EXECUTIVE SUMMARY

Even though there is a worldview within the crypto space that emphasizes anonymity and decentralization, there are also contenders holding opposing views. One such contender arguing in favor of accountability is ParallelChain.

ParallelChain is being developed by the blockchain development and research company ParallelChain Lab. ParallelChain, a blockchain infrastructure, is powering two layer 1 blockchain platforms: ParallelChain Private, which is targetting enterprise use cases, and ParallelChain Mainnet. The project’s ecosystem consists of the following elements:

  • XPLL token
  • Node operation system
  • Inter-ParallelChain Communication (IPC)
  • eKYC-Chain
  • PreventiveChain
  • ApprovalChain
  • ChattelChain
  • ParallelWallet

The network’s native token, $XPLL, provides three utilities to its holders. Its total supply is not finite, and the token issuance mechanism follows a fixed and declining rate schedule.

The jurisdictions where ParallelChain Limited and ParallelChain Lab Limited operate are the Bahamas and Hong Kong, territories with distinct regulatory approaches.

The project has an experienced executive team with a technical and entrepreneurial background. Different partners and venture-capital backers further strengthen the team.

However, the project is yet to launch its mainnet and still needs to reach additional milestones in its roadmap.

Our researchers gave ParallelChain a final rating of 52.35%. The breakdown of this rating is available at the end of this report.

 

PRODUCT & COMPANY DESCRIPTION

Introduction to ParallelChain

In 2018, Ian Huang founded ParallelChain Lab, the blockchain development and research company that develops ParallelChain, a blockchain infrastructure. Two Layer 1 blockchain platforms are powered by ParallelChain — ParallelChain Private and ParallelChain Mainnet.

ParallelChain Private is a permissioned business-native platform running market-ready software created for specific business purposes. It provides Layer 2 solutions like company data leak prevention, tokenized products and loyalty programs, provenance and anti-counterfeiting, supply chain and project management, and AI-Powered KYC and AML RegTech Suite. ParallelChain Private refers to the enterprise version of ParallelChain, called ParallelChain Enterprise, as featured on this page.

ParallelChain Mainnet is an open-source blockchain platform with which developers can build and deploy dApps using smart contracts. The use cases for ParallelChain Mainnet include NFTs, Games, DEXs, and other applications involving DeFi, for example.

$XPLL is the native token of ParallelChain, sustaining its ecosystem. $XPLL will be based on the ERC-20 token standard until a native token standard is implemented in the future (Source: Telegram).

Natively, ParallelChain supports Turing-complete smart contracts written in Rust, GO, and WASM (more in the future). ParallelChain is also leveraging optimistic rollups.

ParallelChain’s notable features include:

  •  Real-time double-entry prevention
  • ~0.003-second transaction confirmation
  • 120,000+ transactions per second
  • GDPR-friendly data privacy compliance

The architecture of ParallelChain can be broken down into four layers:

  • Application layer: it is composed of smart contracts written and deployed on the network by non-validator operators and users, and the client software — web, mobile, desktop, embedded — invoking those smart contracts.
  • Execution layer: consists of a program (ParallelChain Engine) in an isolated environment running smart contracts in response to client requests. This architecture serves to control or prevent their access to sensitive OS functions like the file system and networking, and to abstract their access to state.
  • Data layer: refers to a program (ParallelChain DB) writing the blockchain into a validators’ filesystem and maintaining a “stable state cache,” which is a disk-oriented key-value store — RocksDB for ParallelChain Mainnet, and FoundationDB for ParallelChain Enterprise — reflecting the replicated state of the state machine at a particular block height.
  • Consensus layer: a library implementing a consensus algorithm (ParallelBFT for ParallelChain Mainnet and Paxos for ParallelChain Enterprise) that is utilized by the data layer process to hold the blockchain consistent between honest replicas.

