An independent review of Elrond (EGLD)

December 28, 2020

(Contribution to Picolo Research, in collaboration with Lennard Neo, CFA)

Maiar to fuel Elrond’s explosive ecosystem growth

Company Overview

Elrond has created a novel architecture through two key innovations; 1) adaptive state sharding technology and 2) Secure Proof of Stake (PoS) consensus. This protocol will enable a scalable ecosystem embedded with interconnectivity while maintaining the decentralization, security and fairness features of a public blockchain.

Since our last report in Jan 2020, Elrond hit significant milestones throughout the year with the launch of Elrond mainnet (>80,000 accounts created with over 1.2m transactions), releasing a new token economic model (1,000 ERD = 1 EGLD), and surpassing our prior price target to achieve 750%+ returns for the year (after rebasing).

Report Highlights

It has been a successful year for Elrond as they achieved many milestones, gaining a foothold amongst the top-tier large cap projects. Re-visiting our analysis, we want to update our thematic views and identify a potential price target for Elrond going into 2021.

In this report, we highlight the important developments in the Elrond Network along with an investment thesis on EGLD.

  • Target price of $68.24, representing an upside potential of 212%
  • High staking rewards and upcoming DeFi initiatives as key drivers for EGLD value accretion
  • Launch of global payment app Maiar to create significant tailwind for widespread adoption and growth

Thematic Views

Elrond well-positioned to capture more market share among layer 1 protocols

Blockchain scalability has been a bottleneck for major blockchains such as Bitcoin and Ethereum, which currently achieve around 3-4 tps and 15 tps, respectively. Their centralized counterparts, such as VisaNet, accomplished a throughput several orders of magnitude higher, leading to a host of new projects entering the space to solve this barrier to mainstream adoption.

Ethereum, the most used blockchain in the world, settles more than $1 trillion in transactions and hosts $100 billion in assets. However, in its current form, Ethereum is not capable of serving as a global, decentralized infrastructure. The DeFi boom this past summer has demonstrated this quite clearly: heightened on-chain activity clogged the network and increased gas fees to an unsustainable level for most usages. The ongoing ETH 2.0 network upgrade is much needed to alleviate these issues. However, with basic transaction functionality expected to be about two years away still, ETH 2.0 cannot be the scaling-solution in the short-term. This leaves plenty of opportunities for low-fee, high-throughput competitors, such as Elrond, to challenge Ethereum’s monopoly.

As Metcalfe’s law posits, a network’s value grows exponentially with the number of its users. Adoption thus becomes a paramount metric to evaluate new projects and can be proxied by community engagement statistics. Elrond has managed to create a vibrant ecosystem of users, developers and partnerships and is actively collaborating with other projects to develop new features. It has become the preferred infrastructure provider for high-throughput applications, such as Orion Protocol or PlotX.

As Elrond’s co-founder and CEO, Beniamin Mincu, rightly points out: “Through its design and implementation, Elrond lays the foundation for a new solution space in which the barriers to what’s possible are no longer technical. The googles and amazons of tomorrow are perhaps one smart contract away“

With their expertise in marketing and community management, they keep their users engaged and since our last report, their community has become one of the largest among Layer 1 blockchains.

Comparison of Community Engagement Statistics for Comparable Layer 1 Projects

Comparison of Community Engagement Statistics for Comparable Layer 1 Projects

The Elrond mainnet is only 140 days old and has already surpassed 1.2 million transactions from 80,000+ accounts. For comparison, Hedera Hashgraph, which launched its mainnet in September 2019 has about 81’000, Polkadot around 56’000 and NEAR around 6’000 active accounts (wallets).

While initial adoption is crucial in the bootstrapping phase, without superior features, users wander off. Elrond has shown robust execution capabilities and is well on track to deliver on its goals set out in its roadmap. According to data from Flipside Crypto, Elrond ranks as the top 20 blockchain project in terms of developer activity, furthermore, Coingecko suggests Elrond ranks number 1 worldwide for the last 4 weeks in terms of github activity. All these underscores the team’s strong delivery capabilities.

Elrond’s many technical advantages further differentiate it from major Ethereum competitors that have recently sprung to life. Its high-performant Virtual Machine (VM) Arwen can be used with all major programming languages and is one of the fastest VMs in the blockchain space. A rich toolset makes Elrond’s technology easily accessible to developers and comprises among others a dApp boilerplate, the Elrond IDE for Visual Studio Code, rich APIs and the Rust Smart Contract framework.

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