# Creating and Distributing a New Komodo Smart Chain

# Abstract

There lies a great power in the idea that any person, regardless of nationality, creed, or background, can obtain funding to innovate and prosper. An integral tenet of blockchain technology is "decentralization." By decentralizing systems, we reduce the number of control points that can be compromised and manipulated.

Decentralization plays a more common role in our new cryptocurrency economy, but there is one area of the market that remains centralized and vulnerable: the initial coin offering (ICO). The cryptocurrency industry needs a solution, and Komodo presents an answer with our decentralized initial coin offering (dICO).

In today’s common ICO model, the high level of centralization creates many problems. Third-parties can block or manipulate entrepreneurs’ efforts to innovate and prosper. The centralized location of releasing the ICO blockchain product is vulnerable, allowing whales, hackers, and human error to corrupt or destroy an entrepreneur’s efforts. The negative experience of users in these situations can also impact the perception and adoption of cryptocurrency. Furthermore, the traceable nature of an ICO prevents society from crowdsourcing and purchasing within our inherent right to barter in private.

The dICO model, as created by the Komodo project, overcomes these challenges. It provides the necessary technology to create and release a blockchain product to the world with the full power of decentralization.

Entrepreneurs building on our platform begin by creating a Smart Chain, and our technology simplifies this process. One need only install the necessary software, execute a few commands on a command prompt, and then establish a connection between two or more Komodo-enabled devices. Komodo’s core technology will do the rest of the work necessary to create a fully independent blockchain, empowered with an array of Komodo features.

Our dPoW technology is a key feature. dPoW provides the necessary security to protect the integrity of the blockchain. Use of dPoW is optional, and since Smart Chains in the Komodo ecosystem are independent by nature, entrepreneurs can discontinue dPoW services at will.

Having thus created the blockchain, the entrepreneur then uses our software to release the project to the world. Our decentralized exchange, AtomicDEX, is a useful software solution to conduct their decentralized initial coin offering. Because AtomicDEX relies on "atomic swaps," no third-party manipulators can prevent the entrepreneur from their crowdsourcing and innovative endeavors.

Through the privacy technology available on Komodo Smart Chains, dICO participants can purchase the product within their inherent right to barter in private.

# The Challenges in Current ICO Platforms

# Specific Weaknesses in the Centralized ICO Model

There are many weaknesses present in today’s Initial Coin Offering (ICO) model. Several notable weaknesses include third-party discrimination, the vulnerability to theft and human error, and a lack of privacy.

# Third-Party Discrimination

An entrepreneur seeking to serve their intended audience may experience adverse intervention from a third party. The antagonists may display personal and malicious intent, regardless of the value of the entrepreneur’s innovation.

# Centralization of Technology: Theft and Human Error

Today’s ICOs are typically conducted in escrow, where the purchasers must transfer money to one location for holding. This typically occurs through a single website, and the cryptocurrency funds are held on a centralized collection of server(s).

The user must wait while the ICO administrators first verify the transactions and distribute the coins. During this time the funding is centralized, and therefore vulnerable to thieves and human error.

# Lack of Privacy

Because ICO transactions are highly traceable it is difficult, if not impossible, to perform ICOs within our right to barter in private.

# Third-Party Discrimination via the Centralized ICO

One weakness of the ICO process is, paradoxically, rooted in a great strength of blockchain technology: its borderless nature. A key power of any blockchain is that any human capable of accessing the technology can activate the blockchain, regardless of their geographical location or social status. Thus, anyone can provide yet another verifiable record of the transaction history, and this decentralization provides a crucial element of security to the blockchain.

An ICO innovator, therefore, may prefer to use a blockchain platform that transcends man-made barriers, to protect their innovation. Circumventing man-made barriers could be integral to the blockchain’s survival, because the element of decentralization prevents malicious actors from creating subjective borders around the blockchain records and then using authority to falsify and manipulate.

This creates a conundrum, however. As a human race, we also find strength and empowerment in subjectively defining our own demographics for various reasons, whether they be to form companies, cultures, communities, etc.

While we find the ability to create subjective demographics useful, it contrasts with the borderless nature of blockchain technology. Members of one demographic may desire to participate in a specific ICO, but another demographic may find this unfavorable. Therefore, the second party might try to forestall progress. The paradox lies in the fact that for the underlying blockchain product to maintain its integrity, it must serve both communities without regard to any man-made barrier between them.

The problem compounds even further as we observe that on a decentralized blockchain platform, a new ICO product is capable of functioning anywhere there is access to the underlying technology. On a decentralized platform, once a new blockchain product is released any person from either demographic is now able to utilize it. The sentiment of either demographic is irrelevant. The problem becomes most pronounced if members of a competing group attempt to even maliciously prevent an innovation out of selfish reasons. Thus, it is imperative that the innovator have the option of protection against would-be malicious competitors.

