Sirwin
Sirwin
TECTUM´S SOFTNOTE, THE FUTURE OF CRYPTO PAYMENTS?

Tectum and SoftNote, what are they and should you care?


To be upfront with anyone reading this post, this is my contribution to the writing contest put on by Tectum/SoftNote here on Publish0x. Why would that matter you might ask, well the short answer is I might unconsciously, or consciously, have that affect my opinions and how I portray things. With the hopes of polishing up and turds, I may or may not find, will lead to a more favorable outcome for me in the competition. But I hope I will be able to avoid things like that. Now with that boring disclaimer out of the way. I have taken a look at what Tectum´s SoftNotes are, trying to figure out how they work, and ultimately if it is something we should "care" about. Let's get into it!


Tectum and their SoftNote, what are they?

In short Tectum Tectum is a blockchain and SoftNote is a payment solution. Or if you want a way for people and businesses to make transactions using cryptocurrency. Sounds familiar? Well if you have been part of the crypto community the odds are fairly high that you have come across other projects that also say they are a payment solution or a way for people to transact using cryptocurrency.

This in turn now leads me to more questions like, why their own blockchain, are they doing things differently than others, and what makes them stand out? Let us try and see if we can find some answers to these, and other, questions. And maybe even come to a conclusion or two at the end.

Why their own blockchain?

Well, I think there are several pros and cons to this. While I am a novice when it comes to the tech side of things, as many of you know, I hope to at least be able to convey the reasons as I see them. And If I am wrong I hope there are people like you who can help me put and apples that have ended up with the pairs back with the apples. =)

What would be the option to having their own blockchain? Well, it would be to either be on another existing blockchain or one of the sublayers on a blockchain. One of the bigger reasons for having their own blockchain instead of putting it directly or indirectly on another blockchain is the optics. And by that, I mean as crypto becomes more and more adopted around the globe, and more and more people become aware of it. And when trying to convince a business to become your customer things like that matter. As an example, it is way easier to get new customers if your company looks and feels successful and like experts in their field. This obviously also makes it easier to trick and scam people as well. But more about things like that later.

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What to do, join an existing blockchain, or make my own...

Another reason to simply make their own blockchain is the blockchain trilemma. This refers to the tradeoff a blockchain has to make between the aspects; of security, scalability, and decentralization. This is because it is generally accepted that a blockchain can only max out two of these three aspects. As increasing one thing usually comes at the cost, directly or indirectly, of another aspect. As an example, you might have wondered why Ethereum always asks for your firstborn child as payment for any transaction, and an organ of your choice for every future transaction. This is because they have tried to max out their security and decentralization. This then leaves the network very congested, and hard to scale up, or if you will low scalability aka few transactions per unit of time. This then results in people paying more and more to put their transactions first in line. And that is why we end up with the high transaction fees. This is also why they reach so crazy proportions so fast if there is something many people need to do all at once. Like, sell their house so they can buy the latest monkey jpeg.

Creating your own blockchain, simply put, allows you to fully control these aspects. In contrast, having to settle with the preexisting settings of another blockchain. 

Association, or the lack thereof I should say, is another reason to make their own blockchain. The problem still remains of how you get access to coins or tokens on multiple chains. Being on one chain will, for good and bad, associate you with them. Making you the "blockchain X thing/project". And this can be good and bad. It depends on what you are after when starting out. Being on a blockchain will mean it will initially be easier to reach out to potential customers, as you are part of a community. The drawback tho is it can be very easy to get limited to that community alone. To some degree, this also falls under optics. But I think it is such a large factor in itself that it deserves to be mentioned separately.

Tectum blockchain

Let us take a closer look at the Tectum chain and see if we can determine what choices were made.

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From just spending a little time on the website it is crystal clear that there is one thing that is put at the forefront, and that is their speed. Even loosely claiming the "world's fastest" to some degree, even if there can be a * tied to it. They are also utilizing nodes as the method of validation for the blockchain. And while all details surrounding the nodes are a bit fuzzy at the moment. It is still an indication that decentralization also is a priority and the benefits that come with it. 

If you want to dive a bit deeper into why the number of transactions matters, I have covered that more in-depth in a previous post where I took a look at why VISA was exploring stablecoins as an option. You can read about that here.

Does this mean safety is down-prioritized? They seem to take a simplified approach to the classic blockchain trilemma. 

