Zilliqa ( ZIL ) – Underrated work horse

Unlike many crypto projects out there, Zilliqa actually has fully functional technology. Let’s take a deep dive into Zilliqa and discover how it works. 

Zilliqa is a blazingly fast and scalable proof of stake blockchain that can actually grow while being secure, fully functional and decentralised. Not many blockchains of today can pound their chests at similar achievements. Oftentimes the scalability issues ( meaning too many people overloading the network ) result in higher transaction fees and long transaction time delay. All of this is passed down to the user of the network. This is exactly what Zilliqa is tackling head on. All the tech aside, Zilliqa does struggle with their promotion and marketing, therefore it still remains a mostly undiscovered project with very promising technology under the hood. Let’s take a deeper look at how it ticks. 

Zilliqa before Ethereum 2.0 was cool 

 

 

Do you remember the first half of 2018? The overjoyed bull market has come to a grinding halt and pretty much ALL of the hot and sizzling coins started to take a huge nose dive. This is exactly the period when Zilliqa launched. When the majority of all the glittering ICO’s have retrieved into obscurity, the team behind Zilliqa have been moving mountains and growing their brainchild into a powerhouse that it is today. 

Since marketing was never their strongest point, Zilliqa has managed to somehow stay off most people’s radars for the past few years, but luckily not from ours! Started out as a rather bland and academic project, it quickly became a beast of a scalable network with blazingly fast ( and cheap ) transactions, while these days, also tickling the “oh so popular” topic of smart contracts and the all mighty decentralized finance ( DEFI ).

At the moment Ethereum can handle 15 transactions every second ( Bitcoin even less than than! ). In the fast world of blockchain tech, this transaction throughput is nowhere near enough for everything that Ehtereum is truly capable of. Hence we are moving to the Ethereum 2.0 network from this year on. Not all is nice and rosy though.  You see, in the traditional fashion of Ethereum, there will be huge delays and they are bound to disappoint many hot headed investors who scan the markets looking for quick gains. When we analyse the bearded and hairy chested Zilliqa, we can see that at current state, it can process more than 2500 transactions per second, but even this is not the main “sizzle” behind it. The creme de la creme, is the fact that the network is perfectly scalable! Meaning the network capacity can swallow any volume of new transactions and potential new users that you might throw at it. 

To understand why this is absolutely huge, just realise that the scalability issue is something that’s been plaguing the whole crypto space since the very beginning. We have a trilemma of speed, scalability OR security. You can have the 2, but rarely there is a network that claims to tackle all 3. Without dwelling too much on complicated tech talk, let’s explore how Zilliqa is achieving this. 

How Zilliqa works

 

 

When we think of Zilliqa, we have to think about Sharding first. No, we’re not talking about gastrointestinal problems here. Sharding simply means splitting huge complicated pieces of data into smaller ( more manageable ) pieces. In Bitcoin, there is one blockchain that runs all the calculations and processes all the transactions. Same goes for Ethereum and almost all the other altcoins of today’s market.

If we truly want to understand Zilliqa and what it does for the whole crypto space, it’s very important to always remember the trilemma that plagues EVERY crypto currency out there. You can either have: decentralisation, speed OR security. For example, XRP is a fast network that can crunch some serious numbers ( speed and scalability are right there ), but if you for a moment think that a mere mortal can propose any changes to XRP and won’t be laughed out of their offices, you’re greatly mistaken. Same goes for Bitcoin. Even a trillionaire would find it impossible to perform a double spend attack on the Bitcoin network ( called a 51% attack by the way ). This is mostly because Bitcoin nodes and miners are scattered across the world and they keep the network buzzing away at a nauseatingly high speed. So security and decentralization are pretty much covered. But still we have a matter of just 7 transactions per second. So you see it’s almost impossible to have all 3: decentralisation, security and scalability in the same room together. Or is it?

Zilliqa’s take on this gut wrenching problem is called sharding. If you just had a glimpse of a pink coin passing through your thoughts, you are 100% right! Polkadot is aiming to use a similar tech. For now Zilliqa’s network is already up and running, while the Polkadot team is just revving the engine and warming up the tyres. The core idea of sharding, is actually using many parallel running blockchains and splitting data across them for the duration of your transaction ( whatever that transaction might be ). In the end the blockchain data is compiled into a tangible result. This can take shape in you sending your grandmother some ZIL tokens, or your grandmother completing a smart contract interaction in order to dabble in some defi yield farming project. The core principle is the same; take tons of data, split it into tiny pieces and shovel that data a lot faster through a network of multiple blockchains. How fast? Currently around 2500 transactions per second. Done deal! 

But wait! We already have similar systems. What makes Zilliqa unique you might ask? Remember that trilemma? Here is where we can have our cake and eat it too. High speed? Covered! How about decentralization, security and why not throw scalability into the cauldron for good measure? For starters, the more nodes join the Zilliqa network, the higher speeds it can achieve. These nodes ( meaning computers who process transactions and keep a record of the entire blockchain ) are also scattered across the world and are being actively incentivised by Zilliqa to BE as decentralized as possible. Not bad! When it comes to security, there are different layers that make sure the network is secured even when there are malicious players participating in the whole network. This is called the Byzantine fault tolerance. Let’s take a look under the hood and see how the whole network operates. 