 

The Layered Architecture of ParallelChain Mainnet (ParallelChain F) and ParallelChain Enterprise (ParallelChain S). Source: Mainnet Whitepaper

 

ParallelChain has published a technical whitepaper about the mainnet. The paper is technically detailed and most suited to an audience with advanced DLT/blockchain understanding.

Additionally, there are the following documents for users to obtain more in-depth knowledge about the project:

In addition, a variety of papers are available on the ParallelChain Enterprise page, for instance, a final report prepared by Arthur D. Little. Besides this report, technical papers discuss parallel machines, consortium and private blockchains, and asynchronous blockchains. There is also a survey of breakthroughs in blockchain technology, which has been co-authored by ParallelChain’s founder.

The ParallelChain’s Testnet is live. However, this is the first version of the Testnet, and there will be four Testnet versions in total before launching the Mainnet. The Mainnet is planned to be launched sometime in early Q4 2022 (Source: Telegram).

There are other players in the space trying to serve similar market needs. On the other hand, establishing a market fit might arguably be hindered by the KYC requirements for validators. Some parties could see this as contrary to the prevalent ethos emphasizing the importance of open, permissionless blockchains.

Success Factors

Based on our understanding, there are several success factors for the project. These factors are listed below:

  • The tradeoffs offered by ParallelChain can be appealing in several scalability-optimized use cases.
  • The enterprise approach: GDPR-friendly data privacy compliance.
  • The project is inspired and influenced by researched concepts.
  • An experienced executive team.

 

MARKET CONDITIONS AND COMPETITION

Market Conditions

Overall, the cryptocurrency market still has not recovered. Week-over-Week and Year-to-Date price changes are still negative for smart contract platforms, DeFi, and Gaming/NFT, sectors representing some of the use cases for ParallelChain Mainnet.

 

Week-over-Week and Year-to-Date price changes as of May 22, 2022. Source: Arca

 

The negative market sentiment has also been reflected in the drop in Total Value Locked (TVL) for DeFi.

 

TVL of DeFi. Source: DeFi Pulse

 

The Layer 2 ecosystem, which includes optimistic rollups as leveraged by ParallelChain, has also witnessed a drop in TVL.

 

TVL of the Layer 2 ecosystem. Source: L2BEAT  

Biometrics is one of the features ParallelChain offers. In 2021, the biometric systems market size was valued at $39.95 billion. This market is projected to reach 2030 a valuation of $128.17 billion, growing from 2022 to 2030 at a CAGR of 13.4%.

Competition

The report by Arthur D. Little lists several competitors to ParallelChain from the traditional sector and blockchain sector in contract management. In the conventional industry, SAP Ariba is noted as the closest competitor, while Corda and Icertis are considered the closest competitors in the blockchain sector.

 

The contract management competitors from the traditional sector (left) and blockchain sector (right). Source: Arthur D. Little

 

In asset tokenization, Securitize and Harbor are viewed as the closest competitors.

 

The asset tokenization competitors from the blockchain sector. Source: Arthur D. Little 

 

Other competitors represent the clean energy sector. Power Ledger and Electrify Asia are considered the closest competitors in this case.

 

The clean energy competitors from the blockchain sector. Source: Arthur D. Little 

 

Civic and SelfKey, blockchain-focused solutions, are viewed as the closest competitors in the KYC sector.

 

The KYC competitors from the blockchain sector. Source: Arthur D. Little 

 

ParallelChain has also been compared against Hyperledger Fabric, a permissioned blockchain framework.

ParallelChain’s competition also includes other Layer 1 solutions at a much broader level. A noteworthy competitor is Ethereum’s enterprise offering promoted by Enterprise Ethereum Alliance. Its objective is to drive the use of Mainnet Ethereum and Enterprise Ethereum blockchain technology to empower all enterprises.

 

How is the project different from its competitors? 