The overall centralized nature of today’s ICO process, therefore, presents a problem. Entrepreneurs who are not able to navigate the adverse effects of an inhibiting third party may be unable to realize their creative potential.

# Centralization of ICO Technology: Hackers and Human Error

Yet another issue plaguing ICOs is that the technology upon which an ICO is released is also centralized. This presents a vulnerability to human foibles.

# Hackers and Human Error

Because all coins of an ICO typically process through one centralized point during the purchasing period, the entire supply is vulnerable to any person with access to the node. Therefore, both malicious and clumsy human agents can destroy an ICO. The data holding the cryptocurrency can be damaged, stolen, or simply lost through incompetence.

An entrepreneur can also consider that in today’s ICO model both the funding provided by the purchasers, as well as the actual ICO coins that the entrepreneur intends to sell, remain on the centralized node for a long period of time. It is not just one side of the crowdsourcing endeavor that is at risk, but both.

This central point of failure can be catastrophic for all participants.

# The Right to Barter in Private

Finally, the lack of current privacy options in the ICO process inhibits blockchain participants from purchasing within our right to barter in private. This right to privately exchange goods and services extends further into history than the written word. We have, as a species, utilized this right to organize into communities, institutions, and even nations.

Many of humanity’s most meaningful advancements in art, technology, and other human endeavors began in situations where the creator had the security of privacy in which to explore, to discover, to make mistakes, and to learn thereby.

The right to barter in private, however, is under modern threat as the recent monumental and historical phenomenon, "The Internet of Information," permits many kinds of people to quietly and without inhibition; monitor other people’s shopping and bartering behavior. This is a dangerous development, as it destroys the privacy that empowers much of humanity’s personal growth. We must reserve our right to barter in private, for we observe that there are myriad ways in which a common person may explore personal growth in an economic environment.

Yet, the highly traceable nature of today’s centralized ICO model is in direct contradiction to this human need.

# The Blockchain Industry Needs a Solution

Together, these issues show that the current state of the ICO market is plagued with limitations that inhibit freedom, security, entrepreneurship, and even human growth. The cryptocurrency industry needs a solution to these problems, and Komodo presents an answer.

# The Decentralized Initial Coin Offering

The Komodo ecosystem presents a solution, the decentralized initial coin offering (dICO), that solves these issues and even adds new possibilities to the cryptocurrency market.

The decentralized nature of the dICO enables the entrepreneur to release a blockchain product beyond the reach of a malicious third-party influencer.

Furthermore, through our decentralized exchange, AtomicDEX, the dICO allows an entrepreneur to release their product in a manner that mitigates and even eliminates many of the issues regarding hackers and human error.

With the advantage of Komodo’s privacy technology, the participants in a dICO are empowered with their right to barter in private.

# The Process of Creating a New Blockchain in the Komodo Ecosystem

Formerly, coding and generating the blockchain itself were a most difficult aspect of the development process. Now, the Komodo team has simplified the process into easy steps. Through Komodo’s Iguana Core technology (introduced in Part I), the entrepreneur can create a new independent blockchain by entering just two simple commands in the command prompt of their computer.

The following steps rely on one of Komodo’s underlying software processes that run in the background on a user’s computer. The name of this software is the "Komodo daemon," or komodod, for brevity. komodod is rooted in Iguana Core technology.

# The First Command to Create a New Coin

./komodod -ac_name=[ENTREPRENEUR'S COIN] -ac_supply=[TOTAL COIN SUPPLY] -gen

The first part of the command, ./komodod, initiates a new instance of komodod.

By default, the initial ./komodod command executed alone would launch the Komodo main chain, KMD, on the user’s computer. However, the next part of the command tells komodod to behave differently.


This command tells komodod not to launch the main KMD chain, but rather to launch the chain that has the indicated name.

-ac_supply=[TOTAL COIN SUPPLY]

This tells komodod how many total coins there should be in this chain.


This tells komodod that the user desires to mine this network.

The software can now make several decisions. First, it will check its connection to the Komodo ecosystem to see if there is a coin with the given name and supply. If no similar coin is found, komodod will assume that the user is attempting to create a new coin, and the -gen command tells komodod that the user wants to mine it.

Komodod now begins the automated process of creating a new Smart Chain in the Komodo ecosystem. Komodod will first make a fresh and empty clone of the KMD main chain (though it will not yet generate the actual coins), with only a few differences to the underlying nature of the chain.

# The Features of the New Smart Chain

There are several primary differences between a Smart Chain and the main Komodo chain. For example, the Smart Chain will not automatically generate 5.1% rewards for all wallet addresses holding coins, unlike the main chain. Furthermore, the Smart Chain’s dPoW consensus mechanism is built to notarize to the KMD main chain (as opposed to BTC).

