Syscoin — Update I

12.04.2019

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

Six months have passed since the first BD Ratings article on Syscoin. Here is how the price has changed during this time.

2018-10-12: USD 0.08669, Satoshis 1 391.

2019-04-12: USD 0.05889, Satoshis 1 173.

More specifically, what has happened since? In November 2018, a comprehensive Syscoin roadmap was published. One of the first items on that roadmap was Syscoin Core 3.2, which was released on December 17th, 2018. The version included a couple of bug fixes as well as preparations for Blockmarket Desktop 3.2, the decentralized marketplace- and wallet platform integrated with Syscoin.

In a December post dubbed "A NEW BEGINNING FOR SYSCOIN", the team laid out the frameworks for a project re-brand, including a new webpage and logo. The post also mentioned a newly formed Foundation, a Z-DAG throughput report conducted by research compamy Whiteblock, and also the future Syscoin implementation of Ethereum Virtual Machine (EVM) smart contracts.

2019 started with an announced partnership with hardware wallet manufacturer ARCHOS. Blockchain Foundry, the Syscoin core developer company, granted ARCHOS 3.7 million common shares - representing approximately 5% of total outstanding shares - in exchange for becoming the sole distributor of the SAFE-T Touch hardware wallet in North America.

February continued with an outline of Syscoin 4.0. The issue of future blockchain 'bloat' was discussed, and Syscoin developers estimated the chances of scaling the network to be good - something that was essential for the decentralized marketplace to function properly. 4.0 was also a pivot back to Ethereum, with upcoming interoperability 'bridges' that would facilitate the decentralized migration of Syscoin assets to the Ethereum blockchain. The plan to implement EVM smart contracts directly on Syscoin seems to have been put on hold due to the impracticality of it. After the 4.0 outline, a complementary write-up on Masternodes and governance was published. The article described changes in how a new pool of governance tokens were to be issued to winners of different proposals. It also detailed the extra tokens a Masternode could get if it had seniority (provably been maintaining the network for a long period of time).

Ecology

As usual, the article tries to capture the general activity surrounding Syscoin. When looking at the official BCT thread, it is easy to see that it is inactive. The subreddit is inactive as well, with less than a post per day. On-chain activity per day seems to be in the hundreds when not counting block rewards, which is in line with what is said about the level of activity within Blockmarket. The main overall activity in the ecosystem comes not from the community but from the Syscoin team itself in the form of new client versions, AMAs, blog posts and conferences.

Syscoin social media moderators have kept deleting uncomfortable posts. There appears to have been some controversy as a partnership project, Peer Mountain, allegedly conducted its public sale of tokens in an unprofessional manner. BD Ratings looked at their BCT ANN thread and there are indeed many spam bots praising the project. Even though having Syscoin connected with Peer Mountain might tarnish the image of the project slightly, it seems unlikely that if should have any large affect overall in this case.

In the same unmoderated thread, user IconFirm recently published findings on the financial state of Blockchain Foundry. Syscoin developer sidhujag defended against these accusations and attributed the bad financial numbers to accounting practices. It is hard to know what to believe with all this, but it clearly shows one of the drawbacks having a for-profit company maintaining the Syscoin development. If the company is suffering financially, who knows what its shareholders can pressure the team to do.

Grade: 3

Reasons: Still low overall activity in the Syscoin ecosystem.

Technology

While inspecting the GitHub repositories, it is evident that the code base commits have died off completely. It might be that the planned changes of the core protocol is written elsewhere (Edit: as suspected, they are). Needless to say, some of these new and old changes  -  especially related to transaction throughput - are not battle tested and Syscoin seems to move further away from the stable Bitcoin Core code base it once adopted. Only a long period of uptime will slowly help build the Technology rating of this blockchain.

Grade: 3

Reasons: Large changes to the protocol.

Decentralization

The Masternode Governance Portal SYSHUB was released in November 2018, and could facilitate voting on Syscoin proposals. This in and of itself is a good thing, but might not be enough as the Syscoin team could very well control a large enough supply of tokens to more or less control the votes. The plans of allocating newly minted tokens to these blockchain improvement proposals through so called superblocks might be a way to create money for entrenched team members.

Also affecting decentralization is the establishment of a Syscoin Foundation in Netherlands. BD Ratings will as usual monitor how the Foundation will operate going forward, and hopefully it can absorb some stewardship power from Blockchain Foundry.

Grade: 3

Reasons: Governance infrastructure in the form of SYSHUB. A new Foundation. Still signs of entrenched parties enriching themselves.

Valuation

In a recent Weekly Syscoin Update, the Syscoin team mentioned that most of their funds were spent in 2018. Additionally, Dan from the team seems to suggest even more seignorage - an activity not foreign to Syscoin. Here are the exact words:

Q: How does the cash reserves of blockchainfoundry look? Are there still funds to fund dev etc...? Will the project push on? I can imagine times are tough
They're good but we also are working to create more alignment w the protocol itself. For better or worse we spent a majority of BCF funds in 2018 on SYS development and have no SYS to show for it but we're working to align these things so that we can continue to focus in that same way while also building even more value in the ecosystem through clients we expose to the platform's capabilities.

If the team proceeds with more money grabs, the project will not last as it completely erodes the money properties of the native blockchain token. These allocations were never part of the social contract of Syscoin, which started off considerably fairer with Scrypt mining followed by SHA256 mining, but later took a turn for the worse.

With regards to the SYS price this last 6 months, it has gone down almost 20% compared to BTC. The seignorage risk, combined with the price decrease and the slightly better overall fundamentals cause the Valuation rating to stay the same.

Grade: 3

Reasons: Increased risk of more token minting. Price decrease.