Zilliqa (ZIL) Review: What You Should Know

One of the most significant problems cryptocurrencies and their blockchains face today is scalability. Unlike today’s leading blockchain networks, such as Bitcoin and Ethereum, Zilliqa (ZIL) was built from the ground up to tackle this issue. Zilliqa’s main draw is its ability to clear thousands of transactions per second, allowing advanced financial instruments to be built on top of it. The network may be used to incorporate a range of blockchain-based services, such as data-driven DApps and smart contracts.

If you’re eager to learn more about Zilliqa and where your opportunities lie in regard to investing in it, you’ve come to the right place. In this article, we’ll take a deep dive into what Zilliqa is, how it came about in the world of blockchain, and whether or not it’s a worthy investment for you this year.

What Is Zilliqa?

Zilliqa is a smart contract network with a sharded architecture that seeks to solve the scalability issues that other blockchains have. The team at Zilliqa realized the issues that can arise if a network can only handle 10–20 transactions per second, and saw it as an opportunity. Its sharded structure thus enables simultaneous chains to perform transactions in parallel, boosting the network’s total performance and capacity.

In addition to scalability, Zilliqa offers a smart contract layer that allows users to create smart contracts using Scilla, the company’s native programming language. The network also uses a hybrid Proof-of-Work BFT mechanism to achieve consensus on contract executions and payments. We’ll get into depth about its consensus protocol later in the article. 

Zilliqa has launched a staking scheme in the hope of “raising the distribution of node operators.” It is also a shared blockchain network on which developers can create smart contracts and DApps.

The History of Zilliqa

Zilliqa is a Singapore-based project, developed out of the National University of Singapore as a blockchain thesis project. Prateek Saxena and Loi Luu coauthored a white paper in 2016 that shed some light on the idea of blockchain sharding.

Following publication of the white paper, Saxena founded Anquan Capital, and Loi Luu founded Kyber Network. Shortly after, Xinshu Dong was hired as the head of engineering at Anquan Capital, and the company agreed to begin the Zilliqa project.

In June 2017, Zilliqa was launched. It was cofounded by Amrit Kumar, the project’s chief scientific officer; Yaoqi Jia, the project’s chief technology officer; Xinshu Dong, the project’s former chief executive officer; and Max Kantelia, an advisor and board member. These individuals are PhD-bearing computer scientists, researchers, and engineers. That’s how Zilliqa got its start.

In a private fundraising round at the end of 2017, Zilliqa raised the equivalent of $12 million in ETH. Because of the rising price of ETH after the private round, that initial private investment rose to a significant value of the project’s hard cap of $20 million.

In May 2018, the Scilla smart contract programming language was released. The testnet went live in November of that year, and the project invited miners and developers to help test the network. Zilliqa then launched smart contract functionality and transactions in 2019.

How Does Zilliqa Work?

In well-established blockchains, such as Bitcoin and Ethereum, miners attempt to solve the same set of transactions in a block. Things happen in a logical, sequential order. On the other hand, sharding divides a blockchain network into “shards,” each of which solves a portion of the block in sync with other blocks.

The best way to explain it is to divide a team of people into smaller groups to accomplish a large task. So, rather than everyone attempting to achieve the job all at once, different groups complete different sections in order to achieve the task. 

We use this analogy to show that sharding makes transaction handling much quicker and more effective. The better the network can handle transfers, the more nodes you have joining it. Think of it as getting more subgroups to help you crack a puzzle.

Zilliqa held an initial coin offering (ICO) in January 2018 and raised $22 million. Just like other cryptocurrencies, Zilliqa also has a token. This token is called ZIL. The ZIL coin functions as a mining reward, gas for contract execution, and tender for paying transaction fees, similar to other DApp networks such as Ethereum.

The Ethereum network’s gas fees fluctuate based on how congested it is (although it is hoped that Ethereum 2.0 will resolve this issue, among others). Zilliqa’s fees, on the other hand, are relatively low due to its ability to handle transactions at a much quicker rate. ZIL is also used to pay miners for checking transactions on the Zilliqa blockchain.

A network’s consensus protocol is a framework for reaching a compromise among users. For a transaction to take place, the Bitcoin consensus protocol needs more than half of all nodes to agree. To reach an understanding, Zilliqa’s blockchain employs two levels to its consensus protocol. This is referred to as a hybrid framework, due to its multiple layers. The layers are as follows:

(1) The Shard Layer

Sharding acts as a preparation layer for the formation of whole blocks. Shards only process micromodules, which are small pieces of larger blocks. The shard layer’s nodes only need access to a limited amount of data, so they don’t need to connect with other shards. These micromodules then move onto the DS layer.

(2) The DS Layer

A DS committee is made up of a small number of randomly chosen nodes. The party then joins the macroblocks together to form a single block and decides if it is true or not. These nodes have direct access to the blockchain, enabling them to make final decisions on individual blocks.

For concurrent transaction processing, Zilliqa makes use of shards. For agreement on legitimate transactions, each shard and the DS committee use an optimized Byzantine Fault Tolerance (pBFT). Blocks in pBFT have a deterministic finality, unlike the Nakamoto Consensus, found in Bitcoin, which has a stochastic finality. As a result, multiple block validation is unnecessary.

What is Sharding?