Some of the differences reveal strong advantages held by members of the Komodo ecosystem. By design, this Smart Chain is capable of automatically adopting any updates that the Komodo core development team add to the framework. The Smart Chain also has a built-in capacity within the framework to allow the entrepreneur to code new rules.

For example, the entrepreneur may decide not to use a PoW consensus mechanism, but may instead prefer PoS. Other changes can also be made, according to the entrepreneur’s imagination and developer knowledge. So long as the new code that the entrepreneur adds to the Smart Chain does not interfere with the overall framework, the Smart Chain will smoothly integrate with the rest of the Komodo ecosystem.

For the purposes of our discussion, this new Smart Chain is otherwise the same as the Komodo main chain, including the features to communicate natively with other blockchains via AtomicDEX. The reader may note that this new Komodo Smart Chain is not a colored-token running on top of a parent blockchain, as is often the case in other blockchain ecosystems (consider the ERC20 token of the Ethereum platform). Instead, this Smart Chain is an entirely unique and independent blockchain unto itself.

This empowers the entrepreneur with significant advantages over other blockchain ecosystems. The Smart Chain can run on its own nodes, act according to whatever rules the entrepreneur can imagine, and can scale according to its own audience. Should a Smart Chain in the Komodo network experience a sudden explosion of activity, the sudden change will not negatively impact the overall Komodo ecosystem. This independence grants a significant competitive advantage in the form of overall security, speed, and ease of use.

Consider the advantage of developing an entrepreneurial product as a fully independent blockchain. Should the entrepreneur desire at a future point to leave the Komodo ecosystem for any reason, they are free to take their blockchain product with them.

# Generating and Mining the New Coins

Let us return now to the moment after the entrepreneur executes the first command in the command prompt, and komodod creates a fresh and empty clone of the Komodo main chain. While the instance of the komodod program (running on the entrepreneur’s local computer device) will create the necessary code for the new Smart Chain, komodod will not yet generate the coin supply itself. Komodod instead will wait for the next few steps to occur.

The reason for the wait is that a blockchain’s essence depends upon existing not in isolation, but in a network of multiple devices. This is the nature of decentralization. Komodod will wait until it receives a signal from another device, thus indicating that it has a peer with which to form the Smart Chain network.

# The Entire Coin Supply is Distributed in the Genesis Block

Typically, the entire coin supply for the dICO is created and distributed immediately to the device that mines the first block, the Genesis Block. The code performs this distribution as a one-time reward for discovering the first valid block hash.

Having established a secure connection with a second device, the entrepreneur will enter the following command on the second device.


Note that the first three elements of the command, ./komodod, -ac_name, and -ac_supply, are the same. It is important that the parameters inserted into these commands match exactly. Otherwise, the instances of komodod running on the separate devices will ignore each other, and the coin will not be mined.


In the second device, the -gen command is not present. In this circumstance, we are assuming that the entrepreneur wants to capture the entire coin supply on the first device. Technically speaking, assuming the entrepreneur has ownership over both devices, it does not matter if both devices initiate the -gen command. Both devices will attempt to mine the first block and the superior device will receive the coin supply.

There is another key difference in the command.


With the execution of the IP address command, the second device knows to look across the available connection (the Internet, VPS service, etc.) for the first device, which is already running an instance of komodod and the new coin. The command here simply tells the computer the proper IP address of the first device.

As soon as these two devices connect, having all the proper komodod software running and set in place, the mining begins. One of the devices will mine the first block and instantly receive the total coin supply of the entire blockchain into the user’s chosen wallet.

Both devices sync this information to each other, and the ENTREPRENEUR’S COIN now exists in the world. The entrepreneur can also add more and more devices to the network.

# Notarizing to the Komodo Main Chain

To receive the security of the dPoW consensus mechanism, the entrepreneur simply needs to have the elected notary nodes add the ENTREPENEUR’S COIN to their internal list of coins to notarize. This will empower the entrepreneur’s product with the same verifiable and decentralized security of the Komodo parent chain.

The process of adding a new notarization service can be executed by the notary nodes with just a simple command. While we are at this early stage of development, this sign-up process for new dICO products is not yet automated. In the future, we intend to automate as much of this process as possible.

There is a fee for receiving notarization services. This helps to cover the business costs associated with notarization (recall that all notarizations are financial transactions, by nature).

Entrepreneurs are thus able to use the Smart Chain’s native dPoW consensus mechanism to notarize to the Komodo main chain to create a secure backup of the coin’s history. Even in the event of an attack at this early state of existence the entrepreneur can rest assured that their product will survive, so long as one copy of the blockchain’s history exists.

Everything is set on the backend for the entrepreneur, and they are now fully prepared to begin the dICO process. Naturally, we understand that for many potential entrepreneurs in the Komodo ecosystem, this process is unfamiliar territory. We encourage interested entrepreneurs to reach out to our team for guidance during development.

