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White Paper
published on 04.09.2019
Abstract
During recent years, the adoption of cloud computing by companies and individuals all over the
world has been expanding at highest pace, because outsourcing of computing power is more flexible
and often cheaper than setting up an own dedicated computing center. Today, cloud computing
represents a major business sector, which generates several hundred billion dollars of revenue each
year. The trend continues and the cloud computing industry will grow by about 16 % annually
throughout the upcoming years [1]. Nevertheless, computing resources remain expensive, mainly
due to the high costs associated with procuring and maintaining hardware on the providers’ end, as
well as the huge margins, which are a result of the market’s monopolization [2, 3]. Meanwhile, all
over the world innumerable private and business computers are idle during most hours of the day.
HiveNet will provide the technological solution to utilize these idle computer times by building up a
distributed cloud computing network. This will enable computer owners to make a profit from the
idle times of their computers. HiveNet achieves this by creating an isolated environment on
computers, which allows renting out computing power while still ensuring security against potential
threats. For cloud computing customers, HiveNet will be much cheaper than traditional providers,
because HiveNet will utilize existing idle resources and thereby saves on most relevant cost drivers,
like for example amortization of hardware investments.
Computer owners will receive a fair share from customer payments, depending on the provided
amount of resources. Though, payments in any specific national currency would be infeasible for
many reasons, like for example the huge costs for financial service providers when transferring
money across borders. We solve these constraints by introducing the HiveCoin, which will be the
inherent blockchain-powered cryptocurrency of the HiveNet. The HiveCoin will be a fast, simple and
secure payment system, which will be free of transaction costs. This way, the financial interests of
customers and computer owners are conveniently aligned. In order to ensure a wide distribution and
decentralization of HiveCoins and to fund further development, the largest portion will be sold to the
public.
HiveNet aims to enable public decentralization of the cloud computing industry and empowerment
of computer owners all around the world. HiveNet will also have a positive impact on the
environment, because it will increase the usage of available computers. This way, less resources will
be consumed to build new computers and less electronic garbage will be created.
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Content
1 Introduction 5
1.1 About this White Paper 5
1.2 Legal Disclaimer 5
2 Business Summary 6
2.1 Cloud Computing Market and Costs (the Problem) 6
2.2 HiveNet is the Solution 7
2.3 HiveNet’s Ecosystem is driven by the HiveCoin 8
2.4 Participants within the HiveNet 9
2.5 Customers and Use Cases 10
2.6 Competition 11
2.7 User Experience 13
2.8 HiveNet Prototype 15
2.9 Business Roadmap 16
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5 Development Roadmap and Use of Funds 22
6 HiveNet Ecosystem 27
6.1 Flow of HiveCoins and Fiat Money 27
6.2 Cash-out Options 29
8 HiveNet Blockchain 39
8.1 Proof-of-Stake 40
8.2 Blockchain Economics 41
9 Abbreviations 42
10 References 43
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1 Introduction
In order to prevent yourself from becoming a victim of phishing, please make sure to only procure
relevant documents, links and information from our official website.
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2 Business Summary
Within the last decade cloud computing has become a well-adopted technology and nearly every
single business is in some manner dependent on cloud computing services. Cloud computing has
enabled the execution of user-defined computing activities with high flexibility regarding quantity,
time and location and became the preferred choice whenever possible. Thereby, the global demand
for cloud computing is increasing with an accelerating pace. Between 2018 and 2022 the market is
expected to increase from about 180 billion USD to about 330 billion USD [1].
This rapid growth is served by the respective divisions of large corporations like Amazon (AWS),
Google (GCP), Microsoft (Azure) and Alibaba (Alibaba Cloud). Their customers are trapped, because
moving away would require painful and unreasonable investments into hardware and personnel.
Consequently, the big providers can dictate the prices, which allows them to generate astonishing
profits off their customers. For example, AWS represented more than 72 % of Amazon’s entire
corporation profits in 2018 [2].
Although cloud computing is in most cases cheaper than setting up an own dedicated computing
center, it is still very expensive. For those companies, which have a significant demand, computing
remains a major cost driver. Just to give you an example, for a single, average ‘new’ computer in a
cloud computing center, customers pay about 2,000 USD per year, even if they don’t fully use it [4].
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2.2 HiveNet is the Solution
Computing is still so expensive, because any increase of capacities requires the investment into
additional resources. Even for the big providers, the need to constantly purchase vast quantities of
new computers, causes high costs. These computers also require new facilities to be set up, cooling,
maintenance and so on. All these factors cost a lot of money.
At the same time, all around the clock and all around the world, there are countless idle computers.
Private computers are in most cases only used for a few hours per day, if at all. Office computers are
usually only used for up to 40 hours per week. Therefore, most computers are clearly underused.
HiveNet offers the technological solution to utilize these idle times. This way, computer owners can
make a profit from their computers, when they are not using them. HiveNet will achieve this by
creating an isolated environment on the computer, which will allow renting out computing power to
cloud computing customers, while still ensuring security against potential threats (see chapter 7
Distributed Cloud Computing for details).
