Electroneum — The Herbalife of Blockchains


TL;DR. Ecology:3. Technology:2. Decentralization:2. Valuation:3. Rating:2/10


Elecroneum was initiated on bitcointalk.org by user electroneum on August 4th, 2017. It was described as a cryptocurrency for the billions of mobile phone users across the world, with features such as mobile mining and easy coin transfers through a smartphone app. The code base was a copy of Monero which meant it was based on the privacy focused CryptoNote technology. It was the tinkering around with this code that led Richard Ells, the owner of the social media management platform Retortal, to get a group of people together in order to launch the new cryptocurrency.

The coin had a maximum supply of 21 billion tokens, where a maximum of 6.3 billion of those were reserved for ICO participants. These reserved coins were obtainable for the price of USD 0.01 without bonus (cheaper with bonus), and any unsold coins were to be added to the un-mined 14.7 billion pile.

On August 13th, 2017, the Electroneum Android app was released. A day later, the ICO Social Referral Program launched, detailing generous bonuses for those who referred others to the ICO. This set up a large marketing hype that even reached mainstream media as former West Ham United, Portsmouth, Tottenham Hotspur and Birmingham City manager Harry Redknapp tweeted about the project. The ICO itself started on September 14th, 2017. Running for little more than a month, it reached its USD 40M hardcap due to rising BTC and ETH prices. As the USD hardcap hit, it meant that not all of the allocated 6.3 billion tokens were reserved. Instead, only around 4.4 billion tokens were to allocate to as many as 300 000 investors in the genesis block. The number of participants made the Electroneum ICO one of the world's largest ever.

The blockchain went up on November 1st, 2017, maintained by desktop mining while the mobile mining was still in testing phase. As mainnet was now live, a new BCT thread went up as well. Soon after launch, however, access to the Electroneum wallet and app was temporarily restricted as some type of security threat had been discovered. As soon as the wallets could be downloaded again, the network processed a huge number of transactions while trading volumes increased on multiple exchanges. It didn't take long before the well-known altcoin shill John McAfee tweeted about Electroneum, further pushing the price upwards. January 2018 saw an all time high of 3000% above many investors' ICO price.

On the 5th of March, 2018, the Android app opened up the feature of mobile mining, meaning ETN holders could activate this and without doing any actual Proof of Work receive mined tokens. Tens of thousands of app users quickly activated this feature on their mobile devices. Around this time Electroneum developers also started to talk about CryptoNight ASICs that had become more and more prevalent, and their intentions seems to have been to follow Monero's lead in trying to remain ASIC resistant. A hardfork concerning the ASIC threat was planned for 30th of May. In that same announcement, the Electroneum team stated a desire to move away from CryptoNote's inherent privacy property to appease regulators and accelerate adoption.

The fork activated on block 307 500, but it quickly became apparent that the process did not go as smooth as expected as hour after hour passed without any new block being found. The cause was a massive amount of ASICs being purged off the network due to the PoW algorithm change to CryptoNight v7, while mining difficulty remained high due to the lagging difficulty adjustment algorithm. As a counter move, the Electroneum team promised a substantial mining reward for each found block between 307 501 and 307 527. It was not clear in that announcement where the rewards came from exactly, as no ETN had been pre-allocated to the Electroneum team during the ICO. BD Ratings assumes the tokens must have been bought in the ICO or afterwards on exchanges. At this time, an actual bug was found in the new code which complicated things even further. Some transactions initiated on the pre-fork chain could not be processed on the post-fork chain, which meant that even as some pools started to find blocks, they could not publish these blocks properly. A patch was quickly sent out to pool operators and the blockchain slowly started working again.

On June 12th, 2018, Electroneum CEO Richard Ells announced the beta version of a cryptocurrency instantaneous payment platform. This new platform was to be used through the Electroneum smartphone app and used centralized servers rather than the blockchain itself when transacting. Almost a month later, on the 4th of July, a second fork was announced. After the initial anti-ASIC fork, too few GPU miners came back to the network according to the team. This resulted in a too low overall difficulty, which made the blockchain exploitable by parties that in waves could start mining Electroneum in order to 'trick' the difficulty adjustment algorithm. The second hardfork re-instated the original CryptoNight PoW algorithm and so invited ASIC miners again in an attempt to get more hashrate stability. It was in practice a capitulation to ASICs and the newer re-programmable mining hardware that caused concern also in the much larger Monero camp.

The second half of 2018 was rather silent other than concerns for worryingly large mining pools. It was only until the start of 2019 that the team finally could release the Electroneum iOS app after seeing Apple resist it for a long time. On February 28th, 2019, the team revealed that they had been working on an Electroneum Android smart phone dubbed M1 while partnering up with the South African mobile operator The Unlimited. The phone came with Electroneum wallpapers, an animated Electroneum start up screen and the Electroneum App, and all in all it was a further step in trying to push Electroneum adoption.


Electroneum ran a bounty campaign around launch. These bounties included the payment of ETN tokens to people retweeting, writing blog posts, creating information content, translating etc. While some of these activities are more legit than others, the spam elements included are still red flags and not something worthy of a value protocol that ought to have as a goal to be taken seriously. For example: the way referrals were handled during the ICO seems to have been broken from the beginning, as by referring someone to the ICO, a user could gain 1% extra tokens per referral. It is not hard to imagine all the fake ICO contributors set up in order to enrich single individuals. The 300 000 ICO participants seems far to high to have all been real people. This referral system itself is not a coincident; Richard Ells' history of partnering up with MLM companies (pyramid schemes) like Herbalife, Forever Living and Mary Kay explains a lot.

