Zilliqa: Update Report 1

October 12th 2018

From the research team at

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 Disclaimers

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Introduction

Crypto Briefing has produced over 100 deep analyses of early-stage blockchain
projects since September 2017. Our exceptional diligence has become the gold
standard for crypto researchers who demand independent and unpaid reports.

In October 2018 we expanded our reporting to provide even deeper analysis of

tokens traded on exchanges such as Binance, Coinbase, and Bitfinex.

The result is DARE – the Digital Asset Report & Evaluation.

Our reports come in two guises:

THE INITIATION REPORT

In this first report, we examine the fundamentals of the blockchain project – its
goals, its uses, its economics and team. We then assign a grade based on how we
see the overall strength of the token in the market at the time of the Initiation
Report. This will serve as the yardstick for future updates.

THE UPDATE REPORT

Our second and subsequent reports examine how the token has performed since
the Initiation Report. Have they stuck to their roadmap? Has the competitive
landscape changed? Has there been a major change in adoption?

We then issue another grade, based on the now-current strength of the token.
Updates may come quickly if the token evolves rapidly, and may be less frequent
when there is little to report.

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The world’s trusted source for
independent and unpaid early-stage
blockchain analysis and ratings.
UPDATE REPORT #1
October 12, 2018

CONTENTS
3. Introduction to DARE
4. Zilliqa Overview
In our follow up, we take a close look at 5. Tech Progress
progress indicators of the Zilliqa token 6. Ecosystem Development
project. 8. Token Price
9. Token Volatility
Our initial rating of B- is reaffirmed,
10. Analysis
reflecting the high level of risk posed by the
11. Verdict and Grade
delayed release of the mainnet, slow growth
12. DARE Methodology
of the ecosystem and threats from
16. DARE Grading System
competing chains that also aim to implement
sharding-based scaling solutions.

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Zilliqa Tech Progress

The Q2 2018 of the v2.0 Zilliqa testnet, D24, launched according to schedule on
June 30th. With the timely release, the project appeared to be on track for the
scheduled mainnet launch in Q3.

However, on August 6th, an announcement on the Zilliqa Telegram channel

stated the mainnet release would be delayed until January 2019 at the latest.

The launch of the Zilliqa mainnet will prove a pivotal moment for showcasing
the core value proposition of the network to the cryptospace in what has quickly
become a market saturated with protocol after protocol promising higher
throughput speeds than the rest.

Moreover, release of the mainnet and accompanying dev tools will complete the
foundation on which an ecosystem of dApps could possibly grow. Co-founder
Amrit Kumar released the following statement, edited for brevity, about the
delay of the mainnet launch:

“Since the release of our technical whitepaper back in August 2017, we have
come a long way and have modified part of the initial design and implemented
new techniques to make the protocol more performant and more secure (…)

Oftentimes, such modifications to the protocol design required a complete re-

design of certain parts of the system. In the past few weeks, we have had
extensive discussions to review the timeline in light of these enhancements.
Unfortunately, we will need more time to ensure that the code gets properly
tested by the core development team, the community and last but not the least,
established auditing firms.”

The delayed release of the mainnet and developer tools forestalls the possibility
of 3rd party developers building and launching dApps with Zilliqa.

Until a complete developer toolkit and viable mainnet are available, Zilliqa will
continue to lose crucial time and, consequently, will take on more risk as
competitors push ahead.

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Zilliqa Ecosystem Development

Efforts to set the initial groundwork for an ecosystem have mainly focused on
the launch of a fund for developers and several enterprise partnerships. When
measured against the progress Zilliqa has made toward a fully-functional
mainnet, interest from potential users of the protocol has been lacking.

The ecosystem development program BuildOnZIL was launched on June 19th to

solicit support from the wider developer community toward creation of both
dApps and network components that would spur further growth.

On August 14th, program participants and their respective projects were shared
with the public. Participating developers have delivered a number of network
components like a browser wallet extension, smart contract library for dApps,
and an API for Javascript. While many important network components arose
from the initiative that will help lay the foundation for development, the current
array of tools available to developers interested in building on Zilliqa is still in
the early stages.

In the realm of partnerships, the announcement of cooperation between Zilliqa

and leading media/marketing company Mindshare initially represented a
promising signal that enterprise interest in the project would help drive forward
adoption. References about the partnership have died down since the
announcement, with only sporadic mentions like a Tweet from the official Zilliqa
Twitter account on May 23rd, in reference to a “full value chain solution” pilot-
project that would include NASDAQ and NYSE-listed firms.

