Particl: The Privacy-Centric Marketplace (Altcoin Review)

Particl Highlights <1>

Started: March 21, 2017
Market cap: $64,007,560
Price per coin: $8.23
Reddit subscribers: 1,124
Twitter followers: 7,176
Circulating supply: 7,781,280
Max supply: N/A (currently 8,777,315)
Consensus method: POS
Whitepaper: https://github.com/particl/whitepaper

What is Particl?

Particl (PART) is a privacy-centric marketplace and the first decentralized app (DApp) with confidential transactions (CT) built on the Bitcoin blockchain. <2> It makes use of it's own blockchain, rather than Bitcoin, to accommodate future enhancements and DApps while making use of features like Bitcoin features like SegWit and atomic swaps.
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The platform, which will launch as an Alpha in Q1 2018, will consist of a private marketplace with built-in encrypted messaging and will accept all cryptocurrencies as payment. However, in the future additional DApps will be built into the ecosystem and private DApps could even be built off the Particl platform in the same way many ICO's are built off Ethereum. In addition, Particl offers: <3>

• Passive income for users operating nodes and helping to secure the network;
• Zero-to-low fees;
• Freedom to list almost anything;
• Ownership of the platform through self-governance;
• Private listings; and
• 2 party trustless (MAD) escrow.

Traditional public and private marketplaces

Traditional public marketplaces, such as Amazon, record all aspects of a transaction including buyer and seller information, price, the product sold, location, tax records and more. By giving up this information to a third party, both the buyer and seller get trust in return - the buyer can rely on the intermediary (in this case, Amazon) to resolve any disputes and the seller can rest assured they will receive payment for their product. This is an important aspect of any transaction, even if it doesn't always work out (look up PayPal complaints, for instance). Furthermore, marketplaces like eBay make use of reviews (publicly disclosed information) to prove that sellers and buyers are honest and reliable.

On the other hand private and P2P marketplaces allow both buyer and seller to retain a measure of anonymity if they so wish; however, as a result trust becomes a significant barrier to interactions. If the buyer sends payment and receives nothing in return, there is little to no recourse for the buyer as there is no intermediary and little to no information on the other party. Even face to face interactions fail to address this concern as it exposes both parties to a new set of trust issues.

Then there's Particl. The platform gives users complete privacy through confidential transactions (CT) and RingCT technology (also used by Monero) which obfuscate the transaction amount and participants (if desired), encrypted end-to-end messaging, and optional private listings. The privacy features hold up against any private marketplace, but what sets Particl apart is the way it handles disputes and trust.

The MAD (mutually assured destruction) protocol

MAD, a trustless escrow solution, is Particl's version of a smart contract based on the Nash equilibrium. All funds involved in the exchange are sent to a multi-signature wallet to be held until the exchange is complete, as with most smart contracts. However, the MAD protocol calls for both the buyer and seller to stake an insurance deposit in addition to these funds, which is also sent to the multi-signature wallet. If, for whatever reason, the transaction is not successful, then the entire balance of the multi-signature wallet is cleared, leaving both the buyer and seller with no funds (hence mutually assured destruction). The amount of the deposit is, at this time, uncertain but given that the protocol aims to disincentivize users from acting fraudulently, I believe the figure will be a fairly high percentage.

As an example, buyer A wants to purchase a hardware wallet from seller B for the price of $100. In this case, the insurance deposit is 50% meaning the buyer puts up $150 and the seller puts up $50 for a combined sum of $200 in the multi-signature wallet. In a successful scenario, seller B ships the hardware wallet, buyer A receives it as expected and the $200 is released; $150 to the seller and $50 to the buyer. In an unsuccessful scenario, buyer A does not receive the hardware wallet and the funds are cleared, resulting in buyer A losing $150 and seller B losing $50.

As you can see, the MAD protocol financially penalizes fraudulent actors which, at a high enough insurance deposit, should remove any incentive to transact dishonestly. Although an honest buyer is especially penalized by losing both the purchase price and deposit, in theory there should be no reason for the dishonest party to act fraudulently as they do not gain the cost of goods and lose their deposit as well.

This is a difficult balance for the team at Particl and it will be interesting to see what the MAD protocol looks like upon release. Without the MAD protocol, Particl is just another private marketplace with no trust. However, unresolved disputes could prove to be a bitter pill to swallow for both parties and may even discourage some users from participating.

What privacy features does Particl have?

In the Particl marketplace transactions can be handled publicly, blindly (using CT to obscure amount) or anonymously (using RingCT to obfuscate the payment amount and the sender/reciever details in order to completely separate the link between the payment and buyer/seller). Listings can be made private, meaning only people with the correct private key are able to view it. The platform's native messaging makes use of the BitMessage protocol, which allows only the person with the correct user key to view the encrypted message; these messages are stored across all nodes so there is no way to identify which IP they correspond to. The team is considering additional encryption measures such as dual stealth addresses in order to address concerns around what would happen if another user was to gain access to someone's private key. Additionally, the marketplace offers trustless privacy protocols and is Tor enabled.

