On January 31, in a major milestone for the whole crypto space, Zilliqa became the first blockchain implementing sharding to launch its mainnet. Since then, there has been perhaps a lot less media coverage of the project than it deserves, so this article will attempt to fill the reporting void.
Zilliqa’s core features and value proposition
Zilliqa is the first live blockchain featuring sharding, or splitting of the on-chain activity among several sub-chains, or shards. At this point, Zilliqa only implements network sharding, with the much more complicated sharding of the state of its virtual machine (VM) set at a later date. As far as consensus is concerned, it uses a hybrid approach involving mining and Byzantine Fault-Tolerant (BFT) voting.
In addition to sharding, Zilliqa delivers a smart contract platform based on a programming language called Scilla specifically designed to ensure smart contract verifiability and security. If successful in its implementation and adoption, Zilliqa can be an attractive alternative to Ethereum, at least until its second iteration launches in full.
The project’s evolution is interesting for several reasons. First, it may hint at the prospects of other innovative competitors of Ethereum that are set to launch in the near future, such as Algorand, Cardano, RChain, DFinity and others.
The evolution and current state of the mainnet
The Zilliqa team has generally pursued a very cautious approach to development and rollout and avoided hype. Initially, the network launched in the bootstrap mode, meaning that no transactions were possible, and the objective was to accumulating sufficient hash power to protect the network. This phase ended on April 2.
While the bootstrap stage has ended, though, the mainnet is still limited since smart contracts are not yet enabled on it, they are planned to be made available after the token swap.
Nonetheless, the results of mainnet running in the wild seem to be encouraging thus far. According to Zilliqa’s team, the recent mainnet transactions were 40,000 times cheaper than those on the Bitcoin blockchain.
Like many 3rd-generation blockchain projects, Zilliqa initially used Ethereum to launch their fundraising tokens. This month, the project team has launched the token swap process facilitated by major cryptocurrency exchanges such as CoinONE, Binance and Upbit. No fixed date was set for the token swap termination
Given Zilliqa’s cautious marketing strategy, it is perhaps not surprising that the project team has not been hyping every single interaction with a major company as a promising partnership.
Two major developments concerning adoption that were made public are worth mentioning, though, are Project Proton and Hg Exchage. The first involves, among others, Mindshare and Pepsico and is aimed at reducing inefficiencies in advertising campaigns. Hg Exchainge is supposed to be a Zilliqa-blockchain-driven exchange in the South Asia that will allow trading of private company shares and security tokens.
So far, it appears that no interruptions to the network or other major incidents have been reported in the publicly available sources after the mainnet launch. However, one has to bear in mind that, so far, Zilliqa has not yet presented an attractive target to external attacks.
Why has ZIL’s price been underperforming?
Given all of the above, it is somewhat surprising, however, that Zilliqa’s native token ZIL’s price has not so far benefitted from what looks like a positive rollout trajectory. ZIL’s USD price is somewhat lower than it was at mainnet launch, and its ETH price has gone down significantly.
Image source: Coinmarketcap
This may mean at least three things. First, there may be some hidden problem that the project has been facing of which most people in the blockchain space are not aware but some insiders are. Although this cannot be ruled out, given the project’s stand-out transparency and careful approach to everything, this is highly unlikely.
Secondly, this may signify that the cryptocurrency markets have not yet matured enough to be able to reliably distinguish high-quality projects from flukes and reflect that in their token prices. With the institutional investor participation still low, this is perhaps not shocking. Added to this is the fact that Zilliqa’s team has been reluctant to hype their project to remotely the same extent as EOS or Tron, for instance.
Finally, ZIL’s price trend might suggest that, despite the formidable and long development effort that Ethereum faces in its bid to scale, it is still perceived as an overwhelming favorite by most market participants. The reasons for this may be Ethereum’s enormous first-mover advantage and widespread adoption of Solidity as smart contract programming language of choice. Some market participants may also believe that whether a scalable blockchain platform launches now or in two years is not that important .
As with many interesting questions in the blockchain space, ultimately, only time will tell whether Zilliqa will turn out to be a viable competitor in the smart contract platform segment. Serious participation by institutional investors in cryptocurrency trading may be just around the corner and this may boost projects like Zilliqa if they have genuine potential.