The Token Coin Report: Zilliqa || 24 October 2018

(The necessary cryptocurrency investment report that’s here to help you sift through the altcoin wasteland, focus in on the fundamentals, and ignore the market volatility. None of this is to be considered professional investment advice, rather it is intended to clarify and provide information to help you better understand the project and its potential. As always DYOR.)

Edward Ni

Project: Zilliqa

Coin price: $0.0346 USD || Current Market Cap: $269,571,494 USD || Total Circulating Supply: ~7.8 billion

Coin type: ERC-20 (expected main-net token swap: Q1 2019)

Most Volume Exchange: Binance || Margin Trading Available? No

Overview: Arguably the biggest issue within the blockchain ecosystem at the present time is scalability. Current running blockchains have already shown issues processing large numbers of incoming transactions due to their slow processing speeds. For example, in December of 2017 Bitcoin’s memory pool, a collection of all the requested transaction yet to be verified by bitcoin’s blockchain, reached a staggering 200,000 unconfirmed transactions[1] causing some individuals to wait hours or even days before their transactions went through. Others resorted to paying absurdly expensive fees to have their transactions prioritized only to still have them delayed. Ethereum has experienced similar issues. When the widespread usage of the notorious CryptoKitties DApp quickly bogged down the second largest blockchain’s network, users were either forced to pay record setting gas fees or ignore their transactions. This defaming event occurred when at the time less than 20 million unique Ethereum addresses existed which, for perspective, is less than 7% of the population of the United States. As blockchains are intended to be globally accessed and with the rate of their adoption growing exponentially, at their current speeds, blockchains have no capacity for growth. With Bitcoin and Ethereum’s current throughput of 3–15tps (transactions per second)[2], even simple activities such as transfer of funds are beyond the blockchains’ capabilities at a mass scale, not to mention high cost applications such as gaming. For blockchain technology to grow with the ever-increasing user base and complex use cases, a new solution to scalability is needed.

Enter Zilliqa–a high-throughput blockchain project aiming to reach processing speeds of 1000 times that of Ethereum or bitcoin.[3] The core team plans on achieving this acclaimed throughput by implementing sharding technology which until now has only been toyed with as a concept in the blockchain ecosystem. Zilliqa’s sharding splits its network of nodes into subgroups called shards each of which has the ability to process different transactions simultaneously. Eventually transactions processed by each shard are merged together into a new block and committed to the blockchain. This solution offers a speedy new approach compared to that of bitcoin’s secure but slow consensus model of every node having to verify each incoming transaction. Moreover, with scalability in mind, Zilliqa has developed its own sharding-friendly smart contract language: Scilla. This language aims to execute more efficiently for the applications that Zilliqa believes will benefit most from its blockchain’s features.

On the economic side of the project, the Zilliqa coin has similar use cases to that of Ethereum. When running smart contracts on the blockchain, each computation has a gas fee attached to it. Gas is payed for with Zilliqa; so, when thousands of transactions per second are being processed and verified by the blockchain, the gas fees start to pile on and the demand for Zil coins increases. This concept is the basis of the ZIL coin economics.

Current Progress/Achievements: The idea of sharding has only been conceptualized up until now because it has proven to be a tough puzzle to crack. The Zilliqa team has delayed the release of their main-net blockchain twice, initially from the beginning of Q2 2018 to Q3 2018, and most recently, from Q3 2018 to Q1 2019. The team has cited reasons for the delay on their blog as “[needing] more time to ensure that the code gets properly tested by the core team, the community and… established auditing firms.” With that being said, Zilliqa’s progress has been the furthest from stagnant. The team has been making strides in their technical development, having released 2 versions of their test-net, finishing the development of the IDE for the Scilla language, and maybe most notably, achieving a stress test result of 2,400tps on their test-net. Reaching these test numbers is a huge achievement for the Zilliqa team because it shows the strides they are making to realistically fulfiling their promise of delivering a secure and scalable blockchain. Lastly, they’ve released the design documentation of their Scilla intermediate smart contract language, which details the syntax, smart contract structure, and the current IDEs available for developers to code on. Given all this, it seems the only thing left to overcome is the release of their main-net blockchain.

The team has most impressively convincing smart-contract-based projects to develop on their blockchain. The team understands that the inherent use of their blockchain is to power smart contracts at a scalable speed. Furthermore, according to Metcalfe’s law, a network’s value is derived from its number of connected users. Therefore, to attract users to a smart contract-based platform, their needs to be a network of useful decentralized applications running on top of it. It’s extremely impressive that Zilliqa has already attracted a handful of clients and Dapp’s– from gaming apps to data companies– to commit to developing on a forthcoming blockchain.

Technical/Fundamental Analysis: In recent months, the ZIL market has shown strength at the $0.033USD levels, showing very little downward price movement since mid-August. While the cryptocurrency market as a whole has been stagnant in its price movement the past few months, reasons for optimism surrounding Zilliqa’s market exist with the anticipated main-net release coming up in January 2019. Around the time Zilliqa initially expected to release their main-net, the ZIL/USD market reached an all-time high of $0.20USD per ZIL and a $1.4billion USD market cap, rising 500% in 30 days from mid-April to mid-May. While I find it futile to speculate on how I think the ZIL market will fare the second time around compared to the first, I won’t deny optimism for the outlook on the coin’s medium-term price as we approach its projected main-net installment. Furthermore, seasonality could play a factor in market sentiment as October, November, and December have historically been positive months for the cryptocurrency market. The Halloween effect having a positive impact on the overall market would align perfectly with the timing of the blockchain’s release to increase the probability of seeing a bullish trend.

Whereas, bearish sentiment could overwhelm Zilliqa’s market if the main-net release were to be delayed for a third time. Therefore, careful tracking of the team’s progress from now until the release date is necessary for prudent investing.

Competition: What separates Zilliqa from other scalable blockchain solutions is that they were one of the earliest teams to attempt the endeavor and, from the research I’ve done, are the closest to a finished product. Ethereum’s Prysmatic Labs is working on building a sharding client for scalability on Ethereum Casper V2.0; however, production has also been delayed and no concrete release date has been set. Speculators, such as those over at Mango Research, believe the scalable client for Ethereum possibly won’t see the light of day until 2020. That being said Ethereum developers deem Zilliqa an unfinished sharding solution, citing its inability to address all the issues that come with sharding. However, it’s my belief that the full capabilities of a blockchain are never fully known until it’s released, tested, and built on by the users and developers of the community and Zilliqa is on track to do that much earlier than Ethereum. As for the other projects promising to deliver a blockchain with sharding capability, the Ethereum wiki doesn’t even name them, preferring the word choice “more recent application of similar ideas in Zilliqa”.[4] In conclusion, the medium-term price of ZIL coins should not be affected by the workings of its competition.

Team Highlights:

· Xinshu Dong, CEO

Education: ECNU- Software Engineering

NUS- Ph.D. Computer Science

Achievements: Highly regarded researcher at the Advanced Digital Science Center. His research areas are in systems security, software systems, and cyberphysical systems, some of which has been published at top international conferences. He has previous experience developing a secure and scalable blockchain at Anquan Capital.

· Yaoqi Jia, Head of Technology/Co-founder

Education: HUST- B.E. Computer and Information Systems Security

NUS- Ph.D. Computer Science

Achievements: Highly regarded research fellow at NUS. His work has been published by top international conferences and acknowledged by Google and Amazon. Much of his research has been done on next-gen blockchain technology.

· Amrit Kumar, Head of Research/Co-founder

Education: École Polytechnique- B.E. Data Processing

Grenoble INP- Master’s Degree Cryptology

Université Grenoble Alps- Ph.D. Data Processing

· En Hui Ong, Head of Business Development

Education: Waseda Univeristy

Achievements: Has prior experience at Blackrock and then at JP Morgan Asset Management distributing ETFs and investment funds to intermediaries.

· Max Kantelia, Chief Evangelist/Co-founder

Education: B.S. Engineering Science

Achievements: Selected by EY to be in Asia’s Top 100 Fintech contributors (2016). Serial entrepreneur with 25 years’ experience building technology P&S companies throughout Europe, USA, and Asia.

· Prateek Saxena, Chief Scientific Advisor/Co-founder

Education: UC Berkeley- Ph.D. Computer Science

Footnotes:

Achievements: Receiver of Top 10 Innovators Asia award in 2017. Research professor in computer science at NUS.

[1] Sedgwick, Kai. 200,000 Unconfirmed Transactions Pile Up in Another Crazy Day for Bitcoin. Bitcoin.com: News, 2017.

[2] Sedgwick.

[3] “The Zilliqa Technical Whitepaper.” The Zilliqa Team. 10 August 2017. Page 1.

[4] Ray, James. “Sharding FAQs”. What are moderately simple but only partial ways of solving the scalability problem?. Ethereum. 21 August 2018.