Zilliqa — Update I

09.01.2019

TL;DR. Ecology:3 (3). Technology:6 (6). Decentralization:5 (5). Valuation:6 (5). Rating:5/10 (5/10)

Six months have passed since the first BD Ratings review of Zilliqa. Here is how that prediction has turned out so far.

2018-07-09 USD 0.081836, Satoshis 1 245.

2019-01-09: USD 0.024537, Satoshis 606.

The prior rating of 5, equivalent to 'buy', is clearly a miss so far. Let's explore what the project has been up to the last 6 months.

Just days after the initial ratings review, the Zilliqa team announced a smaller expansion of the team itself, as well as some more development on the testnet and smart contract IDE. Soon thereafter, the smart contract language Scilla was open sourced.

In August 2018, mainnet that until then had been scheduled for Q3/Q4 2018, was delayed to January 2019. Soon thereafter, a project update was provided with a ton of information on the plan for the test network, future security auditing, team member additions and general code progress.

In December, Testnet version 3 was released with the same features as the coming mainnet. According to the team, the test network was the world's first to implement network, transaction, and smart contract sharding.

Ecology

The Zilliqa Ecosystem Grant Program went live August by supporting 12 different projects or developers financially for developing on Zilliqa. Projects included wallets, collection of libraries for node interaction, browser extensions, smart contract libraries and games. This is a great and cost-effective way of using self-allocated funds to build an ecology as well as having tokens less concentrated. As of October 2018, only 3% of the funds had been used to fund up to 20 different projects.

As a result of a Mindshare partnership, Zilliqa's protocol was evaluated for its suitability to address some issues in the digital advertising industry. BD Ratings await the result of all this, demanding evidence in the form of on-chain activity. Some additional partnerships were announced in October.

On an end note, on-chain activity is something that will become apparent as soon as the Zilliqa mainnet launches in a few weeks. With the current ERC20 tokens, such activity is hard to measure properly and does not represent real interest in the project. Soon it will become apparent if interest picks up on the official subreddit as well.

Grade: 3

Reasons: Expanded partnerships. Still no mainnet for activity measurement.

Technology

For increased chances of long-term development of the underlying code as well as supporting infrastructure, it is important that developers can sustain themselves while doing the work. The Zilliqa team seems to have been prudent enough and sold of assets before the total market crash that occurred in 2018. The money is apparently enough for 4 more years, which ought to be enough to get a sound, battle tested code base for mainnet.

The team seems to still focus on technicals rather than marketing, and the seemingly advanced testnet is proof of this. As soon as mainnet launches, the sharded network will start to get battle tested, and BD Ratings await these results.

Grade: 6

Reasons: Technology focus. No mainnet.

Decentralization

As the consensus mechanism is a PoW-PoS hybrid, the concentrated token allocation to the project team is not the issue it would have been had the network used PoS exclusively. This was discussed in the first rating analysis as well. Zilliqa also became GPL3 licenced during this period, making the project fully open source.

The main issue of centralization with his blockchain ought to instead be the outcome of potentially a large number of on-chain transactions, and the cost that this may bear upon full nodes in terms of storage or data processing. BD Ratings will follow such metrics closely in the future to make sure that transaction throughput not just causes a trade-off on a efficiency-decentralization frontier.

Grade: 5

Reasons: Tokens allocated more broadly with time. Potential full node centralization.

Valuation

As with most altcoins, the price of ZIL has fallen drastically in 2018. This is true for the 6-month period as well, despite no fundamentals taking a full turn to the worst. One could ague that mainnet delays have accelerated the price fall in this case, but such delays are not very important unless the delay is closer to years and not months. A technically sound network is always more important than rushed releases; money will seek out safe storage in the long run.

With the current price, the project is valued to more than USD 300M, which at a glance can seem way too high. It has to be acknowledged however that sharding a decentralized network is a hard thing to do, and the Zilliqa team is one of the first contenders to possibly pull such a feat off.

Grade: 6

Reasons: Fall in price despite promising fundamentals. No mainnet.