a decentralized storage layer for Ethereum and EVM compatible chains. The main components of Arcana Network are decentralized storage and the privacy stack. Its privacy stack improves the decentralized storage solution with end-to-end encrypted, non-custodial Key Management Services (KMS) and Decentralized Identity & Access Management. Essentially, at its core, Arcana is a Web 3.0 enabler that the dApp developers use to manage their data layer. Further, with Arcana, developers can build secure and privacy-preserving apps. Additionally, Web 2.0 natives could also use Arcana to offer certain decentralized services to its users.
Arcana offers the following benefits:
- Easy integration to Arcana (plug-and-play solution).
- Multiple configuration options to fit user requirements.
- The modular stack enables discretionary selection by developers.
- Applicable in both Web 3.0 and Web 2.0, based on complexity and user involvement needed by the developers.
- Facilitate payments with credit cards and stablecoins.
Main features of Arcana’s storage and privacy stack. Source: Arcana.Network
The Arcana Network team has only released a Technical Paper (Arcana – Technical Paper v1.0) so far. The paper explains the technology behind its cloud-based storage systems and the basic tokenomics of $XAR, including token distribution, stake pools, and solutions for inflation and future growth. The paper is still a work in progress.
The Alpha Testnet was live from November 2021 to January 2022. This Alpha Testnet aimed to gather feedback and test the robustness of Arcana APIs under different use cases. The team also wanted feedback on the entire testnet experience (on access control and data integrity, migration and integration from other infrastructures such as IPFS and MetaMask, and figuring out new use cases for the Arcana platform). Several functionalities were available in this testnet version, i.e., identity and access management, decentralized storage, end-to-end encryption, and non-custodial key management. Currently, the project is planning to launch the Beta Testnet. Before the beta release, the team conducts platform stabilization, bug fixing, and implementation of the Beta Testnet features. There is an expected delay in reaching the target time frame to deliver the Beta Testnet (expected in June 2022).
Arcana addresses a vast market because it intersects with Web 2.0 and Web 3.0 applications. It wants to allow native Web 2.0 users to be onboarded to Web 3.0 or integrate easily with the crypto industry. Similarly, it aims to provide Web 3.0 developers with a plug-and-play solution—a Platform-as-a-Service (PaaS) of sorts. Interestingly, the platform offers multiple solutions to the market, i.e., decentralized data storage, Decentralized ID (DID), Key Management, and privacy. But currently, these services are provided by isolated players, whereas Arcana bundles these together.
Based on our understanding, there are several success factors for the project. These factors are listed below:
- Arcana serves several verticals of a growing market (data storage, Identity & Access Management (IAM), privacy, dApps); moreover, it focuses on use cases in Web 2.0 and Web 3.0.
- It is a developer-friendly platform: two thousand developers showed interest in participating in its Alpha Testnet launch.
- The project is backed by a diverse and experienced investor base (individual and institutional).
- The project’s team has established a series of partnerships to initially bootstrap the project.
MARKET CONDITIONS AND COMPETITION
While estimates vary, cloud computing generated almost $400 billion in 2021 across IaaS, PaaS, and SaaS markets. According to Gartner, the worldwide public cloud service revenue forecast for 2021 was $308.5 billion. It is clear that the market is growing and will continue to grow, especially with emerging countries joining the online world.
According to DappRadar’s Q1 2022 Industry Report, a record of 2.38 million Unique Daily Active Wallets (UAW) connected to blockchain dApps daily. At present, DappRadar tracks about 11,168 dApps, a number that contrasts with over 9 million websites hosted on Amazon Web Services (AWS) alone. Therefore, it is evident that although Web 3.0 is fast-growing, it is still in its very early stages.
Arcana operates in multiple markets, i.e., Storage, Key Management and Encryption, Identity, and Privacy. These sectors consist of various projects. CryptoSlate lists around 33 projects in the distributed cloud storage sector with a total current market capitalization of $4.55 billion (does not include IPFS). This sector is led by Filecoin, accounting for ~35% of the market cap, followed by Arweave at 10%. Other known names in this sector are Sia, Ankr, and Storj.