Zilliqa Network

 

 

When it comes to security of the network, Zilliqa always assumes that ⅓ of the network participants have malicious intent ( for example by pulling off a double spend attack and rewarding a network user a handsome bounty of ZIL coins ), this is why every new node that wishes to join the Zilliqa network has to complete a grueling proof of work challenge in order to convince one and all that it has no malicious intent at heart. In short, if you thought you might fire up a server park and instruct thousands of computers to become Zilliqa nodes, it would be almost impossible to do with this kind of verification process. 

As if this kind of cherry picking wasn’t enough, there is also a random function that assigns completely different nodes to verify transactions at any given time. This means even if you have some malicious players in the network, there can never be a chance of them colluding into a harmful majority and stirring up trouble for the whole network. A malicious majority is out of the question and all the computers who are constantly supporting the network are actually gaining way more by playing by the rules. How? They get rewarded with some delicious ZIL tokens. 

But wait there’s more! Remember those shards? Meaning the parallel running blockchains? In order to tighten up the security screws even more, even these are randomly shuffled from one computer to the next in order to prevent security issues. If your head isn’t spinning yet, let’s quickly look at the 3 layers of the network and what they do as a whole. 

The Directory Service ( DS ) Committee is the big cheese. This is the main layer of the network that assigns and “directs” different computers to perform computational tasks every 40 seconds and registers data to the main network in the form of a decentralised data ledger. Contrary to the corrupt committees as we might know from politics, this one is ruthlessly effective! It kicks out an old member and replaces him with a new one every 40 seconds. This means every verified node ( computer ) gets a seat at the table at some point in time. Last time something that similar happened was during the French revolution. 

After the DS Committee has figured out what to do, it assigns the number crunching to the second layer called: Transaction Sharding. The transactions or smart contracts get split up and funneled through the complex pipework of parallel running blockchains. Of course there are many rules and fail safe mechanisms here that prevent malicious actions. For example if Bob sends 10 ZIL coins to Alice, this transaction remains on one blockchain in order to make sure no double spend attack is possible. Similar measures are in place for complex calculations like smart contracts.

And off course the last layer is the network of pipes that are all the sharded blockchains that funnel those transactions at high speeds. This is a very basic explanation of the whole network. There are just too many bells and whistles that stretch across multiple articles. The key here is that the whole network is implementing a staggering array of fail safe mechanisms in order to reward the nodes that perform a good job and punish the malicious actors. So far it’s been working like a Swiss watch. So what’s the use of the ZIL token anyway? 

Zilliqa tokenomics 

 

 

Only after we understand the tech, it becomes quite clear what role tokenomics plays in the whole ecosystem. In the grand scheme of things we have the ZIL and GZIL tokens. ZIL is the core native cryptocurrency of the network. It’s the lifeblood and the oxygen. ZIL is being used to reward the network participants for doing their work in an honest and professional way and it’s also the topic of interest for so many crypto investors. Sitting at an impressive maximum supply of 21 billion ( yes with 9 zeros behind it ), the ZIL token can actually decrease in volume due to the burning of transaction fees. Too many people get lost in the technical details of the network and seem to miss this important detail! 

The GZIL is a governance token and it allows users to get a seat at the table and actively propose changes and improvements to the whole network. Pretty damn cool! The GZIL token is limited to only 722 000 coins and can only be earned by staking your ZIL coins. For every 1000 ZIL coins that are earned as staking rewards, you are blessed with 1 holy GZIL token. This generous program is scheduled to end in October 2022 and until today still not many people know about it. 

The whole idea of staking the ZIL token originated from the same old issue of centralisation. If for some reason a large centralised exchange is running too many nodes ( computers ), this creates a serious problem for every network participant. After all, we don’t want one or 2 big players to have a final say in the consensus mechanism of the entire Zilliqa network.  This is why Zilliqa is actively promoting the creation of community run nodes who can help

to decentralise all the processes as much as possible. Zilliqa users are now free to choose one of their favourite community run nodes and literally vote with their money in order to help the holy crusade of decentralization. Oh yeah and for doing that you also get rewarded with ZIL tokens. So all things considered, is Zilliqa a good investment in 2021? 

Is Zilliqa a good investment? 

 

 

Short answer is: Yes. By this point in 2021 Zilliqa has managed to have a fully functioning network that is miles ahead of Cardano or even Ethereum 2.0, working flawlessly and being ready to scale and become even more decentralized. This alone ruffles the jimmies of any old school crypto investor, since the importance of fast, scalable and decentralised networks cannot be understated. It’s the quest for the philosopher’s stone and it looks like ZIlliqa has a shot at getting there while Cardano, Ethereum 2.0 and even Polkadot are still in development. 

There are a few challenges that Zilliqa needs to overcome if it has a shot at surviving the upcoming bear market of 2022 and emerge even stronger and antifragile by the next crypto cycle. Currently Zilliqa is all about steak. There is no sizzle! And during the red hot bull markets, a clear and aggressive marketing strategy can send even the worst shitcoins to the stratosphere. Maybe after you have earned your GZIL tokens, you can throw that proposal on the table? The second problem is that the whole damn network is far from Grandma-friendly at this point. No double you had to re-read a few paragraphs that cover the tech. Developers should be invited to use Zilliqa’s SCILA programming language to tinker and play with, so that the next killer app will be powered by this amazing fully functional network. At the current time it’s still very early and we are seeing first shoots of media attention focussed on Zilliqa and the ZIL token slowly emerging from obscurity. There is no way to tell what price level the ZIL token might reach. What is certain though, is that this fully functional, fast and decentralized network remains severely undervalued.