ELROND Network, $eGLD: Explained
I was asked many times by friends and family and even by other people online, what’s the deal with blockchain and why did I invest in $eGLD? What is Elrond Network? What is the idea? What is the potential?
Trying to answer all the questions I realized 2 things:
First: There is a lot to cover.
Second: The technicalities can be very discouraging for people to even listen.
The following it is NOT financial advice and it is NOT an extensive review of the blockchain technology, cryptocurrencies, or a technical review of Elrond Network.
The following is the answer to the above questions in, hopefully, a simplified as much as possible and easy to understand manner and it reflects strictly my personal views derived from how I process, analyse things and my reasoning for investing in $eGLD.
Always do your own research, evaluate and compare whatever data or details you think are relevant, remember that for more information about any topic Google and YouTube are your best friends and ultimately you should only act based on your conclusions.
Having said that, let’s dive in.
Although there is a distinction between not having confidence and living in fear, unfortunately, in terms of feelings but also pragmatism, it makes no difference. Dare to believe.
Blockchain in simple terms
A blockchain can be viewed as a distributed ledger that records the provenance of a digital asset. The distributed aspect of it leads to decentralization because no single institution or person controls it. Add a consensus mechanism to that, achieving the ability to transfer information from point A to point B while removing the possibility of duplicating the information (the so-called “double spending problem”) and you get a technology that can run autonomously. Add cryptography to remove the need to link personal details and you get anonymity.
The intricacies go far beyond, but to keep it simple, understand that at the very least, blockchain is a powerful technology that cannot be censored, the transmitted information cannot be manipulated because you replace “trusted” third parties with decentralization derived from distribution coupled with a consensus mechanism and you can enjoy the benefits completely anonymously.
I believe that the potential of the blockchain technology is so disruptive that I am convinced that whatever applications or use cases we will see in 5 years, never even crossed our minds. Yet.
Blockchain does not equal cryptocurrencies because the use cases of the technology are not limited to what we call money or value.
When opportunity knocks…
Cryptocurrencies — Brief overview. Understanding context
Bitcoin is the first iteration of the blockchain technology, and the first cryptocurrency created.
Any first iteration would be called MVP (Minimal Viable Product) or Proof of Concept. Interestingly, the original consensus mechanism used by Bitcoin is called Proof of Work (PoW) which is difficult, costly, time-consuming and in average it can process 5 transactions/second.
Ethereum is the second cryptocurrency created that uses the Proof of Work consensus mechanism but slightly improved and it can process around 15 transactions per second.
The inherent value of Ethereum is that it can be used as a platform to deploy smart contracts. And that is the game-changer.
A smart contract is a program that runs on the blockchain. So now, if you are a developer, you don’t need your own blockchain to try different ideas, different use cases. You can simply use Ethereum’s blockchain or in simpler terms, infrastructure, to deploy a smart contract or in simpler terms, run a program.
The easiest way to understand it is like creating an app in Apple’s App Store or Google’s Play Store, but now the infrastructure is a blockchain that comes with the benefits described earlier.
It wasn’t long until Ethereum’s limitations in scalability were felt which is why they are currently working on Ethereum 2.0 which will use Proof of Stake as a consensus mechanism.
But that also comes with an opportunity cost which I am not sure that the developing industry created around the blockchain technology is willing to pay. Because based on their own words, it will take 1 to 2 years or more to develop their Proof of Stake Architecture and once that’s done they have to make the transition from Ethereum to Ethereum 2.0 smoothly, without issues, transition which was never done before. Or even attempted.
Once again, the intricacies go far beyond, but the idea with Proof of Stake is that you can parallelize transactions into what is called shards and use randomness and random sampling for security. Also, the incentive derived from the competition is replaced with the collaboration which increases security. How? Well simply put, with Proof of work miners compete against each other to complete transactions on the network and get rewarded. With Proof of Stake validators “stake” the native network’s tokens by locking them into the blockchain, to produce and approve blocks. The idea being that to get access to the blockchain in a way that would even allow you to attack it, you need to have skin in the game and if you even think of “breaking bad” basically you act against yourself in the process. And that is a complete oversimplification.
To go back to the context, there are literally thousands of other projects with their own tokens. Some of them are very promising, at least in theory. But my frustration is that for some I don’t see the vision, the plan and especially the execution. For me, looking from outside, it is like they created the technology, but they don’t really know what to do it. It goes something like this:
Project: We’ve created this technology, look at it, it’s awesome!
Me: Great! What’s the plan with it?
Project: Ahm… you can trade it on X numbers of exchanges and...
Me: So your use case is a toy for traders to play with?
Project: No, no, no, you will be able to “farm” for “yield” and loan your tokens for interest and…
Me: Well exactly, unless you are a trader or an enthusiast of the technology that also understands all of these financial instruments, derivatives and basically use the project’s token just as a way to make more FIAT money, what exactly is the benefit for me, the average guy?
And then they go into the technical side of things and say:
Project: You just don’t understand, we will reach mass adoption!!
