Arguably, one of the things holding back the widespread adoption of cryptocurrencies is its scaling problem.
Legacy cryptocurrency networks like Ethereum only can only handle about 15 transactions per second (TPS) while the Bitcoin network can only handle about 3 -5 TPS.
In comparison, traditional payment methods like Visa and Mastercard can handle thousands of TPS.
Enter Zilliqa: a blockchain platform capable of processing thousands of TPS and more crucially, Zilliqa’s transaction throughput increases (roughly) linearly with its network size which bodes well for scalability.
The platform also functions as a transparent and open public blockchain network that allows the running of smart contracts and decentralised apps (Dapps) and can be considered a direct competitor to Ethereum.
Here’s all you need to know about Zilliqa!
Disclaimer: The information provided by Seedly serves as an educational piece and is not intended to be personalised investment advice. Readers should always do their own due diligence and consider their financial goals before investing in any investment product.
TL;DR: Ultimate Guide to Zilliqa
- Zilliqa is a public blockchain network that was the first public blockchain to implement sharding on its mainet, delivering high performance, scalability and high security for smart contracts and decentralised applications.
- The blockchain network is currently processing about 1,000 TPS which is more than legacy blockchain networks like Bitcoin and Ethereum.
- The platform is also quite well funded and has a couple of important partnerships with companies in the region.
- I would liken Zilliqa to investing in a small high growth startup with promising technology and a good team. And like investing in these types of companies, you are bearing quite a bit of risk and could lose most of your capital.
What is Zilliqa
Zilliqa is a public blockchain network that was founded back in 2017 by Amrit Kumar, Xinshu Dong, Yaoqi Jia and Prateek Saxena — a group of researchers from the National University of Singapore (NUS)‘s computing department.
FYI: The Zilliqa blockchain platform is registered as Zilliqa Research Pte. Ltd.
Most notably, Prateek Saxena co-authored a paper in 2016 with Loi Luu his PhD student at that time who then went on to start the decentralised exchange Kyber Network.
The paper entitled Elastico explored how sharding, a technology used in database architecture could be implemented into blockchains to enable scalability.
This research paper became the basis for the Zilliqa project which was officially started on 1 June 2017.
Zilliqa was designed to address the two main problems of legacy blockchain platforms like Bitcoin and Etherereum — scalability and smart contract security.
Zilliqa addresses scalability with the use of sharding — a technology that divides the blockchain’s network into smaller blocks that can process transactions in parallel.
Zilliqa is also powered by Smart Contract Intermediate-Level Language (Scilla) a smart contract programming language designed to increase beef up the security of smart contracts.
How it Works: Breakdown of Technology
To understand how Zilliqa’s technology works, you need to have a basic understanding of blockchain nodes.
According to Coinmonks:
A blockchain exists out of blocks of data. These blocks of data are stored on nodes (compare it to small servers). Nodes can be any kind of device (mostly computers, laptops or even bigger servers). Nodes form the infrastructure of a blockchain. All nodes on a blockchain are connected to each other and they constantly exchange the latest blockchain data with each other so all nodes stay up to date. They store, spread and preserve the blockchain data, so theoretically a blockchain exists on nodes. A full node is basically a device (like a computer) that contains a full copy of the transaction history of the blockchain.
But herein lies a limitation of legacy blockchain technology
Each node has to process the entire network’s transactional load which limits the number of transactions a blockchain network can process in a second.
The core feature that makes Zilliqa scalable is sharding — the process of fracturing a group of blockchain nodes into smaller groups (called shards) that are able to process transactions simultaneously and in parallel.
For example, let’s say a blockchain network has six thousand nodes. Zilliqa would divide the network into ten shards each with 600 nodes each.
FYI: A shard needs to have more than 600 nodes to secure the network by lowering the probability of having a fraction of up to 1/3 of the shards being malicious.
These smaller shards or microblocks process a small portion of the transaction simultaneously and in parallel with other microblocks
Subsequently, these microblocks are fused together and added to the blockchain.
Due to the parallel transaction processing, the number of transactions processed per minute can be greatly increased.
If each shard is capable of processing 10 transactions per second (TPS), then all shards together can process 100 TPS.
As a result, Zilliqa is able to handle a larger volume of TPS.
In addition, the block is immediately written to the Zilliqa blockchain after it is processed which eliminates the additional confirmation time.
Transactions Per Second (TPS): How Does Zilliqa Compare?
When it comes to processing transactions, Visa is king as in theory, the network has the ability to process about 65,000 TPS.
However, in reality, Visa only process about 1,700 TPS on average a day (calculation based on Visa’s claim that it processes 150 million transactions per day).
At the time of writing (November 2019) Zilliqa claims its live network can handle about 1,000 transactions per second.
FYI: Ziqilla’s MainNet was launched in January 2019 and became the first public blockchain platform in the world to successfully use sharding technology as a scaling solution.
As Zilliqa is designed to scale linearly, there is potential and room for future growth.
In comparison, the Ethereum network only handles about 15 transactions per second while the Bitcoin network handles about 3 -5.
Scilla Smart Contract Programming Language
In addition, Zilliqa has developed Scilla — a peer-reviewed and smart contract programming language built to address the security vulnerabilities that still exist with the other languages.
Scilla was also built to integrate seamlessly with Zilliqa’s sharding and scalability infrastructure.
