Crypto Market Commentary 

10 March 2019

Doc's Daily Commentary

Checkmate's Corner

Coin Spotlight: FlorinCoin (FLO)

Project description

Florincoin (FLO) is a project which recently piqued our interest, primarily in response to the institutional grade exchange tZERO announcing FLO would be the underlying blockchain of the platform. Given the enormity of what the Digital Securities (DS) industry offers in terms future of trade volume and demand, let’s take this opportunity to assess the underlying fundamentals of FLO before the market catches on in earnest.


Interestingly, FLO is a relatively old coin, having launched in 2013. It is a public and open source blockchain which uses both Bitcoin and Litecoin as its source code-base and is a mineable cryptocurrency. It has relatively quick 40 second block times and differentiates itself by allowing for up to 528 characters to be stored within transactions as metadata – termed flodata. This is not dissimilar to what we are used to for bank transfers where a limited comment or reference to ensure money reaches its intended destination or to keep a record of the purpose of the transaction.


FLO’s monetary policy is a fixed 160 million coins disinflationary system with halving events every 800k blocks (approx. 370 days ~ one year) with consensus via the sCrypt Proof of work mining algorithm. FLO was launched with no pre-mine or ICO which is likely to be an advantage given regulatory uncertainty with ICO fundraising mechanisms.

Figure 1 – Florincoin summary datasheet from Alexandria website

Alexandria dapp

Alexandria is a content distribution platform built on FLO that aims to improve the concept of micropayments between consumers and content creators. As an example, a musician can upload a song and users can use blockchain payments to listen to a sample or download the complete song. This is similar to the business model of Itunes although providing direct P2P payments between consumer and creator via blockchain. The Alexandria library software helps to link the blockchain and the content, however it does seem to be just another app with less content and additional steps required to access media.


Effectively, FLO utilises its metadata to store a hash which corresponds to a unique piece of content on the Alexandria platform. This means that the file itself is not stored on-chain which reduces the data overhead and thus minimizes the block size of FLO.


Whilst I commend the noble intent of the Alexandria platform, the model becomes unstuck in that for our song example, the user is provided an mp3 download which can then be copied and “double spent” by uploading to the internet – it feels somewhat early 2000’s. I feel it unlikely that the general public will scan a QR code and wait the 40 second block time to access their music library. Unless the Alexandria platform reaches adoption by mainstream artists and content produces, the likes of Spotify, Apple music and Youtube will remain the juggernauts in this space, simply due to network effects and convenience.

The tzero partnership

By far the standout “feature” of FLO is its association with the tZERO securities exchange platform. tZERO appears to have adopted FLO for the simplicity of writing plain text to the blockchain rather than codified smart contracts which is believed to make it easier to understand and be adopted by regulators.


tZero utilises technology called the Digital Locate Receipt (DLR) which stores the ledger of transactions on the platform utilising the metadata feature of FLO. The DLR is utilised to record the complete transaction record as well as match lenders and borrowers to facilitate derivatives and naked shorting. This is where traders wishing to short sell a stock can borrow from a P2P pool and bid in the interest rate they wish to pay to access the required stock. This system enables traders and institutions with large long term holdings to effectively loan out their assets and profit from their holdings.


Now what strikes me from this research, is that tZERO has generally not publicised the connection with FLO. In fact this article shows the depth to which one must dig in order to verify this association is true. What is also of interest is that the “unique” features offered by DLR and FLO’s metadata are already fully functioning within the DeFi ecosystem of Ethereum. The likes of dYdX, Set protocol and a multitude of money markets are currently operational offering the creation of derivatives and lending markets. In all honesty, I can’t help but question why the superior technology, security and active development of Ethereum was not the default choice by tZERO.


I argue that with the already significant exposure (and growing trust) regulators have with Ethereum and the widespread adoption by the rest of the Digital Securities industry, this may be a significant risk for tZERO. If tZERO choses to remain on the FLO blockchain whilst the rest of the industry pushes forwards with Ethereum, tZERO may fall by the wayside and could struggle to regain technological advantage.

CHallenges and Risks

  1. Alexandria is the dominant dAPP running on FLO. This makes sense given that the developers are the same between both projects. However what strikes me is that on Alexandria’s website regarding why FLO is the blockchain of choice; it justifies the decision by stating simply that FLO was the only blockchain with 528bytes of data at the time of Alexandria’s launch. It also notes that FLO has a “2.5 year history of security” which shows that the website was last updated in 2015. Alexandria is blockchain agnostic dAPP so there is really no permanent requirement or unique feature of FLO over alternative blockchains. I argue that Alexandria offers little in terms of “partnership value” and equates to developers using their own software out of convenience rather than a sound technical or fundamental basis.


