Cryptocurrencies

What is Zilliqa? The Beginner’s Guide

Zilliqa is not a well-known project, but this platform has many unique and interesting features. Zilliqa is trying to challenge Ethereum and other platform projects. This article is a Zilliqa review. It’s a beginner’s guide for those, who don’t know the project that well. We’ll go through the Zilliqa past, present, future, and technology.

Zilliqa is a platform project

First, let’s set Zilliqa into a category in the crypto universe. We like to divide cryptocurrencies into three categories: platforms, tokens, and currencies.

As the title suggests, Zilliqa should be placed into the platform category. The best-known platform is Ethereum. Other significant platform projects include EOS, Tron, and Tezos.

Platforms are also called as frameworks, ecosystems, and operating systems for smart contracts and Dapps. You can think of these projects like iOS or Android. A platform is a foundation and a framework for developers to build distributed applications.

Tokens, on the other hand, are always created on these platforms. They have utility and usage inside a specific program and don’t have a blockchain of their own. Currencies are designed to be P2P money and include cryptos like Bitcoin, Litecoin, Dash, and Monero.

It’s not an easy task to run a platform project since this niche is so strongly dominated by Ethereum. Even if Zilliqa has risen in the ranks in 2020, there are still about a dozen platform projects with a higher market cap. There’s certainly a lot of work to do.

Below is a short introduction video of Zilliqa from Youtube.

The name Zilliqa can refer to several different things. It can be the whole project, Zilliqa network, Zilliqa blockchain, or the Zilliqa cryptocurrency (ZIL). The Zilliqa blockchain has a native token as all platforms do. ZIL is used for paying transactions and staking in the network.

The project has achieved quite a lot despite its relatively young age. Next, we’ll go through Zilliqa’s background and history.

Zilliqa has its roots in Singapore

The Zilliqa project is originally coming from Singapore. It seems that the name Zilliqa is twisted from the English word silica (also known as silicon dioxide). Note that it has two letters l in it.

Zilliqa was founded in 2106 by a group of NUS researchers and experts. NUS means the National University of Singapore. Xinshu Dong (CEO), Yaoqi Jia (Head of Technology), Amrit Kumar (Head of Research), and Prateek Saxena (Chief Scientific Advisor) are considered as the founding fathers.

The team has lots of experience from the business world and the sharding technology. Prateek Saxena was one of the team members, who published an academic paper of sharding already in 2015. This technology is the backbone of Zilliqa as well.zilliqa team

Zilliqa Research was founded in June of 2017. This is a fintech company responsible for the development work. Many will remember the year 2017 as the peak of the ICO boom. Zilliqa wasn’t certainly the only platform having an ICO back then.

Originally, the project was planning to raise 20 million dollars. Twelve million from private investors and eight million through an ICO. Thanks to the price rise of Ethereum, Zilliqa raised enough funds already from the private round. The public ICO was therefore canceled.

There was so much demand among the public for an ICO, that Zilliqa decided to have one anyway. They raised an additional two million dollars through a public ICO at the peak of the ICO boom. These numbers are quite small when you compare to the multi-billion EOS ICO or 400-million-ICO of Tezos.

The native token Zilliqa (ZIL) was first created on the Ethereum platform, where the ICO was hosted as well. This was a popular method back in the day. Many other platform tokens (EOS, Tron, etc.) were born the same way.

It took about a year for Zilliqa to get their MainNet up and running. This took place in January 2019. This is when a token swap was done, meaning the ZIL token was moved from Ethtereum to the Zilliqa blockchain.

The year 2019 was quite dramatic due to two key people leaving the project.

Xinshu Dong was the CEO of Zilliqa but quit his role in May of 2019. In September of 2019, more bad news arrived. The CTO of Zilliqa, Yaoqi Jia, also stepped down from his position.

The project kept going forward despite these changes, but they certainly had an impact on the ZIL token price. Zilliqa price crashed quite badly in late 2019 and further down in the March of 2020 when the whole market went down due to the “corona crash”.

After this, Zilliqa’s price has moved up significantly. The ZIL token went up about 10x from its March 2020 bottom. The reason behind this move was MainNet staking, which was introduced in June.

Next, it’s time to learn about the technology behind Zilliqa.

