Zhejiang Zhongnan Construction invested $4 million in the US blockchain big data startup Peernova and will establish a joint venture in China to develop the Chinese blockchain market

While some startups are still obsessed with the blockchain hype, others are making a name for themselves by swimming upstream in a low-key way.

PeerNova, a San Jose startup, is one of the latter. The company was previously a bitcoin mining company, and now it is committed to using blockchain to solve enterprise big data problems. However, this may change soon. Peernova is currently in the process of raising $4 million in Pre-B round of financing, which may help the company become a big player in the blockchain field in 2017.

The $4 million in funding comes from China’s Zhejiang Zhongnan Construction Holdings Co., Ltd. This brings Peernova’s total funding raised to $13.6 million, including funding raised in late 2014 and early 2015 for its enterprise blockchain services transformation. Zhongnan Construction will hold a 5% stake in Peernova.

However, even with the new funding, Peernova CEO Naveed Sherwani and CTO Gangesh Ganesan said the company would not choose to be more public about their work, and choosing to use blockchain would make it a typical 'blockchain company.'

Sherwani told CoinDesk:

"We've been researching the financial services industry for three years, and we think very few companies actually take the time to research it. You don't see us doing press releases or giving keynote speeches."

Sherwani said this research-first approach meant that while most of their peers were focused on maximizing partnerships in certain subject areas, such as clearing and settlement, they saw themselves as prioritizing less-discussed areas of workflow and reporting inefficiencies.

He said Peernova is using blockchain to solve specific use cases where traditional database queries would be too time-intensive using more traditional technologies.

Peernova now has a product called Cuneiform, which seeks to help consumers verify changes to subsets of larger data stores without requiring participating institutions to process more unnecessary data.

“There needs to be trust between [financial companies] and auditors, but they don’t want to give auditors too much data. They may need data from six months ago, so that’s a real problem.”

A blockchain without a ledger

What makes Peernova unique compared to its peers is that the blockchain they are using does not itself use a distributed ledger.

This is because unlike other projects of the same kind, Peernova is not trying to establish trust between some trusted or untrusted institutions. Instead, it is trying to provide a reference point for enterprises, while using cryptography to replace the role of traditional auditors.

Sherwani said:

"We don't require any data from you, but there is a trust relationship between us and the data inside your firewall. I can say, 'I know the data is secure,' even sitting outside the firewall, and I know the data has a cryptographic proof."

Sherwani claims that Peernova's product can provide automated reports with '100% mathematical correctness' or 'no misrepresentations'.

In partnership with State Street Corp., for example, Peernova is working to help hedge funds determine the tax liability of their investments, using a blockchain system to track and provide a history of the funds’ investment and reinvestment activity.

He said:

“It’s a complex workflow, and using encryption you can create a faster system and remove a certain level of inefficiency from the audit process.”

Where is the entry point to the Peernova blockchain?

While Ganesan admitted that many in the industry use the term blockchain ‘very loosely’, Sherwani is adamant that Peernova is implementing the technology in a very strict sense.

Sherwani explained that Peernova uses a blockchain to provide cryptographic proof of events, which can be queried based on an agreement that the data being referenced is reliable.

For example, if you want to know whether a certain employee has executed a certain transaction on a certain day, Sherwani said a relational database can be used to store the history of transactions, and then a team of auditors can be hired to create connections between these events.

He said Peernova’s technology allows these connections to be created in real time in a blockchain database, which can then learn these activities more easily and dynamically.

He said:

“You can extract a subgraph because the connections are in an immutable database and you can look at everything, all the dynamics of this transaction, and nobody can change that information. That gives you a lot of trust.”

No proof of concept

Peernova isn't limited to proof of concepts.

While startups like R3 and open-source communities like Hyperledger have brought together financial institutions for testing and experimentation, Peernova has established special partnerships with companies that want to work with it to create what Ganesan calls a ‘final product’.

He said:

“Our goal for 2017 is to get finished products in three to four projects. Blockchain technology can reduce costs and bring new solutions to problems that cannot be solved by current technology.”

This requirement means that Peernova has taken longer to confirm customers.

Compared to many companies, Peernova set a modest goal for 2016, undertaking three projects that met their standards.

Heading East

In the East of the world, Peernova does have something in common with its peers, with China emerging as its 2017 development destination.

According to Coindesk, the open source Hyperledger platform is also preparing to expand to China, and most of R3’s recently added members are from China.

Sherwani said Peernova plans to close its Series B round in the first quarter of 2017, and plans to launch a joint venture with Zhejiang Zhongnan Construction in 2017. Like Circle and Ripple, Peernova hopes to use strategic partnerships to gain a foothold in Asia in this way.

However, Sherwani concluded that you probably won’t hear about these moves in upcoming press releases, saying Peernova is still looking to prove that its technology is worth paying attention to.

Sherawni concluded:

"We think the best way is to find real customers and solve problems, and then come back and tell everyone that this is our solution and we can create a sustainable company. But at this stage, it's too early."