HiveNet isn’t only great for computer owners. It is also convincing from a customer’s perspective,
because HiveNet will be much cheaper than the traditional cloud computing providers as it can save
on most relevant cost drivers (see chapter 2.6 Competition for details). Also, in the HiveNet,
customers will only have to pay for what they are actually using, instead of paying a fixed price for
booked resources, which they didn’t fully use.
Additionally, HiveNet is also good for the environment, because it will increase the usage of readily
available computers. Therefore, less resources will be consumed to build new computers and less
electronic garbage will be created.
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2.3 HiveNet’s Ecosystem is driven by the HiveCoin
However, the HiveNet’s individual providers of computing power and the potential customers are
each scattered all over the world. How can payments be performed efficiently? Payments in any
specific national currency or by traditional financial services would be infeasible, because the various
middle-men (e.g. banks) would request service fees when performing money transfers and currency
exchanges. These service fees would quickly eat up any profit and turn the business unviable for all
participants. And there are many other problems that arise when traditional payment systems are
employed (e.g. transaction speed, legal constraints).
HiveNet requires a globally available, fast, flexible and secure payment system, which isn’t hindered
by country borders and creates no transaction costs.
Therefore, we introduce the HiveCoin, the inherent and fundamental currency of the HiveNet.
HiveCoin is a cryptocurrency, which is secured by the blockchain technology and will fulfill the
above-mentioned criteria. Thereby, HiveNet participants can rely on a fast and secure economic
system, which doesn’t generate transaction costs (see chapter 8 HiveNet Blockchain for details).
The fundamentality of the HiveCoin within the HiveNet will also ensure that the HiveCoin can both
serve as a strong storage of value as well as benefitting from an upward price-pressure through the
ongoing usage of the HiveNet (see chapters 6.1 Flow of HiveCoins and Fiat Money for details).
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2.4 Participants within the HiveNet
Providers, stakers and customers are the essential participants of the HiveNet. Each one of them is
contributing and benefiting from their participation.
Customers are companies, universities, or other organizations and individuals. They choose
cloud computing services because they appreciate the flexibility, reliability and cost-efficiency
compared with setting up an own dedicated computing center. Customers request computing
power on the HiveNet platform and pay for the received services (see chapter 2.5 Customers
and Use Cases for details).
Providers are individual persons or companies, who offer computing power in the HiveNet.
The computing power is utilized to perform computing tasks for customers. Providers are
rewarded through a fair share of customer payments. With the HiveNet client software any
computer owner in the world could be a provider and convert the idle times of their computer(s)
into an income. A computer (desktop or notebook) with access to the internet will be all that’s
needed.
Stakers are HiveCoin owners who use the HiveNet client to have their computer act as a node
(see chapter 8 HiveNet Blockchain for details). They store a copy of the HiveNet Blockchain,
provide this copy to other users and participate in the creation of new blocks. Due to the applied
Proof-of-Stake consensus mechanism, acting as a node will be very efficient and will require only
very little computing power. Stakers are rewarded with block rewards of newly minted
HiveCoins. Any HiveCoin owner, who has a computer with access to the internet could be a
staker.
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2.5 Customers and Use Cases
Customers use cloud computing services, because they appreciate the flexibility, reliability and
cost-efficiency compared with setting up an own dedicated computing center. The HiveNet will
surpass traditional cloud computing providers with its higher cost-efficiency and higher flexibility,
while still meeting the expectations for reliability (see chapters 2.6 Competition and 7 Distributed
Cloud Computing for details).
The HiveNet will fulfill the cloud computing demand of a large group of customers with versatile
applications (also see chapter 7.1 Customer Target Groups). In the following we give just two
examples out of many use cases.
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2.6 Competition
The cloud computing market is currently dominated by a small group of large, global corporations.
An estimation of the market shares can be retrieved from the following figure [3].
When analyzing customer retention in the cloud market, there are three major factors, which need
to be considered. First, the market leaders are exerting ‘lock-in’ methods to prevent their customers
from short-termed switching of providers. Second, especially large customers are usually adopting
services from several different cloud providers (e.g. to use different services or as a countermeasure
to prevent being locked-in). Third, the cloud market is growing very fast at an average annual growth
rate of over 16 %, which is creating ongoing opportunities for customer acquisition [1, 9].
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Any new player, which aims to gain a notable share of the market is required to offer significant
advantages to customers and needs to choose an adequate niche for getting started. The HiveNet’s
major competitive advantage over traditional cloud providers will be its high cost-efficiency, because
several important cost drivers are losing relevance thanks to the utilization of spare computing
power (see table below). Therefore, HiveNet will allows decent profits for individual computer
providers and much desired cost reductions for customers.
In order to reduce costs to a certain extent, customers of traditional cloud providers need to
estimate their future demand and book computing power in advance. But they still have to pay for
the booked resources, even if they are not fully using them.
In the HiveNet, no in-advance booking will be necessary. Customers will only pay for resources, they
have actually used, which will greatly increase flexibility and further reduces costs.