Normally, the rule of thumb for a blockchain is that the greater the security, the slower it is. Conversely, if you want a fast blockchain, you’re going to have security issues, because everything comes with a cost.

It is looking like they are sort of ignoring the decentralization part of the dilemma. At least they are only indirectly talking about it. They are also more or less equating the speed of a blockchain to how secure it is. where slower normally means more secure. Here however they are saying that one of the reasons they are able to achieve such high speed is because they have divided the data into multiple tires. This then appears to get processed by different types of nodes, as they then in turn have three different tires of nodes. "We have a master node that’s designed to carry all the heavyweight data, and then an upper level that conducts communication with hashes.".

Exactly how it works with regards to safety, I am unable to say anything about it. But utilizing nodes as a validation mechanism is however something that is associated with safety. So let us take a look at the nodes a little. In the tokenomics of the Tectums native coin $TET, we see that they bought $2m $TET that are dedicated to nodes. This will be used to run their initial private nodes. 

The nodes are also configured into groups called clusters. These clusters can then be linked up with a gateway node to be able to transact between clusters. The defining feature of a cluster is that it is only using the same consensus mechanism.

SoftNote, now what is this?

In short, this is their payment solution, or how they envision payments will be done moving forward using cryptocurrency to buy things. From what I have been able to piece together in my research they work by taking advantage of the Bitcoin Ordinal Solution, the ability to upload and store data in the blockchain. But unlike with the Bitcoin Ordinal, they have found a much more efficient way to do so. Hence the asking price is under $2 per MB compared to ~$8000 for 4 MB with the older one.

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But this then immediately triggers my internet "but why?" alarm. Why would you want to upload some data in that manner? Especially as it is immutable, or as immutable as it can get by encrypting it with a key and throwing away the key. Or opening it up by burning the SoftNote in question. As soon as I read that you will be able to upload pictures, text or seemingly any data, even if only a small amount. I was immediately reminded about two separate things, well actually three but two of them are similar. Bah, let me just explain what they are instead. The first thing was the computer game Spore. It was doing the rounds on E3 back in 2006 and had brought in Robin Williams to play and show off the game. 

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And that he did. Perhaps not in the way they intended. But it was hilarious either way. One thing tho that stuck with me was when they said that you would be able to travel in space and visit other players and see their creatures creating. Upon Robin immediately said, so a universe full of planets where every alien looks like a penis. And that Is my fear with this as well. "Hey internet, look at me, I made a bunch of immutable Bitcoin penis money" or something to that effect.

And in case you think I am a bit doom and gloom, back when I was at the university. There was an art project that was made on campus. They took a few of those disposable cameras and left them at different places on campus. And when they later developed the pictures I think it was like 15 or 16 pictures before the first penis showed up. Then there is the hitchBOT, the hitchhiking robot was an art project or experiment back in 2015 where they wanted to see how far it could get. And it survived a whopping 2 weeks before it was trashed and damaged beyond repair. Some friendly samaritans tried to put it back together, but sadly they were never able to locate its head.

And this is why I am unsure about this feature. That and the fact I don't really see the use case for it. I do see the nevel effect, but thanks to it being immutable, that negates that. But there were people at Nokia who did not see any use in being able to send text messages between phones as well. Might just be I am one of those, but with less pay.

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The great DOXing Detective strikes again!

Back to the SoftNote. The idea is you can customize it and then mint it and also provide the corresponding liquidity for it. You then can spend these through peer-to-peer transactions. This makes it almost completely anonymous unless you get DOXed or DOX yourself. As these transactions are not managed in the way crypto transactions are, there is no way for anyone to be able to view them in the traditional sense. You do however use the blockchain to verify the balance or store of value. But the transactions are kept off-chain. As far as I know, they are only put back on the blockchain when someone redeems their SoftNote for the crypto. 

The way that SoftNot works is it "representing ownership of a Bitcoin wallet address, or some amount of BTC liquidity sitting within a wallet address". It is the moving of the liquidity that is backing the Softnote that gets handled by the blockchain. Not the transaction, or exchange of the SoftNote. This means a SoftNote can change hands several times before someone redems it, and with that activates the blockchain to move the liquidity backing it.

So the way I understand it is you mint a SoftNote, then you "fill it up" by adding liquidity to it. You can now use the SoftNote in a transaction. And when the new owner has the QR code and the six-digit passcode, they then can transfer ownership of the SoftNote to themself. In doing so a new passcode gets generated, making the SoftNote ready for the next transaction.