 

These features differentiate ParallelChain from the competition:

  • KYCed validator membership: ParallelChain Mainnet, in contrast with traditional (public open) blockchains, is intended to be deployed with a stable, large, and KYCed validator membership. In Bitcoin or Ethereum, nodes are anonymous, but in ParallelChain, Mainnet validators are identified and are liable to legal and social penalties.
  • Processing of transactions: in comparison to consortium blockchains like Hyperledger Fabric, where each transaction is processed in at least two rounds, ParallelChain processes each transaction once.
  • Handling of transactions by nodes: in consortium blockchains, each transaction is validated by all nodes, whereas in private blockchains like ParallelChain, the system is horizontally scalable, and the nodes handle different transactions in parallel.
  • Confirmation of transactions: in HyperLedger Fabric, transactions are only confirmed after blocks containing them are constructed asynchronously, while in ParallelChain, transactions are confirmed immediately and are synchronously added to the blocks.
  • Block size: usually, the block size in HyperLedger Fabric is configured small to decrease the transaction confirmation latency, which affects throughput. In ParallelChain, the block size can be bigger without affecting transaction latencies.

 

Basic elements of HyperLedger Fabric (left) and ParallelChain (right). Source: From Use Case to Benchmark: Comparing Consortium and Private Blockchains

 

TECHNOLOGY REVIEW

Product

ParallelChain is not entirely open-source. ParallelChain Mainnet is open-source, while ParallelChain Private is licensed. Interested readers can explore guides on using the ParallelChain Mainnet Smart Contract Development Kit, an open-source rust crate for building smart contracts. Two GitHub instances are available (access here and here).

  • Node operation system

Node operators play a central role in keeping the ParallelChain ecosystem secure, distributed, and reliable. Any $XPLL holder can apply to run a node and participate in the ParallelBFT consensus. Node operators can also join voting events to participate in the decision-making process of the network.

Three types of nodes are delineated: governing node, alpha node, and beta node. 

Governing nodes constitute the most senior validator class forming the network’s security backbone, and operators are required to stake the most amount of tokens — 2,500,000 $XPLL at launch.

Alpha nodes constitute the middle class lying between governing and beta nodes regarding security and anonymity. Operators are required to stake 1,000,000 $XPLL at launch.

Beta nodes constitute the most junior class of validators, allowing for anonymous participation, with a minimum stake starting from 500,000 $XPLL at launch.    

  • Inter-ParallelChain Communication (IPC)

IPC is a native infrastructure feature of ParallelChain. It enables the permissionless and permissioned networks on ParallelChain to securely interoperate at the protocol level, making it possible for businesses to access the decentralized space. Using IPC, networks on ParallelChain Private can piggyback on the Mainnet‘s consensus protocol. IPC also provides a bridge to connect the isolated communities of DeFi and Web3. Business users will be able to harness the decentralized web by leveraging the patent-pending technique “Proof-of-Immutability.

Different layer 2 applications have been built on top of Parallelchain. These applications are the following ones:

  • eKYC-Chain: a blockchain and biometric system for verifying and authenticating identity. It can be applied to any internal business procedure and can also be used for KYC/AML compliance purposes. The project asserts that eKYC-Chain’s uniqueness comes from the blockchain-enabled capability to, for example, detect duplicate entries or enforce flexible access policies, and there is also the built-in anti-spoofing facial detection feature. The team claims that ParallelChain uniquely addresses privacy concerns by allowing specific data to be removed permanently upon request, making it the only blockchain available at the moment to help organizations comply with the highest standards of data protection laws, including GDPR.

Features of eKYC-Chain. Source: ParallelChain   

 

  • PreventiveChain: a security management system built upon the ParallelChain platform. As a biometric system, it incorporates cameras so businesses can monitor user patterns and pre-empt leakage and improper use of the organization-critical data. Use cases include something as mundane as opening a website to something more complex as I/O traffic between the outside world and the computer. 

Features of PreventiveChain. Source: ParallelChain

 

  • ApprovalChain: a web and mobile blockchain system built on the ParallelChain platform for approval transparency, provenance tracking, and workflow streamlining. Having full compliance with the GDPR privacy legislation, this system incorporates real-time image processing, time stamp generation, and millisecond anti-spoofing facial detection to authenticate the movement of goods and ensure the integrity and real-time visibility along with the supply chain network.

