Competition in the cryptocurrency market is heating up every year as new platforms emerge, offering increasingly sophisticated services to their users. To retain clients and attract new ones, crypto projects need to create something new and unique.
However, there are common problems many blockchains face, such as slow transaction speeds, high transaction costs, and others. Each new blockchain tries to solve these issues in its own way. One solution is to break data into several parts and process them in parallel.
The Zilliqa platform has been quite successful in implementing this technology. We will discuss it in more detail in this article. To learn more about other cryptocurrencies and how they tackle key blockchain challenges, check out the article " Cryptocurrency rankings."
Blockchain сhallenges
Every new blockchain network hitting the market aims to outperform existing ones by offering faster transaction processing, better scalability, enhanced security, and lower fees.
Let's dive deeper into the common challenges these networks face and explore some solutions.
- Scalability means the potential to expand the network. As more users join and conduct transactions, most networks see a slowdown in processing speed and an increase in fees.
- High transaction fees occur when networks become congested, leading to increased commission rates. This makes small transactions and micropayments impractical, as the fee might exceed the transaction amount.
- Niche specialization. Some networks focus on specific services, limiting their audience. This can be a strength, allowing expertise in a particular area, but it also narrows the target market.
- High energy consumption. Networks using the Proof-of-Work (PoW) consensus algorithm require significant electricity for mining new coins and adding blocks to the chain.
- Many networks struggle to balance decentralization with efficient management. Platforms focusing on decentralization often find decision-making and management more challenging.
These issues are actively addressed within existing blockchain platforms and through the development of new technologies and approaches such as sharding, implementing Proof-of-Stake (PoS), and improving management mechanisms.
How to improve scalability
Scalability is a core challenge for blockchains. Chains aim to attract more users but often struggle with the increasing volume of transactions. As the number of transactions grows, so does the processing time.
Chains have devised various solutions to this issue. Some use additional networks called sidechains. Others prefer to handle it within the same network by splitting the incoming data stream into multiple chains.
This process of splitting data is known as sharding. Let’s delve deeper into what it entails, its features, its types, and how it is applied in blockchain networks.
There are two types of data splitting: vertical and horizontal. This stems from the fact that databases were originally represented as tables. If a table is divided into vertical columns, it is called vertical sharding; if it is divided into horizontal rows, it is horizontal sharding.
In classic data management, this is straightforward, but blockchain technology works a bit differently. Here, any operation is broken down into several parts (shards), each of which is sent to different nodes in the chain for verification.
Thanks to this division into multiple shards, operations in chains can be processed in parallel. This allows chains using this technology to handle tens of thousands of transactions per second.
Despite its appeal, sharding faces criticism regarding security and communication. In such a network, each data chain acts as a separate network, complicating communication between them. Additionally, it is easier for hackers to compromise one shard, potentially affecting the entire network’s operation.
Zilliqa was the first blockchain platform to implement this technology. We will discuss this chain more in-depth in this and subsequent sections and also explore its native coin, the ZIL cryptocurrency.
Zilliqa platform
What exactly are the Zilliqa platform and its own cryptocurrency, ZIL? It is a cryptocurrency project known for its high throughput. Let's dive into how this chain achieves such impressive performance.
Zilliqa was developed by a group of scientists from the National University of Singapore in 2017, and the project was launched in 2019. The standout feature of this platform is its use of sharding, which significantly boosts the speed of processing and adding transactions to the chain.
This network is the first chain to be built on sharding technology. Zilliqa uses a hybrid protocol that combines Proof-of-Work and PBFT (Practical Byzantine Fault Tolerance). This enables the chain to process up to 2,800 transactions per second, which is comparable to centralized payment systems.
An interesting fact is that as the network grows, the transaction processing speed increases rather than decreases, as is common to many other networks. This happens because the more nodes that are added to the chain, the more transactions they can handle simultaneously.
Moreover, due to its scalable capabilities, this network offers lower transaction fees than other chains. Transactions are processed in parallel rather than accumulating, which keeps fees low.
In many other networks, a single transaction requires multiple confirmations before it can be recorded in a block. In Zilliqa, a special consensus mechanism allows transactions to be added to the chain immediately after verification, without additional confirmations.