A question in the Zilliqa Telegram channel on August 21st from a community

member regarding enterprise partnerships received a confirmation from their
admin that the Mindshare partnership is indeed still on, yet no official updates
have been released in several months. In the pre-mainnet stage of any network,
partnerships play a crucial role for bolstering confidence in the future of a given
project. As time goes by without any updates, that confidence inevitably
declines as well.

(continues)

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Zilliqa Ecosystem Development

On August 2nd, Zilliqa released news of a new partnership with Japanese

software company Infoteria. According to the announcement, both companies
will promote the Zilliqa platform on Asteria, a middleware product developed by
Infoteria that serves more than 6,500 enterprise customers. As an enterprise
blockchain integration, the exact relationship with the Zilliqa public blockchain
remains unclear.

With the project’s value proposition tied heavily to enterprise deployment, the
results of these partnerships hold significant weight; the ambiguity that has
shrouded both avenues for adoption calls into question whether the Q4
milestone of key, “anchor” dApps will be met.

These anchor dApps will serve as the flagship fleet for the protocol, instrumental
for increasing adoption by demonstrating the true potential of the network to
deliver on the promise of high speed transactions.

Missing this milestone would pose another significant setback during what is an
absolutely decisive moment in ensuring the long-term success of the project.

The lack of updates on the progress of these anchor apps reduces the surety
Zilliqa will reach this milestone by Q4.

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Token Economy Development and Competition

Since reaching peak trading volume on May 5th at approximately $600M, ZIL has
followed a steady downtrend to a current level around $5.5M.

The daily trading volume of QuarkChain (QKC) - another sharding-based protocol

aimed at addressing the throughput issues facing Ethereum - has surpassed ZIL
on 13 of the last 90 days, with ZIL maintaining a slight edge overall.

Between the two protocols, the actual liquidity level of ZIL is only nominally
higher than QKC. With daily trading volume having fallen so much between May
and October, market interest has certainly died down.

ETH / QKC / RDN / ZIL price

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Token Economy Development and Competition

ZIL volatility has remained comparatively below that of both QKC and offchain
Ethereum scaling solution, Raiden (RDN). This is likely attributable to the
comparatively lower daily trading volume of QKC and RDN.

Eth /QKC / RDN / ZIL volatility

With the Zilliqa mainnet launch scheduled for the end of January 2019, any
significant price increase will likely occur early into next year, though the
uncertainty of the launch and possible continuation of bear market conditions
would require substantive news of progress in the lead-up for the release to
result in a significant uptrend.

The reluctance of developers to move over to ZIL and consequent absence of a

growing ecosystem will likely result in any uptrend being short-lived.

Furthermore, the last major release that could have catalyzed a price increase,
the v.2 testnet, did not lead to any meaningful price movement preceding the
launch or thereafter. ZIL currently hovers around 34th place on
CoinMarketCap.
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Analysis of Zilliqa and ZIL Token

Just as the rise of Ethereum catalyzed an emergence of competing protocols built

to address the limitations of the network, the implementation of sharding could
foreseeably result in the redundancy of these very same projects.

For Zilliqa to compete in any real manner with an Ethereum network using
sharding, a robust ecosystem must be established and given time to develop well
before a sharding solution is released. The foremost risk factor posed by
Ethereum is that adoption levels of the network are simply so high, with 1000+
dApps already deployed on the network.

On May 1st, Vitalik Buterin posted a proof-of-concept on Reddit for sharding on

the Ethereum network. As it stands, the current roadmap has set a vague target
for implementation of sharding between 2019-2020.

The delayed Zilliqa mainnet release means efforts to attract developers must
invariably contend with even the slightest concrete signal that sharding is around
the corner for Ethereum. While the risk to Zilliqa posed by Ethereum is high,
timing could play toward Zilliqa’s favor when it comes to building a niche
ecosystem of dApps.

Zilliqa’s technological advantage over Ethereum opens up a brief window to cross

the moat. If Zilliqa fails to achieve a contendeble level of adoption by dApp
developers during that time period, the project prospects look dismal.

When it comes to squaring up with the competition, Zilliqa faces another potential
hurdle to onboarding the number of developers needed for mass adoption

If Solidity maintains its status as the blockchain industry standard, in our view a
likely scenario, Zilliqa’s use of Scilla could prove a barrier to entry. Underlying the
prevalence of Solidity among dApp developers is the fact Ethereum has reached
an unparalleled level of mass adoption within the cryptospace as a whole.

While the current market dominance of Ethereum does not preclude coexistence
with other protocols in the future, the long-term viability of Zilliqa rests heavily on
carving out a niche user base while the window of opportunity remains open.