# The Distribution of Coins

# Observations on the Centralized ICO Method

Previously, the entrepreneur at this point would have been required to go through a centralized ICO process.

This could have required several cumbersome and possibly dangerous steps. For example, the entrepreneur would begin gathering cryptocurrencies from their audience to personally hold in escrow while the process of matching purchases to the new blockchain coin were verified.

To distribute these coins, the entrepreneur had two primary options. They could have created and distributed a digital software wallet capable of holding the entrepreneur’s coins. This would require their audience to download the software. The entrepreneur would then have to send all the appropriate coins to each wallet address, according to the process they established during their ICO.

Or, the entrepreneur would have to make formal arrangements with another service to manage this process, such as with a centralized exchange. This would require a successful negotiation with this third party, likely paying fees as a part of the agreement.

The entrepreneur would then be required to act within the centralized exchange’s arbitrary framework.

The centralized ICO process can be arduous and, at times, disastrous.

# Enter the dICO

# Powered by Komodo’s AtomicDEX & Privacy Technology

The Komodo dICO model is an extension of Komodo’s AtomicDEX technology. AtomicDEX is an atomic-swap powered, decentralized exchange. It enables users to directly exchange cryptocurrencies from one person to another without third-party involvement (i.e. no centralized exchanges, escrow services, vouchers, etc.). Furthermore, as the dICO model is entirely decentralized, anyone can use it at will. There are no centralized authority figures capable of creating artificial control points that can be manipulated at the expense of the users.

To begin the distribution process, the entrepreneur first chooses how many nodes they would like to use for the distribution. Nodes can be any type of machine capable of connecting to AtomicDEX. Typically, a small-business entrepreneur may choose to use server machines. Server capacity can be rented online, and the servers can be distributed geographically throughout the world, if desired.

While renting a multiplicity of servers may be the method of choice for an established small-business, it is not a requirement. An owner of an even smaller business, operating on a low budget, can simply use their own computer(s), geographically stationed nearby for convenience. On the other hand, a large corporation could use the server capacity they already own. The number and strength of the machines is a choice made by the entrepreneur.

Having decided the method of distribution, the entrepreneur will then prepare the total supply of coins. (We are assuming the coins are still located on the first device that mined the entrepreneur’s Genesis Block.) The entrepreneur will first break down the total collection of coins into smaller digital pouches. These small bags of coins are ultimately what will be traded on AtomicDEX with their audience.

The size of the bags is chosen by the entrepreneur, and therefore the entrepreneur can choose a size that is agreeable to their outlook on any KYC legal requirements.

Having created these bags of coins, the entrepreneur then sends them to all chosen nodes throughout the AtomicDEX network. Coins are distributed to each node’s wallet(s) by a normal transaction. With the coins distributed as desired, the entrepreneur sets the time and date when each bag of coins will be available for purchase. When a bag of coins becomes available on AtomicDEX for trading, members of the Komodo ecosystem simply purchase the coins.

# The Many Solutions of the dICO Model: Security, Privacy, Decentralization, and Freedom

This method of conducting a decentralized initial coin offering mitigates and circumvents the issues found in a centralized ICO. The entire process is conducted in a decentralized manner. The dICO entrepreneur has direct access to their audience, as there are no centralized human authorities acting as middlemen.

Concerning theft, the dICO provides solutions to both methods of theft in the centralized ICO. Unlike the centralized ICO, once the distribution of the bags takes place the effect of their distribution adds a layer of security from a would-be hacker. The hacker can only steal funds at the node they manage to penetrate. Were the hacker to steal coins before the actual dICO, the entrepreneur would have the option to simply create a NEW ENTREPRENEUR’S COIN again, without losing any personal wealth.

Furthermore, since the trades happen instantaneously with each bag available for sale, the entrepreneur is only in possession of either their own ENTREPRENEUR’S COIN, or the cryptocurrency funds provided by the dICO participants—but not both. The entrepreneur is never at risk of losing both their own funds and the funds of their audience, which is a strong advantage over today’s ICO model.

Regarding human error, should one of the node’s databases be corrupted by accident or hardware failure, only one node’s coin supply is lost.

Since the coins are immediately available on the AtomicDEX exchange for trading, the entrepreneur’s audience has an immediate trading market. This stands in contrast to today’s ICO model, where users often wait weeks or even months before liquidity for their ICO product arises in a centralized exchange.

Finally, through Komodo's inherent zero-knowledge technology, participants have the option of privacy when purchasing the dICO product. This enables them to support the crowdsourcing efforts of the entrepreneur within their inherent right to barter in private.

Upon conclusion of the distribution of the dICO coin supply the entrepreneur has successfully and immediately completed all the crowdsourcing-related steps that could have taken months in today’s typical ICO model.

Komodo’s dICO model is significantly easier, freer from manipulation, more flexible, and more secure.