Zilliqa’s history and team behind it
Zilliqa is led by a team mostly made up of PhDs in computer science, highlighting a strong scientific approach. The project also enjoys support from a significant list of advisors.
The development team was headed by two key figures: Xinshu Dong and Prateek Saxena. Xinshu Dong, the CEO, previously worked on government projects as a leading cybersecurity expert. Prateek Saxena, the other founder and chief scientific advisor, also holds a PhD in computer science. He is also the founder and director of Kyber Network.
Work on Zilliqa began in 2017. Early on, the project secured $20 million in private investments. Then, the team decided to hold an ICO for their platform coin, ZIL, raising another $22 million.
The main net was launched in early 2019, after a test phase. Transactions on the network were allowed a few months after the main network went live. At the same time, the native token transitioned from the Ethereum platform to Zilliqa.
Since the launch, the development team has been enhancing the project. They have formed important partnerships with other companies and well-known cryptocurrency exchanges.
How Zilliqa works
What are the technical solutions that allow the considered chain and its service token, the ZIL cryptocurrency, to outperform many others by various indicators? Let us focus on the technical component of this project.
The first and main technical innovation of the Zilliqa chain is sharding, which we have already talked about earlier. Thanks to the use of this technology, operations in this network can be processed faster and at a lower cost than in many other chains. Each shard includes at least 600 nodes.
The main difference between this technology and other transaction processing methods is that as the number of nodes increases, the speed of transaction validation rises instead of falling as in other chains. Each shard processes a separate set of transactions, which significantly increases the aggregate throughput of the chain.
The next feature is a hybrid consensus algorithm that includes PoW and PBFT. The former is responsible for securing the chain and creating identifiers for nodes, while the latter is used to achieve agreement within each shard and between shards.
In addition, this hybrid mechanism reduces the negative environmental impact of the PoW algorithm, which requires significant energy consumption. In this chain, it is applied only for node identification and shard creation, which significantly reduces energy consumption.
A unique programming language for smart contracts Scilla is used in this chain. It eliminates many of the weaknesses and problems associated with the execution of smart contracts, making them safer and more reliable for execution on the blockchain.
ZIL cryptocurrency
The ZIL cryptocurrency was released to serve all the needs of the Zilliqa chain. It performs several important functions in the network. Let's consider it in more detail in this section. The service currency of this chain is used for:
- Paying transaction commission;
- Paying rewards for mining new coins;
- Staking to secure the network and generate additional passive income.
The token was originally released on the Etherium platform, so it has the ERC-20 standard. However, after the launch of Zilliqa's own chain, the ZIL currency was converted to it.
The total issuance of this currency is 21 billion tokens, but not all of them are in circulation. The initial issue distributed 60% of the total number of coins, part of which was sent to reward miners, the second part to participants in the crowdsale, and the third part was left as a reserve for the team of creators.
According to the developers' plan, the total volume of all tokens should be mined within 10 years from the launch of the Zilliqa chain, and the reward for the mined block will gradually decrease. Meanwhile, 80% of the coins must be mined in the first four years, and the remaining 20% must be mined in the remaining six years.
The price of one coin at the time of writing is just over 3.5 cents. This is due to the fact that the supply of this token is quite high. That is why many analysts do not expect its value to rise above $1. To boost demand and price, developers need to conduct token burning.
Thanks to the mixed consensus algorithm, both mining and steaking are available in this chain. Moreover, two types of mining are supported: classic mining and dual mining. We will talk about it in more detail in the next section.
ZIL mining and staking
Since Zilliqa uses a PoW mechanism for mining and not all tokens in the chain have been mined yet, the mining process is still in progress. However, unlike many other chains, Zilliqa applies sharding to increase scalability, which may affect the mining process and reward distribution.
As mining is no longer as profitable as it used to be, users have started inventing new ways to mine coins. One such way is dual mining. It can be used with ZIL tokens paired with ETH or other coins.
A unique feature of ZIL coin mining is that it is done in rounds. This means that ETH is constantly being mined, but once in a certain period of time, for example, in an hour or a half, the equipment switches to ZIL mining. ZIL is mined for a few minutes, and the equipment switches back.