 

Features of ApprovalChain. Source: ParallelChain

 

  • ChattelChain: an asset tokenization platform built on ParallelChain to create asset-backed tokens, which provides insider fraud prevention, instantaneous cryptocurrency trading, and integration with the ParallelWallet. ChattelChain is paired with PreventiveChain for insider-targeted security.

 

Features of ChattelChain. Source: ParallelChain

ParallelWallet: features multi-biometric authentication that combines voice, face, and palm biometrics. The team claims that users’ biometric data and everything happening in the wallet are stored in users’ personal ParallelChain, with users deciding what stays and what leaves. The upcoming features include viewing the live status of the mainnet or tracking the performance of the native token across different exchanges, using the staking dashboard to manage staked tokens, monitor pool performance, and track rewards at any stage, GDPR-level data protection and privacy, and support for Android and iOS. Besides the native token, sending and receiving $BTC, $ETH, and several ERC-20 tokens are also possible.

Blockchain

ParallelChain Mainnet is a distributed, public smart contract platform using careful optimizations and modern Byzantine Fault Tolerant State Machine Replication techniques to achieve low latency and high throughput in clusters with tens of nodes and acceptable latency and throughput with hundreds of nodes.

ParallelChain Enterprise is a permissioned blockchain with which ParallelChain Mainnet shares the data and execution layers. The two systems differ in two key aspects:

  1. “In ParallelChain Enterprise, the state cache is sharded. In ParallelChain Mainnet, each node’s state cache maintains a full picture of the world state”.
  2. “In ParallelChain Enterprise, inter-node communication is handled by the state cache’s inbuilt crash fault-tolerant consensus algorithm (which is based on Paxos). In ParallelChain Mainnet, inter-node communication is instead handled by ParallelBFT, a Byzantine fault-tolerant consensus algorithm based on HotStuff with additional optimizations such as early execution.

ParallelChain has been described as having record-breaking scalability. The project claims to have achieved 120,000+ transactions per second.   

Consensus Mechanism

The consensus mechanism powering ParallelChain Mainnet is ParallelBFT, a proof-of-stake consensus based on hashing algorithms and sharding unique to ParallelChain. ParallelBFT is a Byzantine fault-tolerant consensus algorithm based on HotStuff, featuring additional optimizations like early execution and consensus on hashes.

Paxos, which is used in ParallelChain Enterprise, is not Byzantine fault-tolerant.

Security Audit

No security audit has been done.

 

ROADMAP

The project has two roadmaps — one about the ParallelChain Enterprise and the other about the ParallelChain Mainnet. The currently available version of the Enterprise roadmap may be confusing to a reader. The Mainnet roadmap points out the planned milestones for the rest of 2022.

 

TEAM

The team page lists six highly skilled employees in computer science and computational neuroscience.  Some of the team members’ previous accomplishments include being listed in Who’s Who in Technology and Who’s Who Amongst Outstanding Americans, and doing postdoctoral work in artificial neural networks and computational neuroscience. The team members have also gained business experience working for institutions like the Center for Neural Engineering at Tennessee State University, and Hyatt Hotels Corporation.

Ian Huang, the CEO, is a serial technology investor, a serial entrepreneur, and a former US global communications engineering executive. Ian holds a B.S. in Electrical & Computer Engineering, an M.S. in Computer Science from Carnegie Mellon University, and an M.S. in Electrical Engineering from the University of Portland. Ian is also a graduate of the AMP program at Harvard Business School.

Geoffrey Yuen, Chief Scientist, spent ten years studying the brain, built unsupervised neural networks inspired by biology, and now works at the crossroads of AI and blockchain. Geoffrey has also done postdoctoral work in artificial neural networks and computational neuroscience.

Jessie Chan, Chief of Staff, has graduated with an M.S. in Political Science and Government Edinburgh.

