To date, the biggest problem with blockchain technology is that it doesn’t scale well. Transactions need to be verified by a large group of nodes, ideally 51% or more of the network. That means it can take quite a long time before a block of transactions is verified, which limits the usefulness of any blockchain. Real-time financial transactions or games that aren’t turn-based become impossible to implement on a slow blockchain that doesn’t scale.
Additionally, this scaling problem gets worse the more popular the blockchain becomes. More nodes need to verify more transactions, slowing down the blockchain even further. As it stands, Bitcoin can process around seven transactions per second (TPS), and Ethereum between ten to fifteen. And while TPS might not be the best instrument to measure the performance of a blockchain, there’s no denying that blockchain technology has a scaling problem.
Some solutions already exist for this problem. But most of these solutions take transactions off the main blockchain, from layer 1 to layer 2, where transactions can be processed faster. While it takes the load off the main blockchain, it also leads to a less secure and more centralized environment, defeating the purpose of a blockchain.
Other solutions come in the form of moving away from a Proof of Work (PoW) consensus protocol to a Proof of Stake (PoS) or even a Delegated Proof of Stake (DPoS) protocol. But while these protocols might be the way forward, they’re also still relatively new consensus protocols, and they’ve not quite stood the test of time yet. Proof of Work, while energy-intensive and slow, has been around for a decade and has shown to be a reliable way to reach consensus on blocks of transactions.
To the best of my knowledge, Zilliqa is the only project that provides a layer-1 solution to blockchain’s scaling problem, while also continuing to at least partially rely on PoW. But what is Zilliqa? Who’s behind it? How does it work, and what are some of its use cases? Read on to find out.
What is Zilliqa?
Zilliqa brands itself as the next-generation, high-throughput blockchain platform for hosting DApps. Whereas most PoW platforms are severely limited in the number of transactions they can handle, the Zilliqa Testnet has already reached 2,828 TPS, which is orders of magnitude faster than Bitcoin or Ethereum.
It means that developers can build DApps on the Zilliqa blockchain without having to worry about network congestion, high transaction fees, or security. They can focus on building out their ideas without limitations. A PoW blockchain with significantly higher TPS is much more useful technology too, and it moves blockchain from the realm of ideology into the realm of practical applicability.
The Zilliqa blockchain has already been tried and tested by companies in the real world: both to test over-the-counter trading in a trial with a regional exchange and banks, and to deploy an e-commerce app in shipping, to solve inefficiencies in disputes and delays.
Additionally, Zilliqa has partnered with Mindshare, a WPP-owned media agency that has 7,000 employees and $31 billion in annual revenue. Mindshare wants to use Zilliqa to address the problem of fake news and data privacy in ads. In fact, the Zilliqa team sees digital advertising and gaming as two industries where its blockchain will be of most immediate use.
Who is Behind Zilliqa?
The Zilliqa project started in June 2017, but its roots go back one year earlier, when its founding members wrote an academic paper on the implementation of sharding technology for scaling public blockchains. As time went on and no immediate solution for the scaling problem was found in other blockchain projects, now-CEO Dong Xinshu founded Zilliqa to build it himself.
The Zilliqa team, based in Singapore, is now over twenty people strong. It has successfully launched a Testnet that is now on version 3 and is set to launch its Mainnet on the 31st of January this year, already considered to be one of the most anticipated blockchain events of 2019.
Zilliqa in Depth
But how does Zilliqa actually work? Why does it have a significantly higher throughput, while other credible blockchain projects with plenty of developer talent seem to struggle so much solving the scaling problem?
The main technology that Zilliqa uses to make its throughput significantly higher than other PoW blockchains is called sharding. This means that the Zilliqa network is split into smaller subgroups, or shards, that are each capable of processing transactions in parallel. This immediately boosts transaction throughput significantly and lowers transaction fees by orders of magnitude.
But splitting the network into different shards is the easy bit. The hard bit is how you maintain the security of a fully decentralized blockchain platform in a sharded network. After all, the size of the consensus groups are smaller if you split the network into several shards, and so more susceptible to security threats.
This is where Zilliqa sets itself apart from other blockchain projects. While it uses a PoW puzzle to establish mining identities (so it can prevent Sybil attacks) and to actually split the network into shards, it does not use PoW to achieve consensus on blocks of transactions.
Instead, it uses a consensus protocol based on the idea of Byzantine fault tolerance (BFT). Along with a signature scheme called CoSi, heavily modified for the assumed hostile environment of a public blockchain, BFT is a consensus protocol that’s much faster and particularly less energy-intensive than trying to achieve consensus with a PoW mechanism.
I want to stress the less energy-intensive part, because that’s also a blockchain problem that’s not often talked about. As it stands today, because of its reliance on PoW to achieve consensus, Bitcoin alone already consumes 0.5% of all the world’s electricity. This could quite possibly grow to 5% in the near future.
Zilliqa, because of its reliance on BFT as a consensus protocol, has a much smaller energy footprint than other PoW blockchains, while also having a much higher throughput, which makes it scale much better.
