Zilliqa Moons Even While Billions Are Printed – Trustnodes

Zilliqa Moons Even While Billions Are Printed


There has been a full response to this article by the Zilliqa team to clarify many aspects and some misunderstandings.

Zilliqa has been rising by some 4x in the past month, gaining another 20% today to now near 3 cent, up from $0.007 per zil.

That gives it a market cap of $300 million, with this coin rising to the 34th position as it nears its phase 0 launch.

Phase 0 being the addition of staking, but not quite as it is understood. Amrit Kumar, Zilliqa’s co-founder, says:

“Seed node staking is not a full-blown PoS system. In a PoS system, staking is used to determine the validator who will propose the next block of transactions.

Unlike PoS, seed node staking in Zilliqa is to allow certain non-consensus nodes called seed nodes (those that store transaction history) to earn rewards for their service. These seed nodes do not participate in validating transactions.”

Transactions are validated by Proof of Work (PoW) nodes with this blockchain using ethash.

Block times seem to be fixed at 1 per minute, while the design of block rewards appears to be some sort of rocket science, but if we simplify each node currently gets about 20 zil per epoch which is about 100 minutes.

They’re using a DAG in the proof of work algorithm they say, so a node shouldn’t require much work at all.

That may explain why there’s currently 2,400 nodes, a fairly high number for a new project, with one able to run as many ‘mining’ nodes as they like.

‘Stakers’ are to get 5% of this block reward for storing transactions. That translates to “a meaningful annual return of ~10%” of the amount staked according to Kumar.

The max amount here is 21 billion zils. Some 6.3 billion of it was distributed in an ICO in 2017 when they raised $22 million.

Around 3 billion of that has been circulating, with the team still keeping 3 billion according to coinmarketcap data.

This was an ERC20 token. The transition to a full coin was made 106 days ago. Thus it looks like about 7 billion zil has been ‘printed’ in just 100 days.

How? Well although this project is ‘sold’ as proof of work, it clearly isn’t. Not the sort of Proof of Work we know from bitcoin and ethereum anyway, with their ‘blockchain’ looking a lot more different:

Zilliqa's 'blockchain,' June 2020
Zilliqa’s ‘blockchain,’ June 2020

You can see above the very different block rewards with the highest we saw being six zil.

Then of course there’s the nearly 200k zil given per epoch. We’re told currently there are 16 epochs, meaning about 3 million is printed a day, or 3 billion in the past 100 days.

That raises the question of a missing 3 billion, or a potentially created one. That’s because as stated the ICO was for around 6.3 billion. Zilliqa itself currently has on multi-sig about 2.4 billion. So only about 4 billion was distributed. Around 3 billion was ‘printed’ through ‘mining’ as stated above, but total supply is 13.5 billion, so where is this 3.5 billion?

Zilliqa top addresses, June 2020
Zilliqa top addresses, June 2020

The first address is the funds yet to be distributed to miners. We tried to clarify how that distribution happens exactly, but without much success with that address saying there have been 859 transactions, yet it doesn’t say anything about what these transactions were.

There’s no smart contract code here we can read, so just how this address is doing anything is unclear. Nor is it clear how this 200k given in the block we saw above is then given to mining nodes.

The second address was funded by Binance with it curiously corresponding to this ‘missing’ or ‘created’ 3 billion.

Then there’s Zilliqa’s own holdings with it not very clear how exactly you ensure funds have not just been printed here.

Usually obviously you have Proof of Work miners in a fairly complex algorithmic system where the network can go an hour without a block or can find 2 or more within 10 minutes, while averaging one block every ten minutes, all of it under the ‘orders’ of the protocol code which can’t be changed.

Here the block finding seems to be fixed, by magic presumably, with it unclear who exactly is doing the validation.

Zilliqa claims to have deployed sharding, so previously we were told: “The architecture of shard in Zilliqa comprises of a Directory Service (DS) shard and n normal shards.”

The Directory Service so being the coordinator with it unclear how exactly you get to be part of this coordinator, except we were previously told:

“The DS Committee shard is initially elected by the network, but pushes in and out nodes based on PoW, a node gets elected if it solved the PoW the fastest.”

There has been no community review of Zilliqa as far as we are aware, with the many usually quite busy blockchain experts seemingly not finding time so far to look at how all this actually works.

To us however on the surface it sounds like a fairly centralized system that currently has a very high inflationary rate with the security guarantees here appearing to be week as in their own block explorer we can’t see how exactly the funds are being distributed to miners.

In addition the use of a DAG makes the Proof of Work claim misleading as there’s hardly any real work, and thus hardly any real proof.

Storage requirements here at scale are very considerable, hence perhaps why they’re ‘paying’ people to store stuff through ‘staking’ once phase 0 launches.

The staking to begin with will be only by custodians, that being exchanges, according to Kumar, the co-founder.

You require 10 million zil ($300,000) to stake but in phase 0 even then you can’t, unless you’re Binance or KuCoin with whom this China based blockchain apparently has partnered at least for the staking.

At phase 1 you can then stake on your own, but that they’re starting off with exchanges clearly suggests they’re not too strict about decentralization.

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