Due to the high cost-sensitivity of many customers, HiveNet will be able to convince them by
reducing costs and increasing flexibility. In order to further utilize these advantages, HiveNet will
initially target a segment of the market, where cost is the main driver of customer decisions (see
chapter 7.1 Customer Target Groups for details).
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2.7 User Experience
We are well aware, that cryptocurrencies are yet to become mainstream. Understanding how to get
them, use them, trade them and keep them secure, requires considerable technical comprehension
and the willingness to invest many hours of learning. In addition, most crypto-related projects don’t
consider the user friendliness as a priority, which further aggravates the situation. Many potential
customers and computer owners might be repelled by the idea of having to ‘learn’ and use
cryptocurrencies, thus creating a serious entry barrier.
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From a customer perspective, handling the HiveNet should be as simple as employing a traditional
cloud provider. Therefore, we will ensure that all related processes are comparable. Customers will
be able to choose from various different payment options, using either their local currency or
HiveCoins. Payments in fiat money will be automatically exchanged into HiveCoins on a digital
currency exchange to utilize HiveCoin’s advantages as a fast, flexible and secure payment system,
which isn’t hindered by country borders and is free of transaction costs (see chapter 6.1 Flow of
HiveCoins and Fiat Money for details).
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2.8 HiveNet Prototype
We have developed a HiveNet prototype, which includes the following key features:
The current version of the HiveNet client is running on desktop computers and notebooks and
already compatible with most relevant operating systems, including:
ü Microsoft Windows 7
ü Microsoft Windows 8.1
ü Microsoft Windows 10
ü macOS (all official versions)
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2.9 Business Roadmap
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3 Funding, Token Sale and HiveCoin
We have carefully evaluated the associated development costs for all HiveNet features. These
elements of the full-scale HiveNet product are allocated to four different ‘development tiers’. The
first development tier includes all basic features necessary for launching a functional and secure
product. The fourth development tier corresponds to the full-scale HiveNet, including all features
outlined in this White Paper. Depending on the amount of raised funds, we will develop the HiveNet
fulfilling the features of the respective development tier. Falling short of the required funding of a
higher tier doesn’t lead to omission of the respective features, but to their delay until further funding
is achieved later on through financing or operative income.
A short overview of the different development tiers is given in the following table.
Please find the detailed overview of the features associated with each development tier and the
respective use of funds in chapter 5 Development Roadmap and Use of Funds.
The HiveNet will initially be funded through selling HiveNet Tokens (HNT). HiveNet Tokens are ERC-20
tokens and compatible with many wallets and other third-party systems [10]. We aim to have the
HiveNet Token placed on several digital currency exchanges to enable their easy trading.
All details about the upcoming sale of HiveNet Tokens will be announced on www.HiveNet.cloud
appropriately in advance. If you don’t want to miss out your chance to participate, make sure to
subscribe to our email newsletter and/or follow our social media channels.
We consider our HiveNet Token sales to be compliant with German federal laws. All respective
documentation will be proactively provided to BaFin (German Federal Financial Supervisory Authority)
to ensure transparency. Further legal details about the HiveNet Token and the Token Sale are
depicted within our Token Sale Terms and Conditions, which are found on www.HiveNet.cloud.
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3.3 HiveCoin
At the HiveNet’s mainnet launch, HiveNet Tokens (HNT) will be translated 1:1 into HiveCoins (HVC).
This means, one can receive the exact same amount of HiveCoins as one is holding HNT at the
relevant time point, when the snapshot of the HNT ownership is performed. The technical
framework, the exact timepoint of the snapshot and other related information will be published
appropriately in advance on www.HiveNet.cloud and further media (e.g. our newsletter).
The HiveCoin will be the intrinsic and fundamental currency within the HiveNet. In the genesis block
of the HiveNet Blockchain, a total of 1,000,000,000 (one billion) HiveCoins will be issued.
Consecutively, new HiveCoins are minted through Proof-of-Stake creation of new blocks (see chapter
8.2 Blockchain Economics). The relative chance to create a next block depends on the amount of kept
HiveCoins. The amount of newly minted HiveCoins will diminish over time, starting with
100 HiveCoins per block (at an average block time of 60 seconds) in the first year, reducing by about
10.5 % per year. Thereby, the total supply of newly minted HiveCoins is converging to a maximum of
500,000,000. Consequently, the total supply is forever limited to 1,500,000,000 HiveCoins. Limitation
of the total amount of HiveCoins will create a long-term upward price-pressure. The release schedule
is shown in the following figure.
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3.3.2 HiveCoin Allocation at Mainnet Launch
Project Funding
For funding of the HiveNet, a maximum of 700 million HiveNet Tokens (HNT) will be sold
(see chapter 3.2 HiveNet Token and Token Sale for further details). These HNT will be translated
1:1 into HiveCoins (HVC) when the HiveNet is launched. Selling of HNT may be performed
through different phases and is needed for various expenses, for example: Development,
marketing and advertising, build-up of infrastructure, legal advisory, scientific grants, and so on.
Through selling of 70 % of HNT, a strong decentralization of HVC ownership in the HiveNet
mainnet is ensured.