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 Final Thoughts and Verdict

-------------------------------------

ZIL token maintains a B- grade.

Zilliqa has by and large maintained solid momentum toward developing the
network, with the mainnet delay representing the first real setback toward launch.

Still, the minimal progress made by the project toward onboarding developers and
establishing partnerships represents a significant risk factor, especially given the
threat posed by sharding on the Ethereum network, which has the potential to
undermine the core value proposition of Zilliqa.

A timely, successful launch of the mainnet will prove extremely important in

boosting momentum of the project, but remains only half of the equation for
establishing a firm grasp on the market.

Crypto Briefing exists to advocate for the safe and responsible integration of blockchain and
cryptocurrency into mainstream life. In addition to our Digital Asset Report and Evaluation, we
provide an unbiased and independent news outlet with updates on blockchain developments,
token prices, regulatory affairs, opinions, market reports, tech analysis, and much more.

Find us online at www.cryptobriefing.com

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DARE Methodology

Framework

The Token Report is a standardized approach to evaluating blockchain-based

projects and identifying value in the associated crypto-assets.

The token report consists of a dual structure- Initiation reports and Follow Up
reports. The grade reflects our thoughts regarding the future commercial
viability of the product based on the current state of the project. The opinion
piece reflects our views on the attractiveness of the value proposition of a
given token. The underlying methodology involves both quantitative and
qualitative analysis to ensure that we produce the most accurate picture
possible at the time we conduct our evaluation.

Our first look at a token employs the Initiation report as a vehicle for delivery.
Initiation reports provide a format that introduces the audience to the project
basics in a comprehensive. The details contained in the Initiation report include
a project summary, vertical classification, discussion of market opportunities,
user ecosystem structure, token economy design, core team member info,
explanation of the underlying technology and an outline of the roadmap.
Importantly, the Initiation report introduces readers a brief overview of key
project developments. The report concludes with a grade according to our
weighted evaluation system.

The Follow Up report offers a vehicle for sequential updates on the progress of
each token. Follow Up reports provide readers with the latest, most relevant
information on project fundamentals, including progress on tech development,
ecosystem growth, trading volume, a comparative look at token performance,
and examination of upcoming price catalysts.

An analysis of the aforementioned variables is included in support of the

project grade and verdict. Grades assigned to tokens in Follow Up reports can
reflect a change in our opinion of the project or provide a reaffirmation of the
Initiation report.

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DARE Methodology

We consider the project-asset paradigm from five key angles:

1. Technology development
2. Ecosystem development
3. Usability
4. Trading volume
5. Token performance

The evaluation looks at the current state of the project, how it relates to the
initially stated goals, and the realistic outlook for the future. These factors are
all, in some way, codependent, so they are analyzed both individually and in
the context of the overall scope and progress of the project.

Technology Development

Technological development is the core of any blockchain-based project. It is

important to note that TPRs refer to post-ICO projects. So, what we are looking
at, is the progress the team has made more than the promises that have been
laid out in the white paper.

The ideal project will have relevant technological solutions, be keeping on

track with the stated milestone schedule and be producing quality code. The
evaluation incorporates, but is not limited to:

• Code review
• GitHub activity
• Relevant news
• Roadmap evaluation
• Reassessment of relevance

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DARE Methodology

Ecosystem Development

Blockchain projects are highly dependent on network effects. It does not

matter if the project is very innovative, if its acceptance in the community and
the market is low. This is especially important for network projects that are
being built for future dApp development.

We pay special attention to near-term catalyst that have the potential to affect
ecosystem growth. An ideal project will have proven partnerships and active
dApps on its network, as well as, a strong pipeline of affiliated projects. The
evaluation incorporates, but is not limited to:

• Network analysis (dApps)

• Relevant news
• Social media
• Asset allocation
• Governance

Usability

Here we consider how the product and the underlying asset is being used. It is
important that token usage is in-line with the stated goals of the project. This is
especially true for utility tokens whose long-term value is tied to the for-
product usage as opposed to market speculation.

The ideal project will see a strong growth trend in on-chain transactions and a
large percentage of assets being devoted to consensus and other utility
activity. The evaluation incorporates, but is not limited to:

• On-chain data analysis

• Token economics
• Relevant news
• Social media
• Market research

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DARE Methodology

Trading Volume

Here we consider liquidity risks associated with underlying asset. Trading

volume is highly correlated with adoption and market sentiment, but it can
also drive them. High or low volume can affect user awareness as well as
feasibility of utility.