There are also over 20 identity coins in the market with a capitalization of ~$545 million. The most notable projects in this space are Syscoin and Civic.
The notable competitor in the Key Management and Encryption space is Threshold Network ($355 million market cap). Other players like Sepior offer key management and data protection products.
Some upcoming projects offer similar services to Arcana, e.g., Portis.
How is the project different from its competitors?
There are a couple of differentiations that Arcana Network offers from its competitors.
- Arcana targets both Web 2.0 and Web 3.0 use cases: The idea is to assist in onboarding Web 2.0 native users to experience decentralized, secured, and privacy-preserving technology. For example, Arcana Auth allows application users to log in to their apps using their Google login. The difference here is that the users could still interact with their applications without visible changes in current practices.
- Arcana is a suite of solutions that is developer-friendly: If the developers were to integrate stand-alone solutions into their applications, that might require many complex integrations and, above all, many native tokens. Arcana is a Pay-as-You-Go model.
Decentralized Data Store: Arcana storage network organizes storage nodes under different geographic regions—a measure that allows developers to choose the lowest latency upload and download for user data.
Native token rewards incentivize Storage Nodes to provide storage and bandwidth. To achieve optimal cryptoeconomic assurances to promote good behavior and discourage malicious behavior by storage nodes, Arcana implements a Proof-of-Storage scheme based on the Proof-of-Replication method presented by Protocol Labs.
Identity and Acess Management: Every application using Arcana assigns a public-private key pair to every user. Every file uploaded to Arcana is also assigned a Decentralized Identity (DID), which is a Uniform Resource Identifier (URI) pointing to the document.
Non-custodial key management: Arcana provides developers with a decentralized, non-custodial Public Key Infrastructure (PKI). This infrastructure underlies the public-private key claims by app users. Based on Asynchronous Verifiable Secret Sharing and Proactive Cryptosystems by Cachin et al. (2002), Arcana implements a threshold signature system—a verifiable secret sharing protocol. This distributed key generation mechanism involves dealers while a group of distributed nodes stores key shares. Verifiable secret sharing schemes are considered improved over centralized key generations approaches.
End-to-End Encryption: The owners encrypt any files before they are uploaded to Arcana Network. Since the uploaded file sizes could vary, a simple symmetric encryption method is used on the clients’ side. The symmetric key is then encrypted with the user’s public key, and the file is uploaded to the network. A threshold proxy re-encryption scheme is implemented to share the keys.
Arcana Network Architecture. Source: Arcana Technical Paper v1.0
So far, Arcana’s codebase is closed-source. The team intends to make the project fully open-source post-beta launch.
Arcana implements an EVM-compatible self-sovereign blockchain. It maintains the blockchain state regarding network usage, DID documents, and access control lists.
Arcana uses the Istanbul Byzantine Fault Tolerance (IBFT) algorithm for achieving blockchain consensus. As with any BFT algorithm, IBFT is also comparatively more scalable. For instance, IBFT has reached a consensus time of 10ms ~ 100ms with blocks containing 2,000 transactions under test scenarios. It also recorded a throughput of 400 ~ 1,200 transactions per second (TPS).
Arcana follows Delegated Proof-of-Stake (dPoS) consensus mechanism for its blockchain. Token holders could delegate their tokens to any validator of their preference. Twenty-one (21) validators will run the blockchain at launch, and this number will gradually increase over time. Validators are required to stake a security deposit separately, and they stand to lose the stake (slash) in case of malicious behavior.
There are no security audits available for Arcana Network yet. However, as per general practice, we could expect security audits closer to the mainnet launch.
Until January 2022, Arcana was on Alpha Testnet. Interested parties were invited to test Arcana’s SDK’s API endpoints or report bugs in its developer dashboard. The project announced a Bug Bounty Program of $25k for the community members to help test its SDKs.