Stacking the project's own currency offers users the opportunity to earn rewards by investing their tokens to support the network's operations.
To start participating in steaking, you need to select and download one of the wallets, deposit tokens, and select a validator. Rewards will be credited every 24 hours.
In order to start steaking, a minimum contribution of 10 ZIL is required. This is justified by the fact that if the amount is less, the withdrawal fees will exceed the returns. The rewards are per block and depend on the validator chosen.
As for the reward percentage, there is a general rule in staking: the longer the token blocking period, the higher the potential return. In the chain, rewards range from 12% to 16%, although some platforms promise even up to 40%.
To withdraw ZIL, you will need to wait about one day for the funds to be unblocked. After that, you can request a withdrawal by leaving a minimum balance of 10 ZIL with the validator. The withdrawal process takes up to 10 days to validate the transaction.
Advantages and disadvantages
Like any other platform based on blockchain technology, Zilliqa and its own currency, ZIL, have both positive and negative features.
So, the advantages of the considered chain include:
- Scalability. The project is focused on providing a reliable platform for developers that has great potential for expansion;
- Sharding technology. The chain uses sharding to scale linearly, which helps to increase capacity as its membership grows;
- Low commissions. Thanks to the wide expansion possibilities, this chain does not accumulate a queue of transactions waiting for verification. Accordingly, the size of commissions does not increase as their number rises;
- Unique Scilla programming language. Zilliqa runs on the Scilla language, which allows for a high level of reliability and convenience for developers;
- Green mining. The consensus algorithm in the considered chain allows for a significant reduction in energy consumption during mining;
- Strong team and community. There are many people interested in developing the platform, including the team, whose members have doctoral degrees.
Among the main disadvantages of this chain can be noted:
- High competition. New blockchains are emerging almost daily, so they need to be better than others to stay afloat. Even though Zilliqa is performing well, there are larger networks that can outperform it in some ways.
Prospects
After we discussed the key features and peculiarities of the Zilliqa platform, it is time to discuss the prospects of this chain and its own token, the ZIL cryptocurrency.
Zilliqa aims to create a powerful ecosystem where it is possible to build products and services from innovative startups to global enterprises on one of the fastest-growing blockchain platforms.
The platform actively supports developers by providing resources, educational programs, and grants, which contribute to the growth and development of the entire ecosystem. All this will contribute to the launch of more dApps on this platform.
The chain has high potential due to its unique approach to solving the problem of network expansion, which helps to attract new customers. The project already has a number of major partnerships with major companies such as Mindshare, KYC-Chain, and others.
The platform is constantly evolving as its creators add new features. For example, recently, a marketplace of decentralized applications appeared on the platform, where developers can earn income from selling their dApps.
One more factor is a strong community that is interested in the development of the platform. It actively participates in the development of new functions and services provided to customers.
If we talk about the future of the token, many experts predict that its growth will not even reach $1. They attribute this primarily to the large issue of the ZIL token, which amounts to 21 billion units. However, this is a rather controversial opinion.
If the project realizes its potential in various areas where its technologies can be applied, including finance, games, media, and others, demand for its own currency will grow, thus boosting its value.
Conclusion
In this article, we have reviewed the main technical features, advantages, and disadvantages of the Zilliqa platform. Its own token, ZIL cryptocurrency, plays a crucial role in the operation of this platform and the services it provides.
A strong group of scientists worked on the creation of the platform. That is why scientific approaches are applied in its development. The Zilliqa project was the first platform to use sharding to solve problems with chain expansion.
Thanks to the application of this technology, all incoming data is divided into parts that can be processed in parallel in several shards of the network. Thus, the speed of transaction verification increases. Now there are several thousand transactions per second.
The use of sharding opens up a wide range of possibilities for network expansion because, as the network grows, so does its bandwidth. In many other blockchains, network expansion, on the other hand, slows down transaction processing and increases fees.
Zilliqa offers a unique opportunity for miners and network members who want to make money from staking. At the same time, only node identification and shard creation are done with mining, which significantly reduces energy consumption and makes the project more environmentally friendly.
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