Additionally, we consider inflation and deflation catalysts such as lock-up

expiration and hash rate changes. The ideal project will have strong, steady
volume on the major exchanges, such that buying and selling of significant
quantities of the token does not produce violent price swings. The evaluation
incorporates, but is not limited to:

• Trading data analysis

• Governance analysis
• Relevant news
• Social media
• Token economics

Token Performance

Here we consider price volatility risks associated with underlying asset. We

look at the performance of the tokens in the context of the overall market
trends, as well as, individual project dynamics. It is important to note that
while volatility reflects risk, it is not necessarily an accurate indicator of the
commercial viability of the project. The ideal project will have an asset with
positive long, medium and short-term price momentum. The evaluation
incorporates, but is not limited to:

• Trading data analysis

• Relevant news
• Social media
• Token economics
• Value modeling

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DARE Grading

A+
Commercially successful project with a exceptional fundamentals; a thriving
ecosystem and large-scale adoption support high level of token price stability.
The token is utilized by a large community of supporters and value is highly
tied to exceptionally strong fundamentals. The governance model of the
network fully reflects the aim of the project. Long term prospects for project
appear excellent based on a demonstrable track record of sustained growth
and usage.

A
Commercially viable project with a robust fundamentals; positive ecosystem
growth and widespread adoption with high level of token price stability. The
token is utilized by a community of supporters and value is predominantly
based on actual usage of the network. Long term prospects for project look
very positive based on consistency of track record.

A-
Technologically relevant and commercially viable project exhibiting early stage
signs of adoption- while adoption at scale has not occured yet, a strong track
record of achieving goals in line with roadmap indicate risk level is low. Project
has made significant strides toward decentralization of the network, though
mitigating factors may still persist.

B+
Project typically exhibits strong tech development and ecosystem growth
progress in line with all milestones but has yet to prove commercial viability or
gain adoption. Project development has been consistent in moving toward
proposed governance structure of network, though full implementation has
not yet occurred. Token retains moderate level of vulnerability to adverse
market conditions.

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DARE Grading

B
One major progress indicator (tech development or ecosystem growth) is
typically advancing well in accordance with roadmap but the other is lagging
behind; upcoming catalysts signal potential for positive price trend. Project
remains highly susceptible to adverse conditions in the market and token price
is moderately volatile.

B-
One major progress indicator (tech development or ecosystem growth) is
typically advancing well in accordance with roadmap but the other is lagging
behind; no upcoming near-term catalysts strong enough to signal potential for
positive price trend. Project still retains significant susceptibility to adverse
conditions in the market and token price is moderately volatile. Examples may
include a technologically sound project with little prospect of adoption due to
shortage of marketing resources OR a popular token behind on tech
development because there aren’t enough devs or projects in ecosystem.

C+
Project exhibits moderate indications of progress but still faces above average
level of risk; token price is highly volatile, prospects for adoption are uncertain
due to factors such as poor marketing, lack of developers or dApp projects,
irrelevancy of tech, or critical governance issues.

C
Usability issues present substantial issue for token; significant uncertainty, but
project still demonstrates moderate progress on development or ecosystem
fronts, having passed important milestones, albeit with delays. Adverse
conditions in the market pose major risk to value of token.

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DARE Grading

C-
Project has failed to pass several crucial milestones, leaving progress largely
stagnant; while vulnerable to adverse external market conditions, the project
still retains potential for turnaround. The value of token is predominantly
based on speculation and potential for price volatility is high.

D+
Project has missed majority of important initial milestones. Underlying tech
is irrelevant and community support for project is low. Track record shows any
upcoming milestones which may play role as a catalyst for progress will likely
not be achieved. Token price is very susceptible to adverse market conditions
and exhibits persistent volatility, resulting in substantially high level of risk.

D
Consistent failure to deliver on promises with no verifiable signs of progress,
leading to significant degree of uncertainty. Underlying tech is unproven and
community support for project is marginal. Track record shows any upcoming
milestones which may play role as a catalyst for progress will likely not be
achieved. Token price is very susceptible to adverse market conditions and
exhibits persistent volatility with low level of liquidity, resulting in substantially
high level of risk.

D-
Project and token performance exhibit tell-tale signs of failure with little
chance for recovery. Evidence of underlying technology either demonstrates
poor implementation or is non-existent, with no sign of network transactions
beyond speculative trading. The ecosystem of users and support for project is
declining and untenable with no upcoming catalysts. Token price is purely
based on speculation, persistently volatile, and liquidity is exceptionally low.

F
Project has outright failed and prospects for turnaround are non-existent.
Token cannot be used for its intended utility on the network and community
support is near zero.

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