HiveNet GmbH
At the HiveNet’s launch a total of 150 million HVC will be provided to the HiveNet GmbH. This
deposit will serve as a secure long-term funding of the project and hereby ensure future
operations, development, maintenance and so on.
HiveNet Team
The HiveNet team members will not receive any HiveNet Tokens during or after the Token Sales
(unless team members buy them during the Token Sales like everyone else). Instead, a total of
100 million HVC will be reserved for the team. This pool may be considered as a strong incentive
for team members to deliver a successful development and deployment of the HiveNet. These
HVC will be locked up and kept by the HiveNet GmbH and will be released to the team in small
batches over a time-span of five years, once the HiveNet was deployed. This provision prevents
early dumping of incentives after the HiveNet’s launch and will therefore support price stability.
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4 HiveNet Team and Advisors
4.1 Team
HiveNet is a high-tech startup that consists of highly skilled and experienced professionals with
diverse backgrounds from high-tech, finance and science. Our team members’ professional
experience includes world-famous companies like Siemens, Intel, Philipps, LG, and many more with
educational and scientific backgrounds from internationally renowned top universities like
TU Munich or ETH Zurich. In the following you can find the HiveNet’s team members and advisors
and their respective roles at the date this document is published. As our team is still growing, please
visit our website at www.HiveNet.cloud for further details.
Qiao Pinker
Head of Finance
finance and controlling expert
over 10 years of international experience in finance industry
experienced in new business model implementations and company setups
experienced in successfully managing and controlling international IT projects
Evelyn Gu
Senior Marketing Manager
MBA and digital marketing expert
over 10 years of international marketing experience, mainly in IT industry
successfully led various international digital marketing projects
experienced in SMM, SEO, SEM, email marketing and web projects
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Debasis Ratha Manish Chibba James Lee
Senior Software Engineer Senior Software Engineer Software Engineer
Sebastian Daschner
Lead Java Developer Advocate at IBM
over 10 years of experience in software development, consulting and education
strong focus on cloud technologies and applications
well-known in the Java community for his high-quality educational blogs, videos
and conference talks
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5 Development Roadmap and Use of Funds
In this chapter, we give a detailed overview of the features associated to each development tier.
Additionally, we illustrate the planned allocation of received funds. Please note, that these
allocations are a well-thought-out estimation, which is subject to risks and uncertainties. Therefore,
they may be readjusted according to actual business requirements at any time.
During the development of the HiveNet, we are guided by and focused on our three main pillars:
Please note that all descriptions are to our current best knowledge and conscience. We reserve the
right to revise and correct any parts or details at any time, especially if we believe it is in the best
interest of the affected stakeholders and/or follows our above outlined three main pillars.
An overview of the estimated time until go live of the HiveNet and the estimated development time
for all features of each respective tier can be derived from the following table.
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6 HiveNet Ecosystem
After the launch of the HiveNet, HiveNet Tokens will be translated 1:1 into HiveCoins (see chapter 3.3
HiveCoin for details). The HiveCoin will be the intrinsic and fundamental currency within the HiveNet.
HiveCoins will be freely traded on digital currency exchanges for other currencies, like Bitcoin,
Ethereum, US-Dollar, Euro, Renminbi, etc.
The flow of HiveCoins and fiat money within the HiveNet ecosystem is summarized in the following
graphic and the consecutive text. For an overview of the participants in the HiveNet’s ecosystem see
chapter 2.4 Participants within the HiveNet.
Customers can pay with HiveCoins or for convenience with their local fiat money (e.g. US-Dollar, Euro,
Renminbi). In case they paid with fiat money, the biggest part of their payment is automatically
exchanged on digital currency exchanges into HiveCoins. These HiveCoins are under control of the
Provider Reward Application and used to reward providers for their computing power (see chapter
7.3 Provider Rewarding for details). A smaller fraction of incoming payments is used for
compensating the continuous costs of the HiveNet (e.g. development, infrastructure, maintenance,
customer support, sales, advertising). The size of each fraction will be carefully fine-tuned to ensure
both strong profits for providers and economic viability of the HiveNet itself.
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Exchanging customer payments into HiveCoins will create a continuous and fundamental market
demand for HiveCoins and will ensure their inherent value.
The HiveNet Blockchain will be elongated and validated utilizing a Proof-of-Stake proofing
mechanism (see chapter 8 HiveNet Blockchain). The creation of each new block is rewarded with
newly minted HiveCoins (see chapter 8.2 Blockchain Economics), which serve as an incentive for
HiveCoin holders to contribute as a node.
To enable the HiveNet for mass adoption, we will offer various options to HiveCoin owners to use
their savings (see chapter 6.2 Cash-out Options).
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6.2 Cash-out Options
Currently, more than 260 million personal computer units are sold per year [11]. Consequently, there
are more than a billion computers in the world, which could theoretically provide computing power
in the HiveNet. Although the total number of cryptocurrency users is difficult to determine, it may
well be assumed, that most of these computers belong to people, who aren’t cryptocurrency
enthusiasts.
