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With more than 21,000 cryptocurrencies now on the market according to CoinMarketCap, some coins that have been around for 4 or 5 years may be forgotten, while newer tokens are sparking the interest of speculators. One coin that probably fits in that mold is Zilliqa (ZIL USD). Despite claiming a fast and scalable blockchain, ZIL is quietly in the top 100, but rarely mentioned among potential long-term tier 1 winners. Zilliqa has been in the news lately after announcement of a Web3 game console launch in 2023. In this article, we’ll take a brief look at the token and network before diving into the game console.
Network and token
Zilliqa was first conceived in 2016 by Prateek Saxena and several other students at the National University of Singapore School of Computing. It is claimed to be the first blockchain to use sharding. Sharding is the process of segmenting transactions into different blockchain node groups so that not all nodes in the network need to store every single transaction. This theoretically increases the scalability of a blockchain, as transactions are done with a more batch-like process. This allows for more transactions per second because they are done simultaneously. Transaction speeds could then be much faster than blockchains that are not currently sharded like Ethereum (ETH-USD).
In terms of network usage, growth has been a bit mixed. The monthly active addresses on the network, while strong from 2020 to 2021, have stalled significantly. In April 2021, there were more than 731k active monthly addresses. Currently, that number is only about half in September.
ZIL active addresses (monthly) (ViewBlock.io)
From the perