In just 1 month from May to June, the price of Zilliqa has pumped up by 430%. Zilliqa has been gaining media traction all over the world and they are ranked no.1 altcoin constantly on Lunarcrush. This has attracted the attention of many investors including myself. I thought it would be interesting to check out Zilliqa and I have personally bought a few ZIL for fun. So what is Zilliqa and is this a good investment?
1. Background of Zilliqa
Zilliqa is a Singapore-based project that was born out from a project at the National University of Singapore (NUS). In 2016, Prateek Saxena co-wrote a research paper with Loi Luu exploring the concept of sharding in the blockchain.
Saxena then went on to start Anquan Capital while Loi Luu started Kyber Network. Shortly after, Xinshu Dong joined Anquan Capital as head of engineering and they decided to kickstart the project Zilliqa.
Xinshu Dong was then CEO, Saxena is the Chief Scientific Advisor, Yaoqi Jia (head of technology), Armit Kumar (head of research), Juzar (Chief Strategist), Kantelia (Chief Evangelist) and Jun Hao (Core Dev).
There are many more advisors to Zilliqa including Loi Luu, the founder of Kyber. These bunch of people are all computer scientists, academics and engineers with PhDs. That is how Zilliqa started. A research paper which was brought to life by PhDs.
Anyways that was the original team. Zilliqa underwent a leadership transition as Dong went on to found RockX and Yaoqi joined Parity technologies. It is quite common to see people moving around blockchain companies back in those early days.
Armit Kumar is now the President and Chief Scientific Officer of Zilliqa and Sayaan joined Zilliqa as CTO in Jan 2020.
2. What is Zilliqa?
So what is Zilliqa? You can think of Zilliqa like a competitor to the ethereum network. It is also a public blockchain platform that allows developers to build smart contracts and DApps on top of it. The fundamental difference is Zilliqa uses sharding.
Zilliqa was created with the purpose to scale. They knew enterprise adoption is not going to be possible if a platform can only process 10-20 transactions per second.
This problem is immediately apparent from the cryptokitties hype on ethereum. It was so popular that the transaction gas fees spiked up by 3900% at one point due to network congestion. Can you imagine if it is a real-world application? Nobody would use the blockchain if the transaction fees are too expensive.
Fortunately, Zilliqa has already solved the scaling problem through a method known as sharding. It is not some theory research as this is already live on their mainnet. And Zilliqa is the ONLY one that has successfully implemented sharding.
With sharding, Zilliqa can process 2828 transactions per second making it perhaps the fastest blockchain platform as compared to others. Bitcoin can only process 7 transactions per second, Ethereum 15, Tezos 50, Cardano 250 and Visa can do 8,000. Nobody is anywhere near the commercial application of Visa except Zilliqa.
That’s why Ethereum is desperately trying to come out with L2 solutions in ETH 2.0. But it is harder for Ethereum to make the transitions as they have already built all the infrastructure and protocol foundations. There is a lot of testing to do to make sure nothing breaks and the network remains stable.
However, Zilliqa has the second mover advantage as they already know what works and what doesn’t. It is easier to build something ground up by getting the design right rather than thinking of ways to improve a current design.
3. How does Zilliqa Sharding Works?
So what is sharding? In normal blockchains like the bitcoin and ethereum network, it is a situation of everyone trying to solve the same group of transactions in a block. Things happen in a linear consecutive approach. Block by block. In sharding, a blockchain network is divided into “shards” and each shard solves a part of the block in parallel.
The best analogy I can think of is a jig-saw puzzle. Imagine a scenario where you have 50 people gathered around trying to solve a puzzle together. When someone found a fitting piece, he has to ask everyone else if they agree that it is the right piece. If there is a consensus, then they would put the piece down together in agreement.
In sharding, the same jig-saw puzzle is divided into 5 different segments. The same group of 50 people is also sub-divided into 5 groups of 10. Each group would solve a different area of the puzzle simultaneously. After they are done with their parts, all the sub-groups would gather back to piece the puzzle up together as a whole.
You can clearly see how sharding is much faster and efficient in processing transactions. The more nodes you have joining the network, the faster the network can process transactions. Think of it as having more sub-groups to solve the puzzle. This makes it possible for Zilliqa to scale up linearly, something which was not possible before.
4. What is Zilliqa Token (ZIL)?
Zilliqa did their ICO on Jan 2018 and they raised $22 million. So what is Zil used for? In the same way that ETH is used to pay for gas fees when running smart contract transactions on the ethereum network. ZIL also acts as a native token that is used to pay for transactions on the Zilliqa network.
The only difference is ZIL is much cheaper as compared to ETH. The gas fees on the ethereum network fluctuate up and down depending on how congested the network is. Sometimes it can go as high as a few USD dollars. But Zilliqa fees are extremely low because they can process transactions at a much faster speed. Additionally, ZIL is also used to reward miners for verifying transactions on the Zilliqa network.
5. Zilliqa Partnerships
So what is the big hype with Zilliqa? Why are people rushing in to accumulate Zilliqa in a frantic? Here are some of the reasons that make Zilliqa a trusted project in crypto.
5.1 XSGD – Xfers’s Singapore Stablecoin
Firstly, Xfers is launching the Singapore stablecoin known as “StraitsX” or XSGD on the Zilliqa network. 1 XSGD will be pegged 1:1 to the Singapore dollar. This is an initiative that has gained regulatory approval from the Monetary Authority of Singapore (MAS).
In a way, you can say that the Singapore government is supporting Zilliqa. It is also in the government’s interest to make an SGD stablecoin successful as this could potentially transform the cross-border payments market.
Zilliqa has also partnered up with Elliptic to monitor on-chain transactions. Elliptic detects for illegal or suspicious activities such as money laundering on the blockchain network. By doing so, it helps Zilliqa to meet regulatory compliance as there is an added layer of transparency and security. Overall this should benefit the usage and adoption of XSGD.
5.2 Hg Exchange
Secondly, Taiwan’s largest digital asset platform, MaiCoin, has established a Hg Exchange together with Zilliqa. Hg Exchange has also signed a memorandum of intent with PhillipCapital, PrimePartners, RHT Capital and Fundnel.
What Hg Exchange is trying to do is to tokenize high-growth private companies like Airbnb, Uber, SpaceX, Grab, Didi Chuxing and the likes. For the first time, you could actually own tokenized shares of unicorn companies. It will be a liquidity avenue for private capital market trades. This is something that is currently not within reach of the average investor.
MaiCoin will build the exchange functions from matching engine to the order book and user interface. Zilliqa will provide the network for Hg Exchange to settle transactions. The members such as PhillipCapital would probably be the gateway that connects investors to Hg Exchange.
Hg Exchange has already applied to participate in MAS FinTech Regulatory Sandbox. Hg exchange is expected to launch by end of Q2 2020.
Aqilliz is another Singapore-based blockchain company that is in digital advertising. It is the sister company of Zilliqa. Interestingly, the name Aqilliz is Zilliqa spelt backwards. Aqilliz is using Zilliqa platform to help do digital advertising for some of the Fortune 500 companies.
The most well-known example is PepsiCo using Zilliqa platform to trail a digital marketing campaign in South-East Asia. It has helped them to boost supply chain efficiency by 28%. Other media agencies partners that are working with Aqilliz are Mindshare, Xandr, Rubicon Project, IAS Integral Ad Science, MediaMath and Lucidity.
Mindshare has done work for Nike, KFC, Bp, Facebook, Unilever, Volvo and many more. Rubicon has a million+ websites and 60,000 apps. All the big financial media have such as Financial Times, Reuters, CNN, Wall Street Journal and many other more have used Rubicon. Lucidity has worked with Toyota and 21st Century Fox. These are all the big names and the list goes on and on from Aqilliz’s partners. Can you imagine just a few of them trickling down to Zilliqa platform?
Aqilliz recently received funding from Tribe Accelerator, a blockchain accelerator backed by Enterprise Singapore.
And lastly, just a fun fact. Vitalik approves Zilliqa.
6. Is Zilliqa a Good Investment?
The next question is whether Zilliqa is a good investment? The price of Zilliqa is dirt cheap. One ZIL only costs US$0.026 at the point in writing. During the last altcoin bull run, Zilliqa hit a high of about US$0.23. Here are some of the potential price catalyst in the future.
6.1 Zilliqa Staking
First and foremost is staking. Zilliqa is introducing staking on the mainnet and it is coming live by the end of Q2 2020. So we are just a few weeks away. The estimated annual staking yield for ZIL is between 8% – 10% currently. When staking goes live, ZIL would gain even more attention as you get to earn some dividends on it.
There are a lot of long-term holders that are accumulating tons of staking tokens in crypto. They are taking this opportunity to accumulate massively and many are living off a retirement lifestyle on Thailand beaches.
6.2 Hg Exchange going Live
Hg exchange is also coming live by the end of Q2 2020. I am quite curious to see what PhillipCapital would offer or do on Hg Exchange. They are one of the founding members of Hg Exchange. And if Hg Exchange really takes off. It would be HUGE. Real huge. First-of-a-kind. I definitely wouldn’t hesitate to load up tokenized shares of Didi Chuxing, SpaceX and etc.
6.3 Potential Coinbase Listing
Coinbase has put Zilliqa under their watchlist in 2018. This watchlist is a list of digital assets that Coinbase is exploring to list in the future. It follows a stringent digital asset framework that includes factors such as security, compliance and financial inclusion.
Given that Zilliqa is gaining huge momentum across all metrics (social, fundamental, technical). There could be a possibility that Coinbase lists Zilliqa. And all those coins who manage to get into Coinbase are going to see a huge pump just like how Omisego and MakerDAO recently did.
7. Risks of Investing in Zilliqa
7.1 ETH 2.0 Sharding
The biggest risk I see in Zilliqa is when Ethereum launches sharding seamlessly in the next few months.
Zilliqa is attractive now because it can process transactions >200x faster than Ethereum. And the gas fees are also way lower. But if ETH 2.0 can achieve the same scaling properties as Zilliqa, what is the competitive advantage of Zilliqa?
Furthermore, if Ethereum launches sharding successfully, they would process transactions much faster since there are more nodes on the ethereum network as compared to Zilliqa.
Right now, Ethereum is still the king of smart contract platform and all the big enterprises like Microsoft, EY and ConsenSys are all looking at Ethereum. Projects would also choose to build on where the highest network effect is.
While Zilliqa and Ethereum can co-exist together, it will be a tough fight to convince people to come to Zilliqa if ETH 2.0 rolls out successfully.
7.2 Failing to Attract Talented Developers
Secondly, Zilliqa has created a new programming language called Scilla. It is a more secure way of writing smart contract codes and it can help identify security risks. Actually this works like a double-edged sword.
On one end, it is good that you have a language that is more secure. However, that would also mean developers have to learn a whole new language from scratch to build Dapps on top of Zilliqa. This might hinder the adoption or experimentation of Zilliqa platform.
We see the same problem with Ethereum when they first started out. Everyone has to learn Solidity from scratch and there is a lack of programming library in Solidity. A lot of codes have to be written manually and inefficiently.
But I still think the benefits outweigh the cons. It is just a risk that developers would not bother to learn Scilla if Zilliqa is not popular. Blockchain developers are like mercenaries, they want to learn the skill that gets paid the most and is in highest demand. Right now it is Solidity and definitely not Scilla. Though Zilliqa is trying to change that through their Zilhive program.
7.3 Hg Exchange Fails to Take Off
Hg Exchange is still waiting for approval from MAS and they are at the regulatory sandbox stage. Running a tokenized exchange is a highly regulated thing and this means you can’t do anything you want.
There are a lot of restrictions, compliance to follow and MAS can suddenly decide that this is too risky for investors. You never know what will happen with regulations. It is always a slow and bureaucratic process. But of course, if MAS approves it. Then this would be huge clearance news for Zilliqa.
8. How to buy Zilliqa (ZIL)?
After weighing the pros and cons, and you want to ride the wave in the blockchain industry, here is how you can buy Zilliqa. If you are in Singapore, buying ZIL is really simple. You can buy it directly with SGD for about 3.6 cents each.
Just sign up with Coinhako and top up your SGD wallet. They only process your deposits at 10 am and 4 pm on weekdays. Then just click the buy button. That’s it! That’s how easy it is to buy crypto.
Zilliqa is currently not available on Binance Singapore but you can still buy them from Binance Exchange. That’s why I say Binance Singapore has very limited altcoins offerings. For those who are keen, I have written a full guide on which crypto exchange is better over here.
In conclusion, I think that Zilliqa is a good investment. They have solved the problem of scaling with sharding and they have literally no competitors at the moment. The team behind Zilliqa are all computer scientists PhDs and they understand the technology of blockchain very deeply. So much so that they even create an enhanced smart contract programming language out of it. I believe there is much more to come for Zilliqa in the near future.
You can think of Zilliqa as a small-cap high growth start-up in the traditional world of investing. There is huge potential, but also huge risks. So do also allocate your capital investment wisely. And also in crypto, anything can happen. As much as it could go up 400% in a month, it could also go down 50% in a week. So only invest what you can afford to lose and invest safely!