Zilliqa and sharding

Zilliqa is best-known from its sharding technology, which was briefly mentioned in the previous chapter. The team has plenty of expertise in this niche, but sharding is not a technology developed by Zilliqa alone. Ethereum will also use sharding in the upcoming 2.0 version.

Generally speaking, Zilliqa a 3rd generation platform. It has roughly the same capacity and features as other 3rd generation platforms, such as EOS, Tron, and Tezos. All these are based on Proof of Stake consensus algorithm and not Proof of Work like Ethereum still does.

The reason why Zilliqa is known for sharding lies in the MainNet launch. Zilliqa was the first cryptocurrency project to successfully launch a MainNet using sharding technology. This happened in January 2019.

Sharding is so important technology because it helps blockchains to scale. The word sharding means fragmenting and one shard is like one fragment of a blockchain. In other words, the blockchain using sharding is split into smaller pieces.

zilliqa sharding

The problem Bitcoin has right now is that all nodes have to validate all transactions coming to the network. Let’s say there are 15 nodes in the Bitcoin network and 150 new transactions. This means validating would be done 15 * 150 times. Each node would have to validate every transaction.

In Zilliqa, these 15 nodes could be split into five groups of three nodes. If there are 150 new transactions, they could be sliced into these groups with just 30 transactions in each. The amount of validation work decreases significantly.

In the previous example, a group of nodes is called a shard. In Zilliqa’s network, each shard consists of 600 nodes. The system can, therefore, grow in steps: 600, 1200, 1800, 2400… and so on. More nodes will lead to more shards and higher throughput.

Zilliqa can process almost 3000 transactions per second as it is, which make sit a very scalable platform. If you want to learn more about sharding, there’s lots of information on Youtube.

Two types of nodes, two consensus protocols, and two blockchains

There are more unique features on Zilliqa than just sharding. Let’s look at the structure of the Zilliqa blockchain and nodes next.

Zilliqa is using both the Proof of Work and Proof of Stake consensus algorithms, which is quite unique. One should understand that the PoW does not function as a method to reach consensus. It’s only used for a small hash calculation, which is used for node identification. Hence, there are no physical miners involved.

After a node has been identified, it can start the actual blockchain maintenance work. This is done in one of the Zilliqa blockchain shards.

The consensus of the Zilliqa network is reached by using PBFT, Practical Byzantine-Fault Tolerance, which is a Proof of Stake variant. This consensus algorithm is also used by a few other platforms, such as NEO.

zilliqa pbft

Each node works inside the shard it’s been assigned to. There are special nodes called lookup nodes, which perform this assigning action. They also get 5% of the transaction fees.

Nodes build so-called micro blocks in a phase called DS Epoch. This means that transactions are validated first inside each shard. Each DS Epoch has a DS Committee. Members of this committee are selected randomly out of the network nodes. DS Committee will bundle all micro blocks and build the actual block, which is stored on the Zilliqa blockchain.

In fact, there are two Zilliqa blockchains. These are called the DS and TX chain. DS means Directory Service and it has all node identities stored in it. TX blockchain has all the transaction data, which is built and validated in the shards.

A new block is created onto the TX blockchain every 45 seconds. This is currently the weak point of Zilliqa because 45 seconds is quite a long time for a transaction. The strength of Zilliqa is transaction finality, which comes from using the PBFT consensus. This means all transactions are instantly finalized and there is no need to wait for more confirmations.

Zilliqa staking and ZIL token

Zilliqa’s ZIL token has had a significant price rise during the first half of 2020. As mentioned earlier, the reason behind this is Zilliqa staking. KuCoin was chosen as the first partner with Binance. You can read more about the staking from Zilliqa’s blog.

zilliqa kucoin staking

The role of KuCoin and Binance is to function as delegation on-ramps. This is how many other staking platforms function as well. It’s difficult for an average jo to become a network validator alone. Instead, small investors can delegate their tokens to entities running the nodes and still get rewards.

Both KuCoin and Binance run a seed node in the Zilliqa blockchain. The basic requirement for this is 10 million ZIL tokens, so it isn’t for everyone. This article is being written in late June 2020, when the staking has just begun.

We are now at phase 0, which is like a soft launch of the staking.