  1. For those that recall in 2018, Bitcoin had an unfortunate news story break regarding unsavory information stored within the data of a transaction. This is an inherent risk of any permission-less distributed ledger which have the ability to incorporate text or data fields. Whilst I have not encountered any information regarding similar inclusions on FLO, this risk will always exist. Should it ever occur, I believe it unlikely large intuitions like tZERO and their clients would tolerate this impact to reputation and personally, it is likely they would seek an alternative blockchain as a matter of urgency.


  1. The security of FLO in comparison to a project like Bitcoin or Ethereum is questionable. In September 2018, FLO experienced a 51% double spend where 700,000 FLO was stolen from Bittrex. The FLO project took responsibility for this and payed back the full amount to Bittrex to maintain a positive relationship. The current solution to this problem is Sunny King’s checkpointing system which requires a single node to maintain “checkpoints” beyond which no block reorganization may occur. It appears the primary nodes and key that provide the 51% attack resistance are centrally owned by FLO developers and Alexandria. To me, this represents an unacceptable existential risk, particularly for a system which underpins Digital Securities. There are multiple projects with vastly superior decentralisation and security than FLO in this regard.


  1. The distinguishing feature of FLO is the ability to write metadata to the ledger. However, in my eyes, this is not a unique enough feature and is one which is every easily implemented as a layer 2 or even Layer 1 solution on a more secure blockchain like Ethereum. Whilst further rigor is required to fully analyse how tZERO utilises this feature to monitoring Digital Securities trades, I can’t help but feel this is a replaceable function and offers little genuine value in comparison to automated smart contracts. tZERO is taking a significant risk adopting FLO rather than Ethereum which is the Digital Securities industry default protocol, arguably for good reason.


  1. The available information on FLO is remarkably limited with the majority of forums dedicated to technical analysis and moon missions. I have the suspicion this is due to a small development team size and complete lack of marketing effort. This may be by design, however there is immense value in transparency and consistency in updates and looking into the Github activity does not paint a positive outlook for development since 2015. Furthermore, a review of the roadmap (here and here) leaves a lot to be desired…it appears that the main works in the pipeline are the website…and that’s about it.


Figure 2 – Florincoin master GitHub developer contributions to the master codebase are rather unimpressive since 2015. Note that the spike in 2018 was the 51% attack fix (source)



  1. The biggest opportunity for FLO is the tZERO partnership. It is quite possible that behind the scenes is a valid and justified reason for tZERO taking FLO as the backbone ledger for the protocol. I would hope that tZERO makes this information public and transparent to aide due diligence assessments because at the moment, it does not provide investor confidence. I cannot discount that this research has missed critical information which would sway my opinion and thus this remains as the sole positive comment I can raise in support of the FLO protocol.

Concluding Remarks

This research started with a genuine curiosity to understand what the Florincoin blockchain brings to the table to land such am impressive partnership as with tZERO. What really struck me is the notable lack of information available and the extremely concerning lack of developer activity on the FLO protocol, with almost no activity since 2015. The general feel of the roadmap and technology offering is one of an abandoned project with no future developments planned. This may be a gap in this research which I must acknowledge. However if such information and justification exists, it needs to be released by tZERO and/or FLO to the public sphere for transparency and to enable sound due diligence by investors.


The unique features offered by FLO are the ability to write 528 bytes of text to the blockchain which in theory helps regulators with adoption and facilitates advanced features such as derivatives and lending. I argue that Ethereum and its DeFi protocols offer these features with a) significantly higher development and adoption potential and b) substantially greater decentralisation and security. The 51% attack on FLO in September 2018 was fixed by centralizing the security protocol on a single FLO node. I cannot help but feel is an unacceptable risk for a Digital Securities ledger.


If tZERO experiences a security breach due to the poor management of FLO, it would be a significant blow for the Digital Securities industry and institutional trust overall. Furthermore, if tZERO finds itself as the only platform using the FLO blockchain whilst the rest of the industry progresses with Ethereum, it runs the risk of becoming obsolete and may not be interoperable. This is a risk not only for FLO but for tZERO itself.

Resources (watch with extreme caution…)


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