Cryptocurrencies offer a lot of interesting features, advantages and some significant attraction. But,
today, handling cryptocurrencies isn’t simple. Understanding how to get them, use them, trade them
and keep them secure, requires considerable technical comprehension and the willingness to invest
many hours of learning. These circumstances are serious entry barriers for most people and many
potential computer providers might be repelled by the idea of having to ‘learn’ and use
cryptocurrencies. HiveNet isn’t just developed for the technical experts, but intended for everyone.
We aim for mass adoption of the HiveNet and therefore, we implement simple alternatives for
providers to benefit and use their savings, without having to understand cryptocurrencies.
First, we will offer a specifically issued HiveNet debit card. This debit card can be used to pay with
HiveCoin savings at any shop, which accepts debit card payments. We will issue this debit card in
cooperation with a financial service provider to reduce regulatory and developmental complexities as
well as project risks.
Second, we will support integrations of various widely adopted online payment systems, like PayPal,
Alipay and others. This will allow HiveCoin holders to pay with their savings at a large number of
online shops, which accept the respective payment methods.
Third, for providers who want to donate their rewards for charity, we will implement the option to
automatically forward their rewards to a charitable organization of their choosing.
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HiveCoins may also be freely traded among users and on digital currency exchanges, like any other
relevant cryptocurrency.
All cash-out options can be accessed and managed through the HiveNet client software to ensure
maximum possible convenience.
Please note that the exact cash-out options could be changed or adapted depending on the acquired
funding (see chapter 5 Development Roadmap and Use of Funds for details), due to regulatory
requirements or depending on the demand of the HiveNet users.
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7 Distributed Cloud Computing
In general, there are three major classes of cloud computing services [12]:
(please note: There are also sub-classes and other special services, which we don’t get into the details here to
prevent going beyond the scope of this document)
· IaaS (Infrastructure as a Service)
· PaaS (Platform as a Service)
· SaaS (Software as a Service)
IaaS offers the capability to customers to deploy and run arbitrary software, which can include
operating systems and applications. The customer does not manage or control the underlying
computing infrastructure but has control over operating systems, storage, and deployed applications.
For example, IaaS customers can install new software to the computer, which they offer to their own
customers or is used by their employees. When supplying IaaS, it is of critical importance to have a
very reliable and uninterrupted availability of the provided computing resources. This is because
unavailability of the resources may immediately lead to financial damages for the customer through
loss of business, unproductive employees or process failures. To our understanding, such a high
reliability can only be achieved, if the computing resources are entirely under the control of the
customer’s contract partner. In a Distributed Cloud Computing Network (DCCN) such a high reliability,
without a very high level of inefficient redundancy, seems improbable. Therefore, we believe that
IaaS is (currently) not a good fit for a DCCN.
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Initially, the HiveNet will focus on supplying customers with PaaS. We decided to do so for two
reasons. First, PaaS allows for the fastest go to market strategy. Second, PaaS is very flexible and
allows targeting of a big part of the cloud computing market with little required individualization.
As a second step, after PaaS, the HiveNet will focus on expanding into SaaS through cooperation
with developers and acquirement of software licenses. Whether SaaS will be implemented within the
initial development of the HiveNet will depend on the acquired funding (see chapter 5 Development
Roadmap and Use of Funds).
In the long-term, HiveNet aims to develop into further segments of the cloud computing market,
depending on market opportunities and technical possibilities.
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7.2 HiveNet Task Management System (HTMS)
The HiveNet Task Management System (HTMS) will be the HiveNet’s core technology, which will
consist of several individual modules. The HTMS will apply artificial intelligence to organize
everything regarding tasks, including but not limited to the following:
When providers want to contribute their computing power for the first time, their computers will be
benchmarked. This evaluation will be performed by a set of predefined benchmarking tests. These
tests will be executed to determine the computation power of the individual computer at hand. The
results will be used to assign those tasks to each computer, which fit best to its capabilities. Also, this
information will be used within the validation of task results (see chapter 7.2.3 Validation and
Handling of Results).
Benchmarking tests will be automatically repeated, when the system configuration is altered, for
example because a piece of hardware was changed. Benchmarking information will be additionally
gathered from comparing the performance of different DCCs in reference computations (see chapter
7.2.3 Validation and Handling of Results).
When a customer uploads a task, an initial task evaluation will be performed, which will be based on
input and previous tasks from this customer. Depending on this evaluation, a suitable DCC for the
task is identified and the necessary data is transferred. If the task supports parallelization (allows
computation on several machines in parallel), the HTMS will split the task accordingly onto several
DCCs.
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The computation on DCCs will for security reasons be performed in a container environment with
minimal required privileges. After completion of the task, the results will be returned to the HTMS.
The HTMS will be regularly checking all active DCCs to ensure they are still working on their assigned
tasks. In case that a DCC is not responsive or the computing was stopped, the HTMS will re-assign the
task to another available and compatible DCC to ensure a timely completion.
The delivery of correct computing results through honest performance is the foundation of a stable,
well-functioning DCCN. However, dishonest providers could try to fake the completion of tasks in
order to fraudulently gain a financial advantage. Therefore, a thorough but efficient result validation
mechanism is essential. Otherwise, any disingenuous behavior could damage the credibility of the
network and scare off potential customers.