Irene Yiu, Financial Controller, has an M.S. in Computer Science from the University of Manchester Institute of Science and Technology. Irene has worked as a Finance Operations Director at Hyatt Hotels Corporation.

Advisors

Roderick McKinley, CFA, Tokenomics Modeller, has advised several blockchain projects and has over ten years of quantitative modeling, financial analysis, and transaction experience, including work on private equity infrastructure deals, equity fundraising for start-ups, and financial management and planning for CFOs.

Anand Chandrasekher, Global Sales & Marketing, has worked with McKinsey & Company, Avalanche Technology, UPMEM, Tortuga Logic, Dimensional Mechanics, Qualcomm, and Intel Corporation.

Paul P. Chen, JD Corporate M&A, is a partner at Mayer Brown and, as a corporate lawyer, has international business and management consulting experience.

General Comments on the Team & Advisors

The project is built by an experienced executive team with a technical and entrepreneurial background. ParallelChain is hiring for various roles, including multiple engineering and marketing positions. These steps would assist ParallelChain in bridging gaps in required skills.

During our review period, we did not find evidence that the team members have taken part in any previous or current illegal or controversial projects. However, Kyle Chassé, one of the advisors, is involved with PAID Network, which has been exploited in the past.

 

LEGAL AND COMPLIANCE SPECIFICS

Jurisdiction

ParallelChain Lab Limited is a Hong Kong company, and ParallelChain Limited is a Bahamian entity. Any matters concerning ParallelChain Mainnet and its ICO, including but not limited to token offerings, tokenomics, roadmap, and timeline, are governed by the law of The Bahamas; the Terms of Use for matters other than the preceding are governed by the law of the Hong Kong SAR.

In 2020, the Bahamas adopted a framework for digital assets by enacting the Digital Assets and Registered Exchange Bill (DARE). This law creates opportunities for fintech firms and facilitates the registration of businesses and exchanges involved with digital tokens. The legal framework is being heralded as one of the most comprehensive regulatory standards and structures globally while also being welcoming to the industry.

Hong Kong has long been contending to establish itself as a fintech innovation hub. In recent years, Hong Kong’s regulation of crypto has been unclear. The Hong Kong Securities and Futures Commission (SFC) has enacted a strict regulatory framework and licensing requirements for virtual asset services providers. China’s ban on cryptos is also not helping and has caused uneasiness in Hong Kong, with many crypto and fintech firms downsizing operations in the region or leaving.

Partnerships

ParallelChain has various business and technology partners, including IBM, Amazon Web Services, and CyLab, Carnegie Mellon University’s security and privacy research institute.

There are also several media and marketing partners. Additionally, ParallelChain has been backed by various venture capital firms.

 

Backers of ParallelChain. Source: Ecosystem Litepaper

Legal Advisors

The project has not appointed legal advisors or team members responsible for legal matters.

KYC & AML

Details concerning KYC & AML have not been released at the moment. The seed, node sale, and presale funding rounds were executed subject to a SAFT agreement. As it is not public, no further information is available.

Token Classification

$XPLL is a utility token. Its utilities are:

  • Paying for transaction fees.
  • Earning staking rewards.
  • Applying to become a node operator.

Legal/Compliance Risks

The XPLL token lightpaper acknowledges the following legal risks:

  • A risk that in various jurisdictions, $XPLL may be judged to be a security.
  • Privacy and data security laws or any violations thereof may require the project to change its operational structure or business practices, sustain monetary penalties, and address legal claims.
  • The project may be required by law, court order, subpoena, or any other analogous regulatory or legal procedure to disclose personal information received from users, holders, or purchasers of $XPLL to government officials, law enforcement, and other third parties. Any such disclosure could harm the reputation or valuation of the project.
  • Intellectual property rights claims may negatively affect $XPLL’s value.
  • No fiduciary duties are owed. Holders of $XPLL may have limited rights of recourse against the project and its affiliates in the event of disputes.
  • Due to the shifting regulatory environment, it is uncertain what accounting and tax treatment or classification $XPLL will have in various jurisdictions.