Arcana Network does not offer a detailed roadmap for the project. The roadmap presented on the website shows the critical milestones for Q1, Q2, and Q4 of 2022. However, the project is behind this schedule, and Q1 2022 goals have not been achieved yet (two months into Q2 2022). Therefore, the roadmap requires revisiting.
Arcana Network Roadmap. Source: arcana.network
Arcana is run by a relatively young team of over 30 IT professionals. Most of them have about 3 to 5 years of previous working experience. Some of the team members have previously made some entrepreneurial attempts.
Mayur Relekar, Co-Founder and CEO, started engaging in blockchain development around 2017. He has worked for Infosys and Wow Labz. Additionally, Mayur founded a couple of startups, although without much success.
Aravindh Kumar is a Co-Founder of Arcana primarily responsible for growth and partnerships. Previously, Aravindh was a Product Manager at Wow Labs.
Ajay Shetty, COO, focuses on business operations and strategy. Ajay gained experience working for Infosys as a Consultant.
Bill Buchanan is a Crypto Researcher for Arcana and a Professor in the School of Computing at Edinburgh Napier University. He works in blockchain, cryptography, trust, and digital identity.
Arcana has not appointed dedicated advisors to the project. However, the project team could benefit from the well-known individual investors who have invested in the project. These investors are experienced in blockchain and crypto, founders, or senior managerial personnel.
Individual Investors in Arcana Network. Source: Arcana Network
General Comments on the Team & Advisors
Arcana is on the constant lookout for skills. It has been hiring for various blockchain, engineering, project management, community management, and business development roles. It is noted that some of these roles have been open for seven months. It is believed that the leadership can further improve the human resources with finance and administration roles.
During our review period, we did not find evidence that the team members have taken part in any previous or current illegal projects or controversial projects. We did not find evidence of the Advisors’ involvement in any controversial projects either.
LEGAL AND COMPLIANCE SPECIFICS
Arcana Technologies Limited has been listed as the legal entity responsible for the Arcana Network project. Before the rebranding as ‘Arcana,’ the company was called Newfang.
Newfang Networks Private Limited is incorporated as a private company in Bangalore, India.
Arcana Network is headquartered in India. Currently, India does not have any special legislation that regulates cryptocurrencies. India has previously banned cryptocurrencies, a decision overturned by its Supreme Court. Although there were discussions in the latter part of 2021, the authorities did not adopt a new cryptocurrency and digital currency bill. However, the government keeps working on setting up a framework regarding virtual digital assets. The Advertising Standards Council of India released guidelines for advertising and promoting virtual digital assets and services. These rules have been in effect since 1st April 2022.
Indian teams have launched many projects in the past: Polygon, Frontier, Razor Network, WazirX, and CoinDCX.
In a recent podcast appearance, the CEO has discussed their intention to eventually move to community-led governance and innovation.
Arcana has partnered with several projects as briefed below.
- wowTalkies: A business partnership to assist wowTalkies in developing its platform using Arcana’s tech.
- Nemesis Downfall: Business partnership to enable secure P2E game for players.
- Rage.Fan: Arcana entered a strategic collaboration with the sports fantasy platform. Rage.Fan will transition from IPFS to Arcana’s decentralized storage solution.
- DIA: A partnership to provide Arcana’s privacy stack to DIA and its developer community. In return, to avail Arcana of the tools to manage its treasury.
- Headstart: A partnership with the startup ecosystem enabler to drive blockchain adoption in India.
- Spheron: A strategic collaboration with the decentralized hosting service to provide hosting and storage solutions for dApp developers, DeFi projects, and the Web 3.0 ecosystem.
The project has not appointed legal advisors or team members responsible for legal matters.
KYC & AML
The project has not announced its token offering yet.
The technical paper mentions that $XAR is Arcana’s native utility token; it powers Arcana’s “proof of stake consensus algorithm and also is used to reward network actors and stakeholders for securing and providing resources to the network.”
There is also the XARG token, a gas token that has no value outside the network and is used to protect against DDoS attacks and describe units of usage (Model).
A token offering has not yet been announced.