Another important aspect of Zilliqa is Scilla, a sharding-friendly language used to create the smart contracts necessary to build applications on top of the blockchain. It’s a very formal language that allows sharding of computational resources in the blockchain network through an overlay above the consensus mechanism.
Because of Scilla’s formality, Zilliqa has committed to developing a front-end higher-level language similar to Solidity, Ethereum’s smart contract language, that developers are likely to be much more familiar with. Zilliqa will develop compilers that will automatically convert the smart contracts written in this higher-level language into Scilla itself. This should ease a developer’s migration cost of switching to a new smart contract language.
This is only a high-level overview of the main technologies that Zilliqa has developed to make its blockchain capable of handling many more transactions while maintaining its speed and keeping transactions fees low. As you can see, while the idea of sharding a network might be easy to explain, it is very hard to implement in such a way that the network doesn’t become less secure.
If you want to learn more about the technical details of Zilliqa and the blockchain technologies that it’s developed, you can find in-depth whitepapers explaining everything on the resources page of their website.
Zilliqa’s Cryptocurrency ZIL
Zilliqa started a month-long ICO in December 2017 that raised $22 million, which CEO Dong Xinshu said should last them for around three years. Its cryptocurrency ZIL peaked at an all-time high of over $0.20 in May last year, when it achieved a market cap of over $1 billion.
Currently, ZIL ranks #31 on Coinmarketcap, with a market cap of $183 million and a price of slightly over $0.02 per token. ZIL can be mined using the hybrid PoW / BFT protocol described above, and is still an ERC-20 token (considering its testnet runs on Ethereum). ERC-20 ZIL tokens will be transferred 1:1 to native ZIL tokens once the Mainnet is launched on Jan 31.
Use Cases of Zilliqa
Zilliqa wants to focus on the industries that have throughput and scalability requirements that cannot be met today. One such example is digital advertising, which currently suffers from ad fraud, ad blocking, many middle layers, and non-compliance to copyrights.
A blockchain-based ad supply chain, where publishers supply smart contracts to marketers’ demand for them, would lead to a more transparent ad network, accountability, and responsible content delivery.
But an efficient supply and demand system requires real-time parallel bidding and has high volume transactions, something that isn’t possible with today’s slow and expensive blockchains. This is why Zilliqa, with its high throughput and low transaction fees, could be a valuable solution for the digital advertising industry.
Another use case could be automated high-volume auctions, where digital tokens from sellers are auctioned amongst a large group of buyers. Zilliqa could provide the infrastructural support for such a trading application, even at high volume and large scale.
Similar for decentralized exchanges (DEXs). Their benefits of resilience, impartiality, and potential cost-savings are understood, but they’re still too inefficient when compared with centralized exchanges. Zilliqa can be the blockchain to remove those inefficiencies and make DEXs much more appealing.
High-performance scientific computing that incorporates volunteer computing (such as the search for extraterrestrial intelligence) can also be secured from attacks on the Zilliqa blockchain, or even used as a reliable and available resource for very heavy computational loads.
But one of the main applications for Zilliqa is gaming. Currently, no blockchain platform can support a DGame with tens of thousands of users, let alone millions. Zilliqa’s CEO believes the reason why there’s currently no incredibly popular DGame is because they all have complex setup processes and an upfront cost in the form of gas fees. The poor user experience (UX) stops everyone but the most dedicated blockchain gamers from playing a DGame.
But the Zilliqa blockchain allows DGame developers to focus on their idea and not worry about possible scaling issues. Zilliqa is also exploring options to give developers the choice to pass off transaction fees from the user to the developer, to make for a better UX.
The dedication of Zilliqa to gaming is already bearing fruit. Etheremon, one of the most popular DGames on the Ethereum platform, moved aspects of its game from Ethereum to Zilliqa last June. They did so because “[the] higher throughput and low gas of Zilliqa’s sharding solution offers players a better experience” (from their Medium blog). Etheremon’s users had been experiencing high transaction fees, and the team behind Etheremon didn’t want their growth to slow down, hence the partial move to Zilliqa.
Zilliqa is also collaborating with Decentraland, a virtual world parcelled up in plots of land and an exciting combination of virtual reality and blockchain technology. The Decentraland team did an auction of virtual plots of land last December, and allowed its participants to use ZIL tokens to purchase the plots.
Zilliqa seems to have a bright future. Its mainnet will launch in less than two weeks, and it seems like the team has made sure their platform is significantly better than current PoW blockchain platforms. It’s a highly technical project led by a group of PhD scientists, but despite the lack of marketing hype, it’s garnered a significant amount of excitement in the blockchain community.
Bitcoin was a generation one blockchain platform. Ethereum, with the introduction of its smart language Solidity to create smart contracts, could be labeled as a generation two blockchain platform. Zilliqa, with its high throughput, scalability, and low transaction fees, seems set to become a generation three blockchain platform.
It provides the infrastructure for blockchain developers to build without limitations, and has practical applicability in a wide variety of industries, but most importantly in gaming. A DGame built on Zilliqa might be the one killer app that gives blockchain technology the energy boost it needs after a difficult 2018.