In a nutshell, sharding is a database splitting method that is commonly used by blockchain networks to attain scalability. Shards verify “microblocks” at the same time as other shards. The microblocks are then merged to form a new block on the blockchain. This is done to improve the transaction processing capacity of the blockchain network and promote overall efficiency.

The key advantage of sharding is that the blockchain only has to store and process transactional data across the nodes of a single shard. Otherwise, the data would have to pass through all of the network’s nodes, and as a result, the network would continuously get slower with each new user. Sharding solves this problem by dividing a single chain into several parallel chains. 

What is Zilliqa Used For?

The crypto world has been waiting to see how the Zilliqa network will provide the services it has been promising since its ICO in 2018. So who stands to benefit the most from Zilliqa? Zilliqa is the first blockchain to enable sharding on its mainnet. It is this sharding that provides scalability, giving Zilliqa fast transaction times and low fees. 

It is also this feature that, amid the DeFi boom, is making Zilliqa attractive to an increasing number of DApps and smart contract developers (who can use Scilla to create smart contracts). Additionally, users can stake ZIL on the blockchain for returns, and it can be used to pay transaction fees on the network. 

The platform has shown a lot of promise, as the Zilliqa ICO showed. The quick transaction speeds have piqued the interest of many in the crypto community, and it finally looks like it’s gaining some traction. 

Zilliqa Price History

Overall, Zilliqa has experienced relatively steady growth since its launch. There haven’t been any dramatic price drops. Nearly three years ago, Zilliqa reached an all-time high of $0.23 in May 2018.

Following this, the next six months saw a decline down to around $0.01 in December 2018. ZIL continued to maintain a range between $0.004 and $0.02 for about two years until it began its recent bull run in December 2020, climbing up to $0.07. Its price at the time of writing is around $0.20 with a market cap of $2.25 billion.

What Is The Future of Zilliqa?

Given the Ethereum network’s congestion and heavy transaction costs, flexible smart contract platforms such as Zilliqa are becoming more appealing. Developers want to rely on a network that can scale as required and is unaffected in its speed by high-volume DApps. However, Zilliqa will still need to reach a whole new wave of customers, developers, and apps if it is to thrive. To this end, it has yet to achieve its potential.

However, the network has numerous exciting projects in the pipeline which may go some way toward this goal. In April 2021, to capitalize on the NFT boom, Zilliqa announced an NFT collector package involving world-famous boxer Terence Crawford, with bids starting at $250,000.

One of the biggest advantages that Zilliqa has right now is that it doesn’t have any high-profile competitors doing precisely what it’s doing. This means that it can take advantage of the market and continue developing, without the worry of other market players getting in the way.

Price Predictions

By nature cryptocurrencies are volatile. Their prices move up and down often and it’s not easy to be accurate when predicting future prices. Let’s take a look at where some popular analysts predict Zilliqa is headed in terms of its future price.

Wallet Investor claims the ZIL price could increase to $1.03 by 2025. Coinskid predicts that by the end of 2025, ZIL may reach up to $1.53 as they believe its adoption may grow exponentially by then.

On an even more bullish trajectory, Coinpedia forecasts the price of ZIL to increase and hit $1 by the end of 2021 with the breakthrough of certain developments and software upgrades, adding that it could reach $4.50 by 2025.

Price Factors

Prospects look good for Zilliqa, particularly when we consider the project’s fundamentals. The framework has seen exponential community expansion, ample liquidity, and technical advancements. Therefore, significant global adoption could well be on the horizon. There have been no significant setbacks thus far (no conceptual flaws in its design, no team disputes or divisions, no code deficiencies and exploitations, etc).

Since cryptocurrencies are not controlled by a central authority such as a bank or government, they aren’t influenced by monetary policy, inflation rates, or economic development, the way traditional fiat currencies are. There are however, other factors that may trigger fluctuations in the price of Zilliqa. 

For instance, the supply and demand of a particular cryptocurrency have a significant impact on its price. The number of buyers, as well as the places in which the coin is used, are aspects to remember as well. The number of exchanges, as well as the liquidity available on such exchanges, plays a role as many traders are reluctant to sign up for more than one exchange platform. 

The opportunity for a cryptocurrency to develop and continuously improve over time can also attract more users, eventually bumping up the price of the coin. Lastly, the rules and laws that regulate how a coin is operated, exchanged, and circulated are all components that may drive the price of ZIL up or down at any point in time.

The Bottom Line

We conclude that Zilliqa is overall a sound investment. It uses sharding as a way to crack one of the biggest problems behind blockchain technology, and it currently lacks strong rivals. Zilliqa’s founders are all PhD-level computer scientists who have a thorough understanding of blockchain technologies. We conceive of Zilliqa as a small-cap, high-growth start-up, with some significant potential for growth.

So, with the newfound knowledge in crypto, why not sign up to Bybit?

Disclaimer

This article is intended for and only to be used for reference purposes only. No such information provided through Bybit constitutes advice or a recommendation that any investment or trading strategy is suitable for any specific person. These forecasts are based on industry trends, circumstances involving clients, and other factors, and they involve risks, variables, and uncertainties. There is no guarantee presented or implied as to the accuracy of specific forecasts, projections, or predictive statements contained herein. Users of this article agree that Bybit does not take responsibility for any of your investment decisions. Please seek professional advice before trading.