Questions that needed answers

You probably also got some questions after reading this or looking into the project doing your DYOR. Should that just have been OR, as I said "doing your", you see so many questions. I then did what most people do, after reading the whitepaper and looking at the different sites, I went to their Discord server. There, as part of their authentication process, I was asked to turn off my ability to receive direct messages. If you are not on Discord, that is the #1 way scammers try and contact you, pretending to be the support or just sharing links to sites or whatever new way they try and scam you.

After I proved myself to indeed be a human. The first thing I saw in the general chat was a user messaging one of the developers. And the message more or less read "Hey X, check your direct messages. I have sent some to you." or something very similar. Being the overall nice person I am I immediately pointed out the irony of the situation. They did not get back to me. Not even a DM. ^^

Trying my best to hail one of the team members I noticed a message in one of the sub-sections saying that the devs were more active on Telegram. Oh joy I thought to myself. The only place riddled with more scammers than crypto discord, crypto telegram. But I was not going to let a few thousand, or however many scammers there were, Stop me from asking a few questions. There were however 0 scammers who contacted me there, and none on discord as well. And to be fair, the best help and service I have ever gotten was on telegram.

I started asking a little and talked with one of the moderators. They said they would pass on my questions to a developer and that they would get back to me. And to my surprise a few min later Russell Sean said he would be happy to help me out. If you are not familiar with the name that's the CEO.  And he helped me with answers to my questions. And while I did not have all the questions prepared I had a few. And I thought I would share some of the answers he gave. I hope that it will be able to provide you with some answers.

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Nodes, the heart of any PoS blockchain

I asked a bunch of questions regarding the nodes. This, to me at least, is the heart of the blockchain as it is a PoS blockchain. He confirmed my suspicions that the reason they are starting out with only Private nodes is to ensure the basic foundation of operation for the blockchain. He also verified that their goal is to transition away from this to have their nodes operated by whomever. In a similar way to how Ethereum is doing things. Also, they want as many validating nodes as possible.

I was also able to confirm while the initial amount of $TET required to start a node was 20.000, this will come down over time to a more accessible amount. He also said that there is an option for people to to be a part of what he called a "community node". And you could then stake more or less any amount of $TET in one of those nodes. And to start one of those community node pools you "only" need 5.000 $TET. Still a good chunk of money. But only a quarter of the initial 20.000. Also, another team member said that that number was not confirmed. If this was because this number might be different when they open up the ability to host nodes. Or a reference to the fact that this number will come down over time I don't know. Russel did however mention the initial number being 20.000.

He also confirmed that the rewards for the node operators will be earning $TET from the minting process, as well as fees and other charges related to the Ordinals. I was not able to get a guestimate on any APY. But he did mention that there initially at least also is a pool of $TET being accumulated that will be used for rewards. My guess is that what is put into this pool is the same thing that normally would go to the node operators. But as the nodes initially are private, this instead gets put into a pool. And will be used to boost the yield to incentivise people to host nodes to a higher degree than otherwise. Another thing he mentioned that makes any guestimates hard to make is the fact the node earning varies so heavily on the network usage and the number of nodes. He also confirmed that the minimum staking time was 60 days for the nodes. If we compare that to the in-perpetuity option that Ethereum seems to go for. This 60 days minimum seems like a way better deal. He also said that regarding hardware, you will be able to run a node on most mid-range gaming/dev computers.

He was able to clarify some things regarding the SoftNotes as well. In contrast to what is on the website, they will not be done by dollar value (might be I misunderstood something on the site). But instead will be based on crypto amounts. If you look at the picture above you will see what I mean. He also explained that despite you paying the Bitcoin Ordinals fee of an arm and a leg to transcribe 4 MB of data, that is not immutable. And that is one of the features that separate them. The fact that when you mint it it makes it immutable. As described above.

I also asked a little about the design choices for the SoftNote. He told me that yes it was on purpose that some aspects made them look similar to cash or tickets. But then there where also a lot of tech info that needed to be on them like public address, QR code, and so on. He also said when asked that it was not a personal goal to have people print them and use them like money is used today. It is definitely something you could do if you chose to. And it was a feature that many in the team liked as well.

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I also asked about the ability to redeem the crypto from the SoftNote. And here I was given something a bit unexpected. A scoop, not one of those you scoop ice cream with but one of those exclusive things journalists like to get. And that was the fact they have some SoftNote/Fiat pairs in the works already. I like to see the other entries get one of those scoops of victory-flavored ice cream. =) Other than that you will be able to sell the SoftNotes on exchanges.

