While some startups bask in blockchain hype, others are making a name by bucking the trend with an under-the-radar approach.
One startup that falls into the latter category is San Jose-based Peernova, a one-time bitcoin mining firm that now uses blockchains to solve enterprise big data problems. Long out of the spotlight, this could soon change as Peernova has raised $4m as part of an ongoing Series B, one that could prime it to become a bigger market player in 2017.
The funding, from Zhejiang Zhongnan Holdings Group, adds to the $13.6m it raised amid a shift to enterprise blockchain services in late 2014 and early 2015, and gives the China-based construction firm a 5% stake in its business.
But even with the new funding, CEO Naveed Sherwani and CTO Gangesh Ganesan said that Peernova won’t opt to be more public about its work, choosing instead to eschew the idea that its use of blockchain even makes it a “blockchain startup” in the typical sense.
Sherwani told CoinDesk:
“We’ve been studying the financial services industry for three years and we think we’re one of the few companies that have really spent time studying. You don’t see us doing press releases or doing keynote speeches.”
This research-first approach, Sherwani said, means that while most of its peers have focused on maximizing partnerships in certain topic areas (like clearing and settlement), it believes it has emphasized lesser-discussed workflow and reporting inefficiencies.
Sherwani said the firm is using blockchain to solve specific use cases where the querying of traditional databases is too time intensive using more traditional technology.
Armed with a product called Cuneiform (named after one of the earliest forms of writing), Peernova is seeking to help customers verify changes to subsets of larger data stores, without requiring the parties involved to deal with more data than needed.
“[Financial firms] need trust between themselves and auditors, but they don’t want to give them too much data,” he said. “They may need a small amount of data from six months ago, but that is a real problem.”
No ledger here
What makes Peernova more unusual compared to its peers is that it is using blockchain without using a distributed ledger per se.
That’s because unlike those projects, Peernova isn’t trying to establish trust between a number of trusted or untrusted parties. Rather, it’s attempting to provide a reference point for a company, while using cryptography to replace the role of a more traditional auditor.
“You don’t give me any data, but I have a trust relationship with data inside your firewall. I can say, ‘I know that data is safe’, even sitting outside that firewall, I know that data has a cryptographic proof,” Sherwani said.
Sherwani claims Peernova’s products provide “100% mathematical correctness”, or automated reporting with “no misstatements”.
For example, in its partnership with State Street, Peernova is working to help hedge funds determine the tax liability for investments, using a blockchain system to trace and provide event history for dollars as they are invested and reinvested over years.
“It’s a complex workflow, and using cryptographic techniques, you can create systems that are faster and remove some of inefficiency when auditing,” he said.
Where the blockchain comes in
While Ganesan acknowledged that many in the industry are using the term blockchain “very loosely”, Sherwani contends Peernova implements the technology in the strict definition (in that it batches data into blocks).
Sherwani explained that Peernova uses a blockchain to provide cryptographic evidence of events and that can then be queried based on an understanding that the data being referenced is reliable.
Say you wanted to know that an employee had performed certain kinds of transactions on a certain day. Sherwani said a relational database could store a history of transactions, and then a team of auditors could be hired to establish links between these events.
Peernova’s tech, he said, allows those connections to be created within a blockchain-type database in real time, enabling these events to be further studied more easily and more dynamically later on.
“You can extract a subgraph, and you know, since we have all these linkages in an immutable database, you get the whole picture, all the ins and outs of that deal, and you know no one could have modified anything. That gives a lot of confidence,” he said.
Peernova isn’t prioritizing proofs-of-concept either.
While startups like R3 and open-source communities like Hyperledger have sought to collect groups of financial institutions for tests and trials, Peernova has sought specific partnerships with companies it said are willing to build what Ganesan called a “final product”.
“Our goal for 2017 is to prove three to four projects that are in full production, to say here is the cost savings, here are new solutions they’ve obtained for problems they could not solve without this technology,” he said.
This requirement, Ganesan said, has meant that it has taken Peernova a longer time to identify customers.
Compared to many firms, Peernova set a modest 2016 goal, to take on three projects that met its criteria.
One area where it does have commonality with its peers, though, lies in the fact that it has China on its radar for 2017.
As profiled by CoinDesk, such an expansion is also on the agenda for the open-source Hyperledger platform, and it has been the area where R3 has arguably seen the largest, recent growth in new members.
Sherwani said the goal is for Peernova to compete its Series B by the first quarter of 2017, and that it plans to start a joint venture with Zhejiang Zhongnan sometime next year. In this way, Peernova is also following startups including Circle and Ripple, which have leveraged strategic partnerships to set up shop in Asia.
Ultimately, however, Sherwani said you might not hear about any of these moves in upcoming press releases, as he said Peernova is still looking to prove that its technology is worth the attention.
“We think it’s best to find true customers and solve problems, and come back and tell people. To say, here’s a solution and we can build a sustainable company. At this stage, it’s too early.”
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