After successful validation, results will be forwarded to their respective customer. All results will be
stored in an encrypted state for a limited time span by the HTMS and scheduled for consecutive
permanent deletion.
The validation of the successful task completion will be performed via these criteria:
1) Provider Credibility Ratings
2) Plausibility Checks
3) Reference Computations
The HTMS will constantly rate the credibility of all providers in the HiveNet. The credibility of
providers will depend upon many factors. The most important ones are:
· successfully passing all client software checks (any evidence for manipulations raises a red flag)
· accuracy and consistency of sent information (manipulated data raises a red flag)
· correct results in benchmarking tests (wrong results raise a red flag)
· results from previous task validations
· amount of performed computations in the network (accumulated positive reputation)
· customer feedback
Depending on the individual provider credibility rating, the HTMS will initiate risk-based actions to
validate tasks. This means that the number of reference computations will be increased or reduced
depending on the credibility of the provider.
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2) Plausibility Checks
We will implement a continuously improved set of plausibility checks into the HTMS. These
plausibility checks will be applied on results delivered by providers.
For example, it will be checked whether the format of the result reflects the expectation from
previous comparable tasks.
As another example, it will be checked, whether the required computational work for the task fulfills
where
Ptask is the benchmarked computation power of the DCC with focus on the
requirements of the specific, finished task (defined when the task was
assigned)
ttask is the elapsed computation time for the specific, finished task
[xlow, xhigh] is the (empirically determined) expectation range for the variation of
required workload, which also depends on the available knowledge on the
specific task
Not fulfilling this formula doesn’t necessarily mean that a provider acts dishonestly, but it’s an
indication that further validation measures may be reasonable (i.e. a reference computation).
3) Reference Computations
The safest method to validate the correctness of any computation result is to re-perform the
computation on another DCC. If the results from two different DCCs are the same, then they are
most likely correctly reflecting the given task. As reference computations have a negative impact on
the efficiency of the network, they will be only applied in a risk-based manner. This means that
reference computations will be always applied for brand-new providers, but rarely for providers with
a high credibility rating. Providers won’t be informed, whether reference computations were
performed for their tasks as the reference computation itself will also be one of the measures to
identify fraudulent behavior.
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7.3 Provider Rewarding
The workload supplied by a provider will be calculated after every finished task. Consequently,
providers will be only compensated for finished tasks.
The contributed workload to a specific, finished task is defined by the following formula:
where
WTask(PubK) is the workload the provider with the public key ‘PubK’ contributed on the
specific, finished task
PTask is the benchmarked computing power of the DCC with focus on the
requirements of the specific, finished task (defined when the task was
assigned)
tTask is the elapsed computing time for the specific, finished task
C(PubK) is the credibility rating of the provider with the public key ‘PubK’
The overall supplied workload of specific providers is defined as the sum of all workloads they
contributed to finished tasks:
The benchmarked power PTask of the provider’s DCC will be determined through benchmarking tests
and comparison within reference computations (see chapter 7.2.1 Benchmarking of Distributed Cloud
Computers (DCCs)). In theory, this variable could be tricked by a dishonest provider through
down-regulating of the computer or covert exchange of hardware elements. Though, such actions
will be discovered through plausibility checks, random benchmarking tests and reference
computations and will have a negative impact on the variable PTask. In case of significant deviations,
the provider will also be penalized with a negative impact on the credibility rating C(PubK).
The time worked on a task will be measured through the elapsed computing time. This information
will be forwarded by the DCC to the HTMS along with each finished task. In theory, the variable tTask
could be manipulated by a dishonest provider through altering of the information sent to the HTMS.
The dishonest provider would want to increase the time for performed tasks from customers (to
suggest that more workload was supplied) or reduce the time for performed benchmarks (to suggest
that the computer is more powerful and earns a higher PTask). Though, a dishonest provider will have
no possibility to know in advance whether an assigned task is a benchmark or a regular task from a
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customer. Consequently, manipulating the tTask value will in any case have a negative effect on either
PTask or tTask. This is especially the case, if a reference computation is performed on the same task. In
this case, the dishonest behavior is easily discovered, and the provider will also experience a negative
impact on the credibility rating C(PubK). Additionally, the HTMS itself will be measuring the elapsed
time for all performed tasks and will be performing plausibility checks through comparing its own
measurement with the information sent by the provider’s software. Significant deviations will also
have a negative impact on the credibility rating C(PubK).
The credibility rating of providers (see chapter 7.2.3 Validation and Handling of Results) is included
into the formula for two reasons. First, reference computations will be applied in a risk-based
manner, which means that more credible providers will trigger fewer reference computations. As
reference computations decrease the efficiency of a DCCN, providers with a good credibility rating
improve the efficiency of the HiveNet. Second, we generally would like to increase rewards for
reliable, honest providers, while reducing rewards for dishonest providers.
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7.3.2 Provider Reward Application (PRA)
The Provider Reward Application (PRA) will be the software module, which executes provider
rewarding based on pre-defined algorithms. Therefore, the PRA will be in control of the provider
reward deposit (see also chapter 3.3.2 HiveCoin Allocation at Mainnet Launch for details on the
provider reward deposit).