 

TOKEN OFFERING

The initial total supply of XPLL tokens is 250 million, and the circulating supply is subject to change depending on the fundraising success.

 

Distribution of allocations as shares of the initial total supply. Source: Tokenomics Whitepaper 

 

12% of the tokens will be allocated as shares of the initial total supply to the team, with most (37%) going to all node sales. 10% will be allocated to marketing; however, the team has not clearly stated how these funds will be used.

The project raised funds from several investors. However, the project has not been transparent about the amounts raised during each funding round and the number of tokens allocated across various groups.

The seed and private round prices were $0.12 and $0.60, respectively.

There will be a 12-month lockup for the team.

 

TOKENOMICS

The $XPLL supply is not finite. The token is inflationary, and the token issuance mechanism follows a fixed and declining rate schedule.

Burning is one of the main components of the token economy. A mathematically calculated adjustment factor is in place, with whatever sum of tokens not passing on to the next reward calculation step getting burned.

There is also a slashing mechanism in place. It removes some tokens from an offender’s pool; thus, their previous owner is no longer in control of those tokens. This mechanism is also applied to delegated tokens, giving delegates an incentive not to delegate a stake to offending actors on the network.

According to the information posted on Telegram, some unsold allocations could go back to the treasury or could be added to the public sale allocation.

Suppy and Demand Dynamics

Token Supply

  • Transaction fees: The transaction fee collection process generates supply since 80% of the transaction fee volume will fund part of the reward pool accessible to validators.
  • Token issuance: The token issuance process generates supply because of a deterministic, declining issuance rate schedule with a fixed low-term rate, making the total current supply evolve dynamically over time.

 

Scheduled issuance rate curve. Source: Tokenomics Whitepaper

 

  • Token unlock and vesting: Different token holder categories are subject to varying vesting timelines creating changing emissions from vesting schedules, contributing to the overall token supply.

  

Emissions from vesting schedules governing each allocation (all nodes activated). Source: Tokenomics Whitepaper

 

Token Demand

  • Staking: Node operators are required to stake tokens to become validators.
  • Utility: The XPLL token has several utilities in the ParallelChain’s ecosystem. For example, the token can be used to become a node operator.

 

SOCIAL MEDIA AND VIRALITY

The project is active on Twitter. The channel has 62.4k followers.

The most accessible and popular channel for communication is Telegram, where the admins actively participate in community discussions on varying topics about the project. The channel has 28.6k followers. The project’s Discord channel is not listed on the homepage and has gathered 269 members so far.

The project has 1.3k followers on LinkedIn. The account is active and has witnessed an increase in the number of followers; on November 27, 2021, the account had 564 followers.

The project is not present on Facebook.

The project has its own YouTube channel with 30.2k subscribers and six uploaded videos. The most viral video has amassed 54k views.

Several reviews exist about the project, e.g.:

 

RISKS TO THE PROJECT

The following list of risks is not an exhaustive one. Some risks may be minor or not materialize. Refer to the XPLL token lightpaper for a detailed list of risks.

  • Malfunction: The tokens and any network interacting with the tokens might malfunction or could function in an unintended or unexpected manner, potentially resulting in the loss of tokens.
  • Security weaknesses: The project’s technology infrastructure may or may not have unknown bugs or security weaknesses, which may interfere with the use, or cause the loss of the tokens.  
  • The volatility of digital assets: In general, volatility in the values of digital assets can be significant, and indirectly, a decrease in the value of digital assets could have a material and adverse effect on the value of the tokens.
  • Unmet expectations: The project might undergo significant changes, and user expectations and market expectations regarding the functionality and form of ParallelChain and the tokens may not be met. This could negatively affect the value of tokens.   

 

RATINGS

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 ParallelChain a final rating of 52.35%.

 

 

DISCLAIMER

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.