The language also allows developers to automatically verify the security properties of smart contracts. Also, the language has its own library of resources which means there is no need for external programming libraries.
Due to its implementation of sharding technology, Zilliqa is able to scale in a linear fashion as the network increases in size.
This scalability keeps network fees low.
Unlike legacy blockchains where network fees increase with more transactions, Zilliqa keeps fees low.
For example, fees on Zilliqa are so low that it allows microtransactions with fees as low as $0.000023 ZIL per transfer as well as huge international value transfers.
Microtransations are great as they allow creators of decentralised applications (Dapps) to carry out daily transactions without paying high fees.
Potentially, Zilliqa can host transaction heavy social media Dapps like Facebook (NASDAQ: FB) or Twitter.
Zilliqa’s Consensus Mechanism
Zilliqa actually uses two types of technologies for its consensus mechanism.
The proof-of-work (PoW) consensus protocol is used to establish initial mining identities, carry out network sharding and defend against Sybil attacks (type of attack where a node in the network operates multiple identities at the same time to corrupt the decision-making process).
But, to give finality to transactions, Zilliqa then uses an optimised Byzantine Fault Tolerant (pBFT) protocol.
Currently, Zillliqa’s complex blockchain structure is being utilised to develop some pilot and commercial applications in the areas of:
- Data mining
- Domain registry service
- Financial services (e.g. financial modelling)
- Payment reconciliation in advertising
- Training neural networks, machine learning (ML) applications and financial algorithms
- Token offerings
Background of Team
The Zilliqa team is led by President and Chief Scientific Officer Dr Amrit Kumar who has a doctorate in Philosophy from Université Grenoble-Alpes and a Master’s degree in Cryptology from Instituto Politécnico Nacional de Grenoble.
Not to mention that the platform has advisors like FBG Capital’s co-founder Vincent Zhou, decentralised exchange Kyber co-founder Loi Luu and more.
Funding, Investors And Partnerships
Zilliqa is also quite well funded as according to CryptoCurrency Guide, the platform received about US$12 million (S$15.9 million) worth of Ether (ETH) at that time from private investors at the tail end of 2017.
But shortly after the funding round ended, the price of ETH surged. This meant that the US$12 million that they raised was now worth US$20 million (S$26.5 million) which meant that the platform had met the initial funding target.
But subsequently, the platform went ahead and launched an initial coin offering (ICO) to raise more funds for development.
The ICO was wildly successful as the platform managed to raise US$22 million (S$29.1 million) worth of ETH in a token sale that ended on 4 January 2018.
Zilliqa has also inked deals with several partners like:
- Deloitte and FWD: Zilliqa partnered with Deloitte and FWD in 2018 to launch Inmediate, a collaborative ecosystem for blockchain-based insurance.
- Mindshare and PepsiCo. Zilliqa partnered with global media agency Mindshare in September 2018 to conduct a pilot with Zilliqa’s blockchain protocol to address the challenges faced by the advertising industry. Zilliqa’s technology was used by Mindshare to launch a test campaign with PepsiCo which saw an increase in advertising efficiency by 28%. Following the success of this pilot, the Aqilliz advertising blockchain platform was launched.
- Xfers. In June 2019, Zilliqa established a partnership with Xfers, another Singapore-based fintech company with 10 million unique monthly active users to launch ($XSGD) the first SGD-pegged stablecoin on the Zilliqa blockchain network.
- Mintable NFT Marketplace: Zilliqa is also a partner of the non-fungible tokens (NFT) marketplace Mintable. This partnership has allowed users to buy NFTs on Mintable using ZIL tokens.
- Hg Exchange (HGX): Member-driven private exchange that allows investors access to investments like whisky-linked securities, private equity, venture capital funds, and real estate which went live in September 2020.
Finances And Tokenomics (Token Economics)
Like many other blockchain platforms, Zilliqa has a token for its ecosystem called the ZIL token which is given out to miners as a reward and and used to pay for transactions on Zilliqa (e.g. gas fees).
Here are some details about the ZIL token at the time of writing (according to CoinMarketCap):
- Price: US$0.123 (S$0.16)
- Circulating Supply:
- Max Supply of 21 billion ZIL (#65 largest cryptocurrency by market cap)
- Total Current Supply of 14.6 billion ZIL
- Market Capitalisation: ~US$1.4 billion (S$1.85 billion)
Like Bitcoin, Zilliqa has a finite maximum supply of 21 billion ZIL tokens where the allocation can be broadly broken down into:
- 6.3 billion or 30% of the maximum supply of ZIL which were generated during the platform’s ICO in January 2018.
- Another 6.3 billion or 30% was given to Zilliqa Research (the company behind Zilliqa), the founding team, investors and advisors.
- The remaining 8.4 billion or 40% is reserved for mining.
You can also stake your ZIL tokens on Zilliqa to earn annual returns of 6% or more with non-custodial staking returns on their investments.
Risks of Investing in Zilliqa
At this point in time, I would liken Zilliqa to investing in a small high growth startup with promising technology and a good team.
And like investing in these types of companies, you are bearing quite a bit of risk and could lose most of your capital.
But on balance, investing in Zilliqa could be potentially rewarding as well.
Please your own due diligence on this cryptocurrency and invest only money you can afford to lose.
Not to mention that this coin is still highly volatile, with its price swinging from +400% in a month and dropping -50% in a week.