Regarding the transaction, it gets handled by smart contracts. They will make sure you get the correct change and that the balance is showing correctly along with the transactions being made. But the whole thing does sound fairly similar to a centralized exchange. So obviously I had to ask him about it.

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The passcode he is talking about is the passcode that goes with the wallet. And this is the way how they solve the above-mentioned anonymity, as well as make their system transactionless. What happens is that the SoftNote changes ownership and a new passcode is generated. And as I understand it, the passcode is what truly represents the control or ownership. So it works in a similar way to the monicer we are custom to "not your keys, not your crypto". 

Remaining questions and thoughts

There are however some new or remaining questions I have. And perhaps the biggest one is regarding the liquidity connected to the SoftNote. Where is this kept, who "controls it". I mean the SoftNote can be noncustodial, but if the liquidity is. Then it does not matter whether the SoftNote is custodial or not as long as the licuidity is. Sadly this was not something that I thought to ask while I was talking with Russell. And depending on the answer to this I would argue that can equate them to a CEX or not. 

the crypto community is so stupid that they keep taking their decentralized currency and putting it up on centralized exchanges and then being like, "why me thefted" why this happend?". You´re literally taking your decentralized thing and putting it in a central location that doesen´t have FDIC insurance like a bank would, and then going. Oh no, my thing stolen from the central location I put them on for my decentralized. What are you doing? What the hell are you doing? Stop that.  -Pirate Software

I think those words of wisdom sum up my thoughts on keeping things on exchanges. But of course each to their own. *cough* not your keys, not your crypto *cough*

That for me is the remaining big thing I am able to see as a possible "problem" that not necessarily is a problem. I mean a CEX is not a problem until it becomes one. I think the majority of people would argue FTX was perfectly fine up until the very moment it no longer was. And the same can be said about Celsius and a slew of other shit scam scummy projects.

Do this mean I think that Tectum and SoftNote is a scam, no. Do I still have some concerns that I would like to see addressed before I put any large amount of money into it? Yes, the biggest tho is simply the lack of money I have access to. But after that yes there are some concerns. Like how the liquidity possibly is handled. The fact that all the nodes are private starting out is my main once. Does that mean I don't understand or agree with why things are as they are, no? I fully get why they are starting out with private only nodded. They need to be able to ensure the functionality of the project. Or why else would businesses want to use SoftNote as a payment option? It would be like trying to sell in a new credit card but you only have the card and no way to ensure it works. 

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No matter how nice the surroundings are, problems with liquidity can still sink any project

The same goes for the liquidity, why would you choose to use SoftNotes if there is a risk you end up with things that are worthless when you take them to the bank? Companies need to be able to trust in the system. If they can't then they will simply choose another way to do business. The biggest problem currently is that all too often companies do not view people as customers. They instead view them as obstacles that they need to overcome in order to get to the money. This means that the type of people who are primarily attracted to cryptocurrencies are very wary of centralization and anything they can not directly control themselves. 

But with regard to my liquidity concern. This can to some degree be mitigated if you simply treat it in a similar way to how most miners use CEXes. Get in, do what you need, and get out. Or to put it plainly. Put your crypto in, get your SoftNotes, and then buy the thing you want to buy. Do not keep all your crypto locked up in SoftNote liquidity. 

But this is definitely a project that I would say has tremendous potential and one that I will keep a close eye on moving forward. As it potentially can unlock the global use of cryptocurrency as a way to be able to buy what you need. Instead of as it is now, only fringe cases and in the back of a van where you are able to buy things using cryptocurrency.

I do hope that I have been able to take you along on my journey of trying to get a better understanding of what Tectum and SoftNote are, how they work, and why I think it is a project worth keeping an eye on. And while I have tried to do as much of a comprehensive deep dive into the project, there are most likely things I have missed. Perhaps there is something you have picked up on and can share with me?

There are also links to both Tectum and SoftNots as well as the Whitepaper if you want to take a look and ready up on the project on your own.

If you would like to support me and the content I make, please consider following me, reading my other posts, or why not do both instead. 

https://medium.com/@bo.daniel.jensen

 

 

See you on the interwebs!

 

 

 

Picture provided by: https://www.pexels.com/, https://unsplash.com/, https://pixabay.com/ and https://tectum.io/, https://softnote.com/ Used with permission. 

 

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