I think the privacy-optional approach is a smart play as it satisfies different purchasing behaviours. There are plenty of situations where users who generally don't care about keeping their transactions private would opt in to private payments, especially in the case of sensitive purchases. Meanwhile, those who value privacy as a necessity will have that available to them. Optional privacy also allows Particl to make some worthwhile trade-offs and borrow some aspects of public marketplaces. For example, in a completely private marketplace there is no way to link the seller and the product meaning there is no way to see other products listed by that seller. Given that the listing-seller relationship can be deducted via time, image or linguistic analysis anyways, this is a small privacy trade-off that enables trust, relationships and branding. <4>

As always with privacy-optional approaches, there are some concerns. The volume of private transactions will need to be a reasonable proportion of the total volume so as to not stand out from public transactions. Particl also makes a few trade-offs (such as the example of the seller-listing link) for the sake of trust and user experience. However, Particl makes complete privacy available to all users and only makes privacy trade-offs in situations where the advantages of public far outweigh the advantage of private.

What does Particl offer other marketplaces do not?

Besides privacy, Particl has a lot of advantages over other marketplaces. Fees for listing and selling have not been confirmed but the team has communicated they will be zero or little. <3> This provides one incentive over traditional marketplaces as sellers won't have profit eaten away at by fees. Particl also makes use of proof of stake consensus and offers those who stake their coins a 5% annual ROI (which will decrease by 1% each year, down to a minimum of 2%) creating additional incentive for adopting the platform; the team recently released cold staking meaning the wallet doesn't even need to be online to receive these rewards.

The Particl marketplace will accept all cryptocurrencies, so the barrier to transact is extremely low. It achieves this through atomic swaps of supported currencies and ShapeShift integration for those which are not.

Furthermore, sellers can list almost anything they want to sell, and likewise, buyers can buy almost anything they want. This enables access to a wide variety of items that may be geographically blocked otherwise, may be sensitive in nature, or may be prohibited by regulations. However, Particl makes use of a self-governance system which means the coin holders are able to regulate the network, including restricting certain types of goods from being listed in the marketplace - or as the team would say, the platform will not become "the ultimate version of Silk Road." <5>

The role of the Particl coin (PART)

One of the smartest decisions the Particl team made was to have the coin, PART, be an integral aspect to every part of the platform including:

• Providing voting rights in the self-governance system;
• Providing passive income to PART holders;
• Acting as the native currency of the Particl marketplace, with all other currencies being converted into PART; and
• Payment of listing fees (if Particl does charge for listing).

Compared to many other decentralized exchanges, the PART coin has clear utility and value. Bundle this with the limited supply and low inflation and it's easy to see why the coin itself currently has significant value.

Future potential

Initially, Particl will be a decentralized private marketplace with built in encrypted messaging and a trustless escrow system. However, in the future it has the potential to not only become an all-in-one privacy ecoystem but it could also be used as a privacy platform in which to build other DApps upon. Some future use cases include: <6>

• A DApp to manage voting, either for the Particl self-governance platform or for general purpose voting;
• A gambling or betting DApp which would allow users to place private bets with the outcome handled via smart contracts;
• A DApp for managing private crowd-sourced funds with the ability to restrict participation via private listings; and
• A native DApp store for the Particl platform allowing users to add DApps to their Particl dashboard, giving users the ability to customize the Particl platform via apps of their choice.

The Particl team

The Particl team is made up of 17 people, 4 of which act as advisors to the project. The 7 developers are led by the founder, Ryno Mathee. Ryno worked on ShadowCash, a decentralized privacy platform and currency which started back in 2014, before deciding to start on a new and improved project in March 2017 - Particl. Juha Kovanen also worked on privacy-related cryptocurrency projects (including ShadowCash and a CloakCoin wallet) going back to 2014. Even though the project is relatively new, in reality Ryno and other team members have been working on it for a long time.

Particl also has a dedicated communications specialist, Paul Schmitzer, and some interesting advisors including Yann Allemann, an innovation engineer at Ferrari, and Micah Spruill, the founder of a blockchain capital venture group.

What makes Particl great

• It strikes a balance between giving users total privacy while providing features which offer consumer trust;
• Many of the core team members have been working on the platform foundation since 2014;
• Cold staking allows users to generate passive income with little to no effort;
• Built in encrypted messaging;
• Future use cases are promising and show the potential of Particl to grow into a privacy ecosystem;
• The PART coin is central to everything in the marketplace including conferring voting rights and acting as the native currency;
• Acceptance of all cryptocurrencies via atomic swaps and ShapeShift integration lowers barriers to adoption;
• Open marketplace with both public and private listings overcomes geographic and regulatory barriers;
• Self-governance to prevent the marketplace from turning into the Silk Road; and
• Very limited coin supply with low inflation rate.

