NULS — Update II
TL;DR. Ecology:3 (3). Technology:3 (4). Decentralization:3 (3). Valuation:4 (3). Rating:3/10 (3/10)
Six months have passed since the second BD Ratings article on NULS was published. Here is how that prediction has turned out so far.
Both ratings are currently hits. Let's go through some of the events occurring within the NULS ecosystem for the last 6 months.
The last NULS rating article aptly finished with detailing the release of some minor client software updates. This article however, will also explore what the NULS team has dubbed NULS 2.0, and what changes and features are included in that major milestone. While the old dapp architecture was centered around Java, it quickly became apparent that with NULS 2.0, dapps could be written in virtually any programming language. NULS 2.0 also tried to make modules simpler as well as easier to extend, modify and replace. This was all in line with the NULS core focus on flexibility, simplicity, and modularity.
While work on the 2.0 version of mainnet continued, the end of November saw the release of NULS 1.1.3, which at last included support for smart contracts, multisigs, and also came with bug fixes and optimizations. NULS 1.1.4 - a minor bug-fix version - was released in late November as well. On the 3rd of December 2018, NULS 1.1.5 was released.
On 22nd of February, 2019, the NULS co-founder Jason Zhang announced his resignation from the project. The stated reason was given as personal. NULS 1.2.0 was released in the end of February, and included for example a decentralized random number generator - a feature deemed important partly for the consensus mechanism to function securely, and partly for future dapps that could use it as input.
On March 14th, the NULS 2.0 whitepaper was finally published, giving a high level description of where the project was going. March continued with the announcement of the first NULS 2.0 alpha release. This was followed by a second alpha release in April. NULS 1.2.1 was released in April as well, focusing on a better user experience and fixing some bugs. In summary, the developer team has been churning out new client versions at a high pace, and is currently re-factoring the whole code base.
Activity on the NULS subreddit has cooled off somewhat, with just one thread per day on average. Most threads are posted by NULS team members. On-chain activity is still very low, with a vast majority of all transactions being staking rewards. and not real economic activity. It has to be noted however, that both the NULS community and the team have organized a number of meet-ups around the globe, which obviously increases the chances of a future growing ecology forming around the blockchain.
It is important for the meet-ups and workshops to continue. At time of writing, no clear evidence of commercial use of the NULS blockchain has emerged. The low transaction count indicates this as well. If the blockchain indeed creates utility for real companies, there will be an increase in transaction count. With the coming NULS 2.0 blockchain and its smart contract capabilities, it will be easier to establish whether the utility is there or not.
Finally, with regards to the Ecology rating, it is worth mentioning that the NULS team is conducting ridiculous marketing campaigns such as a Valentines Day give-away. Holders of NULS tokens ought to ask themselves why they should be subject to what in practice is a huge inflation tax in the form of 60M NULS pre-allocated to others, when it is funding stuff like this. Somewhat related to this is the fact that the NULS team still pay's for press releases in cryptocurrency newspapers like CoinTelegraph.
Reasons: Still low transaction count. No sign of real economic activity. Some community and team activity, including meet-ups and workshops.
NULS GitHub repositories for both 1.X and 2.0 still show considerable activity by a number of developers. With the creation of the Code Craft Council (CCC) community developer group, it can be assumed that the total technical resources of the project have increased somewhat. More technical bounties was posted during the rating period as well, and the team also organized a couple of developer workshops - something that is positive as well.
BD Ratings has criticized the Proof of Credit consensus mechanism in earlier articles, and the critique stands. In the newly published 2.0 whitepaper, further worrisome properties seems to have been introduced, where for example staked funds can be locked for as many as 60 days if the node is deemed hostile. A consensus mechanism that can punitively lock funds over such a period is not good, and begs the question how the network will judge who is 'hostile' if there are different interpretations of the truth.
Reasons: Focus shifted to NULS 2.0, with new code base that needs to be battle tested. Active development team. Complicated, possibly gameable, PoC consensus mechanism.
In a Reddit AMA in November 2018, the NULS team clarified that a US NULS Foundation was setup as a C Corp in California. This to BD Ratings' knowledge makes the Foundation a for-profit entity, and so is not really restricting unethical use of pre-allocated funds. The NULS Community Foundation setup in Singapore is technically also a for-profit entity. As these entities have direct control over a considerable number of tokens, they can hypothetically siphon funds in various ways, and also influence the consensus process to certain individuals' advantage.
NULS has however seen some positive developments on the Decentralization front as well. In November 2018, NULS developers announced the Code Craft Council (CCC) - an independent developer team set up to complement the NULS core developers. This is generally a sound setup for a cryptocurrency, which is then not controlled by a single strong developer team. It is likely that multiple developer teams increases the likelihood of a stable protocol.
Further decentralization efforts come in the form of the newly created NULS Improvement Proposal (NIP) process. As with Bitcoin and Ethereum, this governance vehicle is used to encourage better and broader discussions around code changes, and also encourages authors to seek consensus for proposals before trying to implement them. Ir reduces the risk of top-down decision making over important properties of the blockchain. Some curreently relevant NIPs are a Community Constitution proposal, and a Community Fund proposal where initially the Foundation (later on the community through governance) will use funds to support various community activities.
Reasons: Still a large concentration of tokens controlled by the team or Foundation. For-profit entities as Foundations. Sound developments with respect to project governance.
By continuing to fall in price, all 104M NULS tokens minted so far has a combined market cap of around USD 60M. NULS is currently barely in the top 100 list of CMC. The fundamentals are more or less the same since the last review, meaning the drop in price is enough to raise the Valuation rating one point.
There has been no indication of future seignorage or other value-destroying activities from NULS developers. The somewhat high inflation has paid for stakers and the network has been able to function properly partly because of this in-built financial incentive.
Reasons: Still high inflation. Unchanged fundamentals.