At a high level, the XAR tokenomics model is built around the initial bootstrapping of the project with rewards via inflation and, in the long run, based on the platform’s revenue.
Proposed $XAR Token Model. Source: Arcana Technical Paper v1.0
SOCIAL MEDIA AND VIRALITY
The Arcana Network Twitter page has 38.6k followers and is quite active. The number of followers has significantly increased over the last few months, from 6.3k in early 2022.
The project’s team is active on Telegram (18k followers, up from 1.3k in early 2022) and Discord. However, in comparison to other projects, Arcana has not yet built a larger community in these channels. The project’s Discord channel has gathered 27.5k members so far. Discord link here.
Arcana Network has 776 followers on LinkedIn and is not very active.
Arcana’s YouTube channel has not been active (its last activity was a month ago). Several third-party YouTube videos discussed the project. However, none of those videos has any significant views. It is important to note that these videos provide the audience with the project’s plans, technical details, current status, token-related facts, team skills, and HR situation.
There is no ongoing bug bounty program at present.
The project is on Twitter, Discord, has a discussion Forum (targetting the dev community), and Telegram. The management team does not have a significant following on social media, and it appears that its activity is mostly focused on the Indian market. Some Arcana team members contribute on a contractual basis while being founders of their own companies, a potential area of conflict of interest alignment.
RISKS TO THE PROJECT
The following list of risks is not an exhaustive one. Some risks may be minor or not materialize.
- Market and competitive risks: A potential slow down of the overall crypto market and Web 3.0 adoption could become challenging for the project. Moreover, Arcana is facing strong competitors.
- Technological challenges/security risks: the technology that Arcana is building may suffer from malfunctioning, breaking down, unexpected or unintended functioning, and various attacks. The project and its technology are still relatively untested and highly experimental (only tested at the alpha level).
- Legal/Regulatory risks: Any unanticipated regulatory actions could impede the project’s continuity. The project may also be subject to various laws and regulations, and if the project fails to comply with them, it could receive negative publicity and face significant liabilities. (e.g., India has attempted altogether banning crypto, and the threat has not entirely disappeared)
- Lack of adoption/slow uptake: Developers might be hesitant to start using the Arcana SDKs or its technology stack. There are also plenty of other blockchains attracting the attention of developers.
- Other risks: The project needs sustainable funding available to access required resources. Similarly, skilled human resources are critical to the project’s success. If the project fails to attract the necessary human resources, the project could lag.
Everything you see in this report is the aggregate result of an extensive research process carried out by a distributed team of researchers and crypto enthusiasts around the world. The process consists of 60 questions divided into three phases. Researchers are called to answer these questions about a project, while providing links or screenshots as evidence to support their answers. For every answer, they also provide a rating from zero to ten. The average of their ratings is detailed below.
Our researchers gave Arcana Network a final rating of 57.80%.
This Report is for informational purposes only and/or all or any of its content thereof, should not, may not and will not be taken to constitute, either as a whole or in part, any investment advice or recommendation or similar, regulated, or authorized advice, and D-Core by producing, disseminating, giving away, or making available this Report does not, should not, may not and will not be taken to advise on investments, or carry out any similar activity, or any regulated activity or any other authorized activity. D-Core is not authorized by the Financial Conduct Authority or by any other competent EU or elsewhere or otherwise competent authority to carry out any regulated activities and/or any activities within the scope of these authorities’ competence.
D-Core excludes and disclaims all liability and/or responsibility whatsoever and/or howsoever caused, arising out of any actions, or omissions taken, or made by any authorized and/or other recipient of this Report in reliance on, or arising out of, or in connection with any or all content of this Report. Any authorized and/or other recipient of this Report acknowledges, accepts and agrees that they carry out their own independent research and act in their own sole risk in reading or using any or all information contained in this Report. In any event, recipients of this Report are urged to seek professional advice before making any potential investment decision in relation to the project described herein. Any authorized and/or other recipient of this Report accepts this Disclaimer in full. For the avoidance of doubt, this Disclaimer is binding against any recipient of this Report whatsoever.