Me: Great! How? Explain it to me. I may not be the most gifted guy in the world technology-wise, but I can understand the logic. For any technology ever invented, the mass adoption came when everybody understood how it benefits them, the interaction with the technology was extremely simple and the learning curve was short.
Treating me as inferior because I don’t fully understand the technology from a developer’s perspective only helps you as a project if you are aiming to create an elitist kind of an organization where the infamous Twitter “Few understand” line applies.
If you are aiming at mass adoption that includes me and, you know, a few billion other people, well pardon my French, but to quote a famous movie line “English motherfucker, do you speak it?!!”
There are also projects than only focus on specific needs that other blockchains have. And of course, there is value in that. One way to think about this type of projects is like having a factory where you produce something. You may need screws of a specific size, some tools and so on but you will not build another factory for the tools that you need because it does not make any sense economically. You will work with suppliers that specialize in that thing. Well, it is the same idea here. For a specific function integrated into your blockchain, rather than spending the time to build that tool yourself, it’s faster, cheaper, easier to just work with somebody that has their focus strictly on that and provides it as a service for other blockchains.
Some projects focus on specific use cases. There are plenty but I will give 2 examples:
- Using the blockchain technology for the supply chains. Which is very smart. I worked in the logistics industry for years, import & export, organize shipments and so on. And basically, you have goods that are owned by one party that needs to be shipped in a different location and at the end of it, the ownership of the goods is exchanged after payment. So using a blockchain to track the goods from origin to destination, keeping records of who owns what and settling the transaction instantly on a blockchain will reduce the time spent and costs IMMENSELY. So there’s value in that.
- Using the blockchain technology for cloud storage. It’s obvious that more and more businesses are going digital or at least have a digital component. And when the name of the game is data, you have to think where will that data be stored. And one of the best options is cloud storage particularly because it gives you access to all of your data from anywhere instantly. And so the business model for this kind of projects is that users “rent” out the unutilised space from their hard drives to earn money and the client’s data is encrypted and stored across many hard drives across the world. For the project’s client it may be a cheaper option than a “traditional” company focused on cloud storage, the projects gets a fee and the users get paid for unutilized space on their hard drives. It’s kind of an Airbnb for digital data if you will.
So there is a lot of value and even more potential but mostly scattered.
But why not have it all?
What is Elrond Network? A highly scalable, fast and secure blockchain platform for distributed apps, enterprise use cases and the new internet economy.
Ever since I first saw an interview with Beniamin Mincu, the CEO of Elrond Network, I understood the vision, the plan, the potential and most importantly how does the execution look like, which not only that it makes sense, but it has 4 powerful and complementary pillars:
Step 1: Infrastructure.
Their view? It’s pointless to focus on building anything else until you first build an architecture that brings at least 1000X improvement to the current state of blockchain technology.
Which is exactly what they built and it is live today.
Elrond’s technology is called adaptive state sharding which enables parallel transaction processing. That is important for 2 reasons:
- Each shard processes approximately 5000 transactions/second meaning that whatever the requirements for the network might be today or in the future, you can simply add more shards making the potential capability in theory, infinite.
For example, before the launch of their Mainnet, in a public testnet with 50 shards, Elrond Network achieved 263,000 transactions/second.
2. The “adaptive” side of things is extremely important. Remember about the fact that PoW (Proof of work) needs energy-intensive algorithms which makes it expensive? Well even if you use Proof of Stake consensus and you get a blockchain that can process let’s say 1 million transactions/second, if you don’t need the full capacity, even it’s cheaper than PoW that doesn’t mean that it is cost-effective. It’s like you would have a car that only goes at max speed even if you don’t need it to. With Elrond and their technology, you get as much processing power as you need, if/when you need it making it both scalable and cost-effective.
Step 2. Create a sustainable economic model to power the infrastructure
The “fuel of the technology” is the native Elrond token which is called egold (Ticker — $eGLD).
The name itself it’s a metaphor chosen specifically to be easy to understand at first glance. Meaning that the digital currency shares gold’s characteristics but more importantly, it actually takes them to a whole different level.
The economics of $eGLD are simple, powerful but most importantly sustainable. Since Elrond’s consensus mechanism is secure proof of stake you need validators and delegators. The more they are, the more decentralized and secure the network is. The incentive for validators and delegators to be there is the rewards. 36% yearly return for validators and 29% yearly return for delegators. The guarantee that the rewards will continue to be there is the fact that the total supply starts from 20 million and within 10 years it can reach a theoretical maximum supply of 31,415.926 tokens.
What is the idea?
You use inflation to pay the rewards until the number of transactions grows via adoption at which point you replace the inflation with the transaction fees. So technically, the 31.4 million number of tokens will never be reached. Because every single transaction fee from 20 million onwards reduces the theoretical supply by substituting inflation with fees. So I guess that the total supply will be around 25–26 million tokens.