Concerns about Particl

• The decentralized marketplace space is very competitive and none have been overly successful yet;
• There are some competitors that already have a working platform;
• The concept of a private marketplace may deter some users and could attract some unwanted attention - the team will have to be careful about positioning and ensure the self-governance model is working as intended;
• Self-governance model will require active participation and representative views to succeed which would be undermined if a large portion of PART was held by a small group - right now 33% of all coins are held by the top 5 wallets though some of these wallets are exchanges or locked for fundraising; <7>
• Privacy optional approach could be a difficult balance as users who are mostly concerned with privacy may opt for other platforms while those who are not as concerned may look at other alternatives;
• No working product yet, Alpha of the platform is expected to release in Q1 2018;
• The MAD protocol assumes rational behaviour from both buyer and seller, which is rarely the case; and
• The MAD protocol heavily punishes the buyer in the situation where a dispute cannot be resolved.

Competitors

BitBay. BitBay, which currently sits 103rd in overall marketcap offers almost all the same features and already has a working platform. It's main advantage, is of course, that they have delivered a working product that is in use today which Particl definitely can't say; Alpha isn't even out until Q1 2018. However, Particl does has some advantages. Firstly, despite not even having a working product, Particl has a stronger community following than BitBay and the fact that it has a higher marketcap reflects how the two are comparatively viewed. Secondly, Particl offers superior privacy protection especially with RingCT. Right now I can only speculate that Particl will have greater adoption than BitBay currently has but time will tell.

SysCoin. Again, another direct competitor that already has a working product, in this case a desktop app. Unlike BitBay, SYS currently has a larger community than Particl and almost twice the marketcap. One point of difference is that SYS makes use of proof of work consensus with master nodes rather than proof of stake. The main advantage Particl has at this time is it's privacy features, though it seems SYS is looking into adopting RingCT themselves. Particl also makes the PART coin central to the entire platform where as it is more of an optional use in the case of SYS. Particl will have to work hard to distinguish themselves against SYS.

Ethereum DApps. Several decentralized marketplaces have already been built off of Ethereum but at this time none are really direct competitors. However, once zk-SNARKs is integrated into Ethereum that could change very quickly. All of a sudden all of the existing marketplaces built off ETH could integrate privacy features in addition to the existing smart contract capabilities. Something to watch out for.

Is Particl a good investment?

Particl currently sits 83rd overall on coinmarketcap.com with a total marketcap of 64M. It has a very limited supply of less than 8M PART and given low inflation rate the total supply will always be small.

There's a lot of reasons to avoid investing in Particl. There's no working product, there are direct competitors that are already up and running and although I'm a fan of the privacy optional approach, it could inhibit adoption from a number of users. A large number of the coins are already centralized amongst a small number of wallets, which in a self-governance system could lead to significant issues. Lastly, there are a number of features which haven't been fully fleshed out and it remains to be seen whether the MAD protocol for escrow is going to solve the problem of trust or cause a nightmare for users.

However, there are a couple key things that really intrigue me from an investment perspective; the first and main reason is the PART coin. The supply is tiny and given the staking rewards and self-governance model, the amount actively circulating will be even smaller. The coin is central to everything including transactions; even though nearly every cryptocurrency is accepted, they are all converted to PART which is the native currency of the platform. This means that there is real utility to the coin, which combined with the limited supply will make it a scarce resource - in other words, if the platform takes off the price of PART is going to go way up. Secondly, Particl offers the strongest set of privacy features amongst decentralized marketplaces at this time and more than that, it offers the potential to develop into an entire privacy ecosystem. Lastly, the platform is not yet launched which means PART is likely to increase in value leading up to it.

Overall, I see Particl as a bit of a Hail Mary. There's a lot of competition, a lot of potential issues, and they haven't delivered much yet which means it could very well flop. However, it does have a strong privacy offering which may set it apart from the field and the way the PART coin has been integrated means the increase in value could be huge if the platform gains adoption. There may be some short term gains to be made leading up to the platform launch and personally I'll probably consider acquiring a very small holding and seeing what happens. PART is currently available on Bittrex.

Conclusion

Particl is a privacy-centric foray into the decentralized marketplace space. The platform will offer leading privacy protection, encrypted messaging, self-governance, staking rewards and will likely build on existing offerings through DApps.

The core team have worked in the privacy crypto space for over 3 years now and have put together a unique idea that is attempting to provide all the benefits of a private marketplace while still offering some of the beneficial aspects of more traditional marketplaces, such as trust.

I like the way the team has put the PART coin at the center of everything and it's one of the main attractions for me. Particl is far from a safe bet but the price of PART could see significant growth if everything pans out and therefore may be a worthwhile investment as a high risk/high reward option.

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References and Notes

This post originally appeared at https://www.cryptoadvocate.net/single-post/particl-the-privacy-centric-marketplace and was modified slightly for relevancy and for the steemit audience.

<1> Logo, as well as all stats are from coinmarketcap.com with the exception of social following which is taken directly from the social pages
<2> https://twitter.com/ParticlProject/status/872889412773974016
<3> Taken from https://particl.news/the-need-for-a-private-person-to-person-marketplace-ec37348790a3
<4> Adapted from page 2, section C of the whitepaper
<5> Particl website, Voting Governance section
<6> Examples taken from https://distributed.com/news/building-framework-privacy-dapps/
<7> https://chainz.cryptoid.info/part/#!rich

All other information is either adapted from the whitepaper and other research or is personal opinion.

Crypto Advocate does not have any holdings in PART at the time of posting.