Customer payments, which are performed in HiveCoins will be directly sent to the provider reward
deposit. For payments, which are performed in a fiat currency, the biggest part of the payment will
be automatically exchanged on digital currency exchanges into HiveCoins and transferred to the
provider reward deposit. The smaller fraction will be used for compensating the continuous costs of
the HiveNet (e.g. development, infrastructure, maintenance, customer support, sales, advertising).
The size of each fraction will be carefully fine-tuned to ensure both strong profits for providers and
economic viability of the HiveNet itself.
The balance in the provider reward deposit will be used by the PRA to reward providers for their
contributed workload. Each provider’s fair share will be determined through continuous analysis of
Woverall(PubK) for all providers (see chapter 7.3.1 Workload Determination for details). To ensure a
timely rewarding, the PRA will be performing HiveCoin transactions with every newly created block
of the HiveNet Blockchain (see chapter 8 HiveNet Blockchain for details).
Correctness of transferred rewards will be verified through two measures. First, failing transactions
will be prevented by the PRA through comparison of Woverall(PubK) with the performed transactions
of previous blocks. If a transaction wasn’t completed (e.g. because it was only included in a
then-orphaned block), it will be repeated. Second, after sending a transaction to any individual PubK,
transactions to this PubK will be suspended for a short safety period to prevent double rewards for
single workloads.
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8 HiveNet Blockchain
During the conceptual design of the HiveNet, we intensively discussed, whether the HiveNet is better
implemented into a pre-existing blockchain platform for DApps, like Ethereum or EOS, or whether
setup of a dedicated HiveNet Blockchain is favorable.
A blockchain, which is hosting the HiveNet, needs to fulfill several critical requirements:
ü very high scalability, because a fully functional HiveNet may continuously require an enormous
amount of micro-transactions for provider rewards.
ü very high security, for obvious reasons.
ü no transaction costs, because HiveCoins will have high circulation rates and profit margins of
providers must be protected. Transaction costs would harm the ecosystem.
ü high sustainability and safe future, because the HiveNet is meant to be a sustainable network
with long-term use.
Currently, there isn’t any pre-existing platform, which can fulfill the complete set of requirements.
Therefore, we decided to setup a dedicated HiveNet Blockchain, which will be carefully optimized for
the needs of the HiveNet.
For performing its token sales, the HiveNet will use the Ethereum blockchain as this is where the
Ethereum blockchain excels. But, afterwards HiveNet will switch to employing an own, dedicated
blockchain, which will be specifically designed and optimized for the given purpose. This allows us to
speed up all blockchain dependent actions, omit transaction fees and enable HiveCoin holders to
create a return through staking.
In order to limit developmental costs, we don’t develop a new blockchain from scratch. Instead, we
implement an available and functioning open source blockchain [e.g. 13], which we will adapt and
optimize for the requirements of the HiveNet.
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8.1 Proof-of-Stake
The Blockchain technology was first introduced through the development of Bitcoin, where security
is relying on a Proof-of-Work (PoW) consensus system [14]. Until today, more than ten years later, no
successful attack on the Bitcoin blockchain itself was perceived, although a huge economic incentive
to perform persists. Therefore, PoW is generally considered secure within today’s technological
limitations.
However, the security of the various PoW blockchains comes at a high cost. The competition among
miners for block rewards has led to computer arms races, which waste unthinkable amounts of
electricity and computing infrastructure. Therefore, for many people Bitcoin and its kind are already
considered one of the biggest ecological disasters of mankind. Consequently, less wasteful
blockchain proofing techniques were researched, which led in especially to the development of
various Proof-of-Stake (PoS) mechanisms [15, 16, 17, 18, 19].
Blockchains, which employ PoS are also elongated by computational tasks. But these tasks are very
simple and therefore only insignificant computing power and electricity is required to solve them.
Whereas in PoW, performed computing power is used to secure the blockchain, PoS employs a user’s
stake of coins for this purpose. If a user acts dishonest, the market price of the currency may be
harmed and thereby the dishonest user loses value. The security features of PoS have already been
deeply analyzed, especially in comparison to PoW [20, 21, 22].
We choose to apply Proof-of-Stake for the HiveNet Blockchain for several reasons:
ü very economic and efficient – synergy with cloud computing
PoS is very economic regarding its required computing power. This results in a high synergy with
the HiveNet, because stakers can in parallel also act as providers.
ü return on stakes – upward price-pressure for HiveCoin
PoS rewards stakers for holding large amounts of HiveCoins. This creates a self-sustaining upward
price-pressure for the HiveCoin’s value for two reasons. First, because it increases the motivation
to keep HiveCoins rather than spend them. Second, because it increases the demand from
people outside the inherent HiveNet ecosystem.
ü very high scalability – support for HiveNet’s mass adoption
PoS mechanisms support a very high scalability, because blocks can be created with little
computing power in a short time. A sufficient scalability is critical to allow mass adoption of the
HiveNet.