Incentive -> Reliability + Security + Decentralization -> Increased scarcity -> Sustainable economic system. More details here.
Step. 3 Make the technology invisible and accessible, available to anyone, everywhere.
To make the interaction with the technology extremely simple without the necessity to understand it, understand how it works or given the nature of it, without the need to understand cryptography & complexity, they are building an application called Maiar where the interaction starts with 1 simple requirement almost trivial in today’s world: Having a smartphone connected to the internet and a phone number. That’s it.
Mass adoption of any technology that we use, happened directly proportional to its simplicity and the value that it brought to us. If there would be an app that allows you access to a global digital decentralized economic system where the only requirements are a smartphone connected to the internet and a phone number that allows to you to send and receive money instantly at a minimum cost, which reduces cryptographic complexity to simple clicks and instead of long wallet addresses made up of random digits and letters you could have a hero tag just like you use anywhere else from e-mail to social media, wouldn’t you use it?
And that is only the beginning. More functionalities that will essentially enable you access to multiple opportunities will be integrated into Maiar in due course.
But the name of the game is EASY access for ANYONE, ANYWHERE.
Step 4. Create tools and give incentives to the developers to build on top of the architecture.
- Simplify the abstract.
- Expand the number of languages available to developers.
- 30% royalties of the fees collected by the smart contract go directly to the developer.
- Whatever custom token you create for the project you build, will have the same speed and scalability as the native $eGLD token. How? Well for that they created the Elrond Standard Digital Token — ESDT. More details here.
More details about the Elrond Developer Toolkit here.
“Price Is What You Pay, Value Is What You Get” — Warren Buffet
My reasoning for investing in $eGLD:
- If I were to invest in Bitcoin, $BTC because of its scarcity, well Elrond, $eGLD has a similar built-in scarcity. But also, it has something that $BTC does not, which is the scalability component -> $eGLD can be used as a medium of exchange at scale. $BTC cannot.
- If I were to invest in Ethereum, $ETH because of its capability of being a platform for other projects to build on, well we would have to talk about Ethereum 2.0 but that won’t be a reality for years. Elrond, $eGLD has that capability today.
- Apart from Elrond, $eGLD that understands that true adoption comes when the technology is easy and simple to interact with, which they are focusing on with Maiar, I don’t see any other project even caring about being user friendly. In a way, it’s understandable because they have to first nail down the technology side of things.
And I know that a lot of people are frustrated by the fact that Maiar is not being launched soon enough. You have to understand that what Elrond is building, was never done before and so some delays were to be expected. However, the wait is almost over, it will be launched in Q4 2020 which means at any point within the next 40 days :).
- Are you a developer? Do you want to start building? Go ahead. The wait is over.
- An ecosystem of dApps (Decentralized Apps) will be created on Elrond. But it helps a lot if you can bring them in front of users in a user-friendly interface such as Maiar.
- Searching for solutions to very important problems is a + in my book.
- I don’t remember seeing any team that works as hard as they do.
- By pure coincidence, it just so happens that just as the majority of the Elrond’s team, I am from Romania as well and I know more about some of the people around Elrond either as advisers or in different capacities and I can tell you that they had remarkable successes across different industries and particularly technology.
- Binance $BUSD stable coin will run on Elrond’s Mainnet.
- They are extraordinary at marketing. And it matters a lot because I know and I am sure you do too, a lot of products and services that are great but nobody ever heard of them. Why do you think that Apple, Nike, Coca-Cola but even companies such as Facebook which has literally billions of users, advertise continuously? It’s not enough to be great, people need to know about you.
- I am not even going to speculate about what kind of potential collaboration could be between Elrond huge companies such as Samsung and others with whom they worked before and you know, the contacts are in place.
And we haven’t even gotten to the enterprise side of things.
It is important to understand that my reasoning comes from the perspective “If you were to choose one project, with the most chances of becoming a success because they thought of everything and all the pieces of the puzzle fit and work, what would be that project?”
The answer to the above question, without a shadow of a doubt, would be Elrond, $eGLD.
There will be other projects as well that will have important roles in the economy of the future, but today, none is better prepared and positioned to guide us towards that future than Elrond Network.
And governments can try to fight it but the reality is that they fucked up the current system mainly due to corruption and stupidity and now we have to fix it. It’s increasingly becoming a question not of “If”, not even of“When” but of “How fast can we start”? The answer is: We can start today.
Any technology that makes something that we need, faster, better, more secure or easier, will be adopted. Eventually.
We should search for opportunities where nobody or only a few are looking. Blue Ocean Strategy.
I wanted to simplify my answers to my friends, family and other’s questions as much as possible. I don’t know if I achieved that, but I hope that at least some useful and valuable information can be found in the above.
I wasn’t expecting to take me 3 days to write this, but there you go. If you appreciate the article, please follow me here on Medium or Twitter at @MirceaColceag. If you are the kind of guy or girl that likes to go the extra mile in showing their appreciation, my Elrond wallet address is the below.
Thank you for your time!