Ontology — Update I

02.03.2019

TL;DR. Ecology:4 (3). Technology:3 (3). Decentralization:2 (2). Valuation:2 (1). Rating:3/10 (2/10)

Six months have passed since the last BD Ratings article on Ontology. Let's continue to explore the project.

2018-08-26: USD 2.35, Satoshis 35 043.

2019-03-02: USD 0.914186, Satoshis 23 650.

With the mainnet swap deadline set to October 1st, the Ontology team regularly encouraged NEP-5 token holders to complete this step. As of August 31st, almost 98% of all tokens had already been swapped. 99.32% of all tokens had swapped when the deadline hit, resulting in a fallback plan for those who still had not acted. This plan included a 3-month extension when swapping through the official wallet.

On 8th of October, the Ontology Research Institute opened. Its focus lay on researching the Ontology core blockchain technology but also in exploring broader implications on the sector as a whole. 10 R&D personnel were in it from the start. A week later, a second round of Triones Seed Node applications opened. Total number of consensus nodes were still fixed at 7, but applicants increased the pool of competing nodes.

On the 8th of November, the dApp development framework Punica Suite was released. The software facilitated all necessary tools to build smart contracts on the Ontology blockchain. A month later, the Ontology team initiated a discussion regarding incentivizing dApp developers by setting up a fee sharing structure, meaning specific transaction fees were to go directly to the developer. It is unclear however why such schemes couldn't just be defined in the smart contract logic.

As of March 1st, there were 7 consensus nodes (just like for the NEO blockchain), and 40 candidate nodes.

Ecology

The subreddit is not that active but not dead either. Meetups were organized in San Francisco and Seattle during the review period. On-chain activity is still rather low with around 8000 transactions per day, which at least is an increase since the first rating analysis.

As a logical extension of NEO Name Service, a protocol for human-friendly public addresses was announced by the same team. Ontology Name Service, if launched, would make it easier to grow the ecosystem. The same can be said of the Punica Suite release, which would increase the activity surrounding smart contracts.

During this 6-month period, Ontology partnered up with Muzika - a music platform with 2 million active users. The partnership focused on building a dApp that could distribute music to customers in a peer-to-peer fashion, cutting costs. A partnership was also initiated with SenseTime, one of the largest AI start-ups, and Hanwha Insurance, South Korea's first life insurance company.

The stupid community airdrops are posed to continue according to plan. As many as 120M tokens will in the future be given to the community in attempts to boos the hype. BD Ratings wonders why these tokens were created at all, just to be controlled by the team.

Grade: 4

Reasons: Somewhat higher on-chain activity. Multiple teams are building applications on mainnet.

Technology

It is good to see that Ontology still encourages participation and code improvements with the help of technical bug bounties. Additionally, the team recently sponsored a hackaton in Shenzhen. Looking at the GitHub repositories, BD Ratings concludes it is still very active.

The team seems to recruit heavily. The Ontology Research Institute also saw new resources pushed towards research and development of the codebase itself. All this has the potential to increase total technical capabilities.

The earlier mentioned dApp incentive scheme was introduced on Ontology, ensuring that 50% of all ONG paid for dApp interactions were sent back to the dApp developer(s). There are many things that are strange with this. First, developers ought to be able to set dApp fees independently in the smart contract code. And secondly, hard coding a 50% ONG reimbursement to developers do not incentivize them to write efficient code. The more computing heavy the code is, the more ONG ought to be sent to the dApp owner for each interaction.

Grade: 3

Reasons: Mainnet stable so far, and code base is still being improved. Continuous recruitment and bug bounties.

Decentralization

A second round of Triones Seed Node applications was initiated, solidifying the centralized nature of the project. Applicants needed to complete ONT ID trust certification, which just creates a large attack surface for governments to apply legal action. These applicants can be viewed here. In a recent AMA, the team confirmed that there won't be a third application process. Instead, anyone who fulfills technical requirements will be able to participate in the consensus process.

As the team and entities close to the team still own the large majority of all ONT, the consensus mechanism is still compromised in the sense that they can pick and chose the 7 vital consensus nodes.

Grade: 2

Reasons: ONT tokens mostly controlled by the Ontology team and associates.

Valuation

Ontology is still severely overvalued. Comparing to the somewhat similar NEO project, the total valuation of all ONT supply is almost the same at time of writing. When including gas tokens, the total Ontology valuation is higher than that of NEO. NEO is in most regards a more professional and less centralized project and ought to overtake Ontology sooner or later.

Compared to BTC, Ontology is overvalued as well. As the total valuation, including ONG, numbers over a billion USD, it accounts to almost 1% of total cryptocurrency valuation, and around 2% of BTC valuation. This is considerably above fundamental value as Ontology is extremely centralized in its token distribution and permissioned full node system.

Grade: 2

Reasons: Slightly better fundamentals coupled with lower total ONT and ONG valuation.