Another issue BD Ratings has with Electroneum is the stated main goal of the whole project - broad adoption through smartphone mining. This is a very weak purpose. Monero, with its almost identical code base, was already trying to establish 'fair' mining through ASIC-hostile PoW-algorithms. In any case, as the ICO proceeded the team clarified that the mobile mining was just for show; no user actually mined anything through the Android or iOS app. The app only simulated mining in order to help adoption by the use of viral marketing while real mining occurred only on computers running full nodes. This is simply deceptive. Electroneum, as a copy of Monero, was created on the premise that by enabling mining on mobile devices it is different from other cryptocurrencies. This premise was then pushed to ICO investors who in many cases probably never realized the mobile mining was a sham. It is extra bad that team members talked about mobile mining early on as if it was actually contributing with (prof of) work. All details were properly presented in the whitepapers, but the team could anyway have been much more upfront about the whole issue.

As if all that was not enough, team members were also urging people to buy ETN tokens and talked about a realistic price of USD 5 per ETN, which would indicate a USD 100B network valuation. This happened multiple times and can still be seen in the BCT thread. Electroneum team members obviously bough ETN tokens in the ICO and had incentives to push the price higher, but to their credit they did not, unlike in most ICOs, self-allocate any such tokens for free in the genesis block.

When looking at general activity, it is clear that it has decreased continuously as cryptocurrency prices fell after 2017. The official BCT thread is still somewhat active. The subreddit is fairly active compared to other coins, with a couple of posts per day. Number of on-chain transactions doesn't look great, but it is still more than most coins of similar size. It nowhere near reflects the vast number of registered Electroneum users though.

To end the Ecology section on a somewhat more positive note, the Electroneum focus on mass adoption is not just talk. The Instant Payment system that the team has developed supposedly makes is easy for vendors to attach themselves to the network and get paid in ETN or other larger cryptocurrencies instantaneously. The move to produce their own pre-loaded Electroneum smartphones may help onboarding further. In the end, however, all the marketing ploys have to lead to an increase in on-chain transactions, as that is what BD Ratings takes as an indication that an actual ecosystem is forming.

Grade: 3

Reasons: Strong focus on adoption. Above average community activity. MLM-like referral systems.


The commits on the master branch stopped in September 2018, and on the developer branch they stopped a couple of months later. This drop in development is seen clearly. BD Ratings has however also seen some indications that coding occurs outside GitHub and that code is added in batches later. The general code base work by the Electroneum team seems to consist of implementing Monero updates to the Electroneum repository. Among all team members listed on the Electroneum webpage only three are dubbed bockchain developers. As the Electroneum CEO Richard Ells has a marketing background, it is not hard to imagine that the team overall has very limited blockchain experience.

The mobile mining experience works like this: instead of iterating certain hash algorithms with different inputs, the Electroneum app will somehow estimate how powerful a mobile device is before establishing how many future ETN tokens the device 'deserves' to mine. It is in other words artificial Proof of Work than might very well be gameable. The project runs a risk of some people figuring out how to trick the measurement method and so 'mine' a proportionally higher amount of ETN. Additionally, the mobile mining worked sub-optimal also when implemented in practice, and some users had trouble mining for months even.

Electroneum has always had a focus on fast, cheap transactions. Because of this, they set a very low minimum fee to transact on the network through the app. This ultimately led to flooding of the mempool and subsequent fee changes as a counter measure. For anyone that knows anything about how blockchains work, this should have been obvious, and so it was a bad sign when the Electroneum team failed to understand how low fees produce an attack surface.

Grade: 2

Reasons: Partially closed source. Low development activity on the code base. Team focuses on marketing and not code.


It was clear early on that the Electroneum team lacked a decentralization ethos. Before mainnet, Electroneum CEO confirmed that the mobile mining app was to remain closed source, and that it only worked with the team's own mining pool. Not only ought the closed source of the app be a long term threat to the privacy and security of the people downloading and using it, but the fact that it can only point to a single mining pool would have assigned power to that pool's operators as well. As it later became clear that the mobile devices wouldn't mine a single block, this latter concern of course became invalid, but the fact that the most popular Electroneum wallet remains closed source to this very day reveals the team's mindset.

Further evidence of centralization became apparent when the Electroneum team with no discussion decided to ditch privacy code like Monero's RingCT, in order to better facilitate cheap transactions instead of fewer private ones. The same can be said about the decision to revert the anti-ASIC hardfork and go back to the original CryptoNight PoW algorithm.

With regards to the current mining situation, it appears to be under control as no pool is close to obtaining 50% of total hashrate. Hash power can be hidden however, so the pool distribution is not proof of hashrate decentralization, just an indication of it. Despite being more ASIC-friendly now, Electroneum has to BD Ratings' knowledge never been 51%-attacked.

In September 2018, the team rolled out KYC requirements that users had to go through with in order to get proper access to the official Electroneum Android wallet app. While the decision was taken as a step to become more regulation friendly, it is obviously an insane thing to do for a cryptocurrency. The main point of cryptocurrencies is censorship resistant value transfers, and a mandatory KYC imposed by a for-profit company and introduced a year after the ICO, clearly breaks the initial social contract of the ICO. Many users were left with filled up wallets they could no longer fully access.

Grade: 2

Reasons: For profit company takes the decisions. No decentralization ethos. Mandatory KYC to even use a wallet, a year after the ICO. No material mining threat so far.


Less than half of all Electroneum have been minted so far, mainly because of the low age of the blockchain. Counting all future supply, the blockchain is valued at over USD 100M at time of writing. Considering the fundamentals - especially the centralization - this valuation is too high. The team will predictably screw something up with a future centralized decision.

Grade: 3

Reasons: Relatively high valuation considering the level of centralization and the team's low technical skills.