ü very high security – well established alternative to PoW
PoS is already well established and has proven to be a convincing alternative to PoW [15, 16, 17,
18, 19, 23]. Through various analyses, it was shown that a well-thought-out PoS implementation
can assure very high security [20, 21, 22].
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8.2 Blockchain Economics
The HiveCoin will be the intrinsic and fundamental currency within the HiveNet. In the genesis block
of the HiveNet Blockchain, a total of 1,000,000,000 (one billion) HiveCoins will be issued.
Consecutively, new HiveCoins are minted through creation of new blocks using the Proof-of-Stake
consensus mechanism.
Newly minted HiveCoins are rewarded to the creator of each individual new block. This block reward
will only be available to the node, which successfully created a block that is, based upon consensus,
added to the blockchain. The relative chance of a node to create a next block depends on the
amount of staked HiveCoins. The block reward is initially set to 100 HiveCoins per block on an
average block time of 60 seconds. This block reward will be reduced by about 10.5 % per year.
Thereby, the total amount of ever newly minted HiveCoins will be limited to exactly 500,000,000
HiveCoins, resulting in a total amount of ever available HiveCoins of exactly 1,500,000,000 HiveCoins
(see chapter 3.3.1 HiveCoin Release Schedule for a graphical illustration).
The deflationary nature in the number of newly minted HiveCoins will create a further upward
price-pressure, which will ensure that block rewards will remain appealing, even when they are
getting reduced. Another important advantage of the given, attractive reward is that it allows the
omission of transaction fees. It is basic economic knowledge that higher rates of transaction fees lead
to an increasingly negative impact on the trading volume of financial products [24].
Most other cryptocurrencies in the market, both PoW and PoS, apply transaction fees to create an
incentive for users to participate as nodes. We on the contrary are convinced that offering a reward
of newly minted coins is sufficient to encourage user contribution in a PoS mechanism, because the
required computation power and effort is negligible compared to the return.
Omitting transaction fees has two major advantages. First, the costs of using HiveCoins for payments
or trading of any kind are minimized. Thereby, the trading volume in the market will be constantly
high, allowing both buyers and sellers to easily perform their desired trade at any time. Second, use
of transaction fees significantly increases the amount of transaction information in created blocks.
Omitting transaction fees will significantly slim down the size of the HiveNet Blockchain and will
thereby positively contribute to its scalability.
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9 Abbreviations
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10 References
HiveNet GmbH
Koppstraße 42, 81379 Munich, Germany
Please also check the following additional information, which can be retrieved from our website
www.HiveNet.cloud:
[2] Amazon.com, Inc. annual report pursuant to section 13 or 15(d) of the securities exchange act of 1934 for
the fiscal year ended December 31, 2018; retrieved from https://ir.aboutamazon.com/node/32656/html
[3] https://www.businessinsider.com.au/goldman-sachs-4-big-tech-companies-will-own-65-of-the-cloud-
market-2017-12
[4] https://calculator.unigma.com/
[5] https://en.wikipedia.org/wiki/Numerical_weather_prediction
[6] https://www.forbes.com/sites/susanadams/2019/06/24/the-real-cloud-wars-the-6-billion-battle-over-the-
future-of-weather-forecasting
[7] https://en.wikipedia.org/wiki/Big_data
[8] https://setiathome.berkeley.edu/
[9] Justice Opara-Martins, Reza Sahandi and Feng Tian: Critical analysis of vendor lock-in and its impact on
cloud computing migration: a business perspective. Journal of Cloud Computing: Advances, Systems and
Applications (2016) 5:4
[10] https://github.com/ethereum/EIPs/blob/master/EIPS/eip-20.md
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[11] Market analysis by Gartner, published 10.01.2019
[12] Peter Mell, Timothy Grance: The NIST Definition of Cloud Computing (Technical report). National Institute
of Standards and Technology: U.S. Department of Commerce. Special publication 800-145 (28.09.2011)
[13] https://www.parity.io/substrate/
[15] Sunny King, Scott Nadal: PPCoin: Peer-to-Peer Crypto-Currency with Proof-of-Stake (19.08.2012)
[18] Larry Ren: Proof of Stake Velocity: Building the Social Currency of the Digital Age (April 2014)
[20] BitFuryGroup: Proof of Stake versus Proof of Work White Paper (13.09.2015)
[21] D. Mingxiao, M. Xiaofeng, Z. Zhe, W. Xiangwei, and C. Qijun: A review on consensus algorithm of
blockchain.
[22] Aggelos Kiayias, Alexander Russell, Bernardo David, Roman Oliynykov: Ouroboros: A Provably Secure
Proof-of-Stake Blockchain Protocol. Advances in Cryptology. 21.08.2017
[23] Vitalik Buterin, Virgil Griffith: Casper the Friendly Finality Gadget. 25.10.2017.
http://arxiv.org/abs/1710.09437
[24] Michael J. Barclay, Eugene Kandel, Leslie M. Marx: The Effects of Transaction Costs on Stock Prices and
Trading Volume; Journal of Financial Intermediation, Volume 7, Issue 2, April 1998, Pages 130-150
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