”KuCoin will follow a soft staking approach. With this flexible option, users can earn staking rewards anytime without locking up their funds. All they need to do is hold tokens in their Pool-X account on KuCoin. They can receive rewards daily.”

According to Zilliqa FAQ, one can expect about 10% yearly return on your investment.

At this point, one must also consider the yearly inflation rate of 8.5%. However, it depends on the view. The “monetary base” of Zilliqa is not growing – it is fixed just like it’s fixed for Bitcoin. But just like with Bitcoin, not all Zilliqa tokens are out in the market yet.

There are 21 billion Zilliqa tokens created, but only about half of them are in the market. The remaining tokens will be released over the next 10 years as staking and block rewards.

Zilliqa partnerships and development

Even if Zilliqa is a relatively young project, it has achieved a lot. The Zilliqa roadmap has also interesting and upcoming milestones. What’s important is the fact that Zilliqa seems to get things done in time, which can’t be said of every project out there.

Previously mentioned MainNet staking is probably the biggest milestone in 2020. Next, Zilliqa is working with a Layer-2 solution and zk-SNARKS. These will eventually lead to faster block times and privacy features.

Below is a picture from Zilliqa.com with the most important infrastructure projects in it.

zilliqa roadmap

You can read more of Zilliqa’s development from the project website.

When talking about partnerships, we’d definitely mention Chainlink. This is one of the hottest cryptocurrency projects out there. The Chainlink partnership will give smart contracts access to data outside Zilliqa blockchain in a distributed manner.

If you are not familiar with Chainlink, please check our Chainlink guide for more information.

Elliptic is an important project from the regulatory point of view. Tom Robinson gave the following statement in an interview by Coindesk.

“Our tools enable these services to identify whether funds are being laundered through their businesses, by tracing each crypto-asset transaction all the way through the blockchain, to its source. If this source is one of the illicit wallets we have previously identified, the business is alerted and can take steps to prevent the money laundering from taking place.”

Elliptic helps Zilliqa in the ever-growing AML battle. Besides Elliptic and Zilliqa, there are also other notable partnerships. You can read more about them from here and here.

Investing in Zilliqa

Zilliqa is an interesting platform, which has gained lots of popularity in 2020. Many analysts had doubts over Zilliqa in 2019 after two key members left the project. Now, everything seems more positive again.

Staking has been a massive boost to the price of several different cryptocurrencies in 2019 and 2020. It looks like the ZIL token is no different. Zilliqa owners have enjoyed a nice ride so far this year. Time will tell how popular the actual staking will be.

Zilliqa is also a solid project technically. The fact of the matter is that Zilliqa is at least two years ahead of Ethereum by implementing sharding.

It even has its own programming language called Scilla. The developers say Scilla is an improved version of Ethereum’s Solidity with many of its weaknesses fixed. Below is a good video explaining Scilla if you are interested.

The biggest problem of this project is the lack of general visibility and popularity in the crypto universe. You get this same feeling of Dash and DigiByte. All these are technically great projects but so unknown for most of the investors since they do not make the headlines.

Even if Zilliqa has risen a lot in market value, there are still about a dozen bigger and more popular platforms. Staking has certainly improved Zilliqa’s status. The question is: how much potential there is left in the ZIL token after such a rise in price?

Zilliqa price and how to buy Zilliqa

If you want to invest in Zilliqa, you’ll get the best price and liquidity from Binance. It is the leading cryptocurrency exchange and offers multiple pairs for the ZIL token. You can buy Zilliqa with BTC, USDT, BNB, and ETH.

KuCoin and Bittrex are also popular and trustworthy exchange to buy Zilliqa. If you are from the United States, you can use Binance US. From there you can purchase Zilliqa with USD.

There are several good wallet options for storing Zilliqa. You can use the Moonlet wallet, which is supported by the Zilliqa team. Trust Wallet is an excellent mobile wallet, which also supports ZIL tokens. Ledger Nano hardware wallet will give ultimate security.

The official website can be found at zilliqa.com. You’d also check Zilliqa’s official blog, which has lots of useful information. The Twitter handle is @zilliqa, and the official Reddit page is reddit.com/r/zilliqa.

Finally, we recommend checking the Zilliqa presentation below by Coin Bureau.

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