Zilliqa: Next-Gen High Throughput Blockchain Platform — ICO Analysis & Review

OVERVIEW

Zilliqa sees itself as a new blockchain platform that will scale in the open, distributed and permissionless network. The primary problem that Zilliqa is looking to solve is scalability.

The problem is one that resonates well with the blockchain community right now. Current popular blockchains face a throughput bottleneck and will not scale to the several thousand transactions per second (TPS) required to serve a VISA level network.

Key points about Zilliqa:

  • Zilliqa is looking to implement on-chain scaling, which is to scale the blockchain itself as opposed to off-chain solutions such as payment channels. Zilliqa achieves this scaling by sharding transactions on the Zilliqa blockchain
  • The Zilliqa network is broken up into smaller component networks that increase the throughput of the blockchain by increasing the number of transactions that can be processed in parallel
  • Zilliqa makes use of a dataflow programming paradigm that allows tasks to be executed in parallel and can efficiently work on MapReduce like tasks

CAPITAL STRUCTURE

Here are some key points on Zilliqa’s tokens distribution:

  • 40% of tokens will be kept aside to incentivize miners
  • 30% of tokens will be available for sale to the community
  • 30% of the tokens will be divided amongst the team and its partners
  • 10% will be held by Anquan which will continue to support the development
  • 12% will be held by Zilliqa Research, a new entity
  • 5% will be held by the Zilliqa founding team
  • 3% will be split between agencies and advisors

The 30% made available to the community will be split between early contributors and the token sale. The actual allocation to the broader community appears to be quite small as most of the tokens were allocated elsewhere.

Use of Proceeds

This is how the Zilliqa team intends to use the money raised during the token sale:

  • 80% of the proceeds will go toward development which is estimated to be 3–4 years
  • 15% of the proceeds will be paid to Anquan Capital which is the company that developed the core technology behind Zilliqa
  • 5% will be awarded to the founders

Given the projected budgets, the annual burn rate of the project is about $4.4 million with about $2.1 million being spent directly on developing the blockchain itself. This points toward the team expecting modest growth in the team sizes going into the next 3–4 years with 15–20 developers being our estimated number.

It should also be noted that the core team consists of quite a few members from the Anquan Capital. Depending on how this is handled, it might indicate that the founders might be getting a larger percentage of the sale proceeds and tokens than expected.

THE PROBLEM

Scaling is becoming an increasingly salient problem as the blockchain space moves toward widespread adoption. Current popular blockchains such as Ethereum can only handle ~15 TPS which is a fraction of the several hundred or several thousand TPS needed to run a large scale application.

Scaling can generally be broken into two approaches:

  • Off-chain: These type of scaling solutions focus on providing a method where parties can communicate off the blockchain itself and only use the blockchain periodically or to log the final net transaction
  • On-chain: The blockchain itself is used to alleviate bottlenecks

Zilliqa is aiming to achieve the latter of the two by making use of sharding and unique consensus protocols to improve the overall throughput of the blockchain.

THE SOLUTION

Zilliqa’s sharding solution has led to impressive results, recently Zilliqa reported a peak of 2,488 TPS on its testnet. However, as I mentioned in my RChain review, TPS is only meaningful insofar as it is measured with real data. Which means that we should view this reported TPS as an aspirational goal rather than a solved problem.

With that said, there are many innovative things that Zilliqa is doing to address the scaling problem. Some of them include:

  • Making use of a hybrid consensus model that uses Proof of Work (PoW) to elect a directory committee which will lead the sharding process. Once the network has been sharded, each shard uses a decentralized witness co-signing (CoSi) method to reach consensus
  • In the Zilliqa blockchain, there are two types of blocks. Transaction blocks which contain the information about the transactions and directory service (DS) blocks which contain information about the miners who produced the transaction block. Since shards can persist for more than one block, each DS block can be linked to multiple transaction blocks
  • Zilliqa will have a smart contract layer which will have a gas mechanic similar to that of Ethereum. However, unlike Ethereum, the gas mechanic in Zilliqa allows you to spend more or less gas to increase the security of the contract by controlling number of nodes that need to reach consensus before it is accepted by the network
  • The way that Zilliqa is performing its sharding means that the capacity of the network grows as more miners join the network thereby giving Zilliqa a method of scaling as more people start using the network

While these techniques will help Zilliqa scale transactions, a scalable solution for historical data is not currently in scope for the Zilliqa project. To the credit of the project, this point was highlighted and discussed in their whitepaper.

Token Utility

Currently, the only use for the Zilliqa token is to pay for transactions and for smart contracts. In both of these actions, ZILs are not burnt and are transferred from the user to the miners.

Given the current token utility, the only way in which tokens can appreciate in value is through demand for the network. While similar in model to Ether, tokens on the Ethereum blockchain have a well established store of value use case fueled by the popularity of the ICOs.

THE TIMELINE

Zilliqa is currently running an internal testnet version of the Zilliqa blockchain and has reported 2,488 TPS based on 6 shards and 3,600 nodes.

Based on the roadmap posted on their website and here by their CEO, Zilliqa should have released their design documentation detailing how things like their application framework, smart contract, and compiler would work. However, as of the time of this writing, these documents have not been released.

The roadmap presented by Zilliqa is very aggressive and should they meet the roadmap, it will certainly put Zilliqa at the front of the pack in regards to high throughput blockchains. However, the executional risk of achieving this aggressive roadmap is very high.

COMPETITION

Zilliqa has mentioned several times that they don’t see themselves as fully competing with other blockchains and instead see themselves as a blockchain that will be better for some tasks. With that said, I think comparisons to other high throughput smart contract capable blockchains is inevitable.

RChain, EOS, and Cardano are examples of upcoming projects that have similar goals. In a similar light, Ethereum should be seen as competition. WhileEthereum is only capable of ~15 TPS today, there is active development being done to improve Ethereum’s scaling capabilities.

All that considered, Zilliqa’s non-turing complete smart contract will be both a boon and a bane. The planned implementation will allow Zilliqa to potentially be much more efficient at performing certain MapReduce style tasks at the cost of some functionality. This is the likely reason that the team has mentioned that interoperability with other blockchains is going to be a big part of the roadmap.

THE TEAM

The project’s team is solid and decently sized, with several people who are fairly prominent in the blockchain community.

Zilliqa is led by Xinshu Dong who obtained his Ph.D. from the National University of Singapore and has prior experience building blockchains at Anquan Capital, a blockchain and software company geared toward enterprises. It should be noted that many of the team members appear to have a common thread in Anquan Capital or the National University of Singapore.

The advisory team cites people who are veterans of their fields with notable advisors like Loi Luu from the Kyber Network project.

THE HYPE

There is decent following for the Zilliqa project:

  • Telegram — 4,300 members
  • Twitter — 1,900 followers
  • YouTube — 132 subscribers
  • Reddit — 439 subscribers

The numbers are healthy especially if you consider the fact that the ICO details have not even been finalized yet. There is also strong buzz around the Zilliqa project with many people requesting this review.

SWOT ANALYSIS

CONCLUSION

Positives

+ Testnet results have been very positive demonstrating the ability to scale

+ Network architecture allows the network to scale in capacity as more miners are added

+ There are functions such as MapReduce that are reported to run very quickly because of the way the network is sharded

+ Sharding is built into the all levels of the stack

Negatives

- The aggressive roadmap presents high executional risks

- Non-turing complete means that some contracts just cannot be run on the Zilliqa blockchain

- State sharding is not planned

SCORE

Zilliqa has a niche in the high TPS blockchain space that is starting to become fairly well populated. If the team hits their ambitious roadmap, they will likely be the first high throughput blockchain in the market. Even if the roadmap is delayed, the focus on the dataflow programming style will probably lead to sufficient differentiation that Zilliqa’s blockchain will have its own niche as long as it ensures sufficient interoperability.

Disclosure

This is not investment advice. While I have no position in Zilliqa, I am currently undecided on whether to participate in future token sales. However, I do have positions in Ethereum, RChain, and Cardano which are the other tokens discussed in this analysis.


CHAINROCK is a digital asset research and investment group, focused on blockchain technology and cryptoassets. We strive to be a trusted resource, providing transparency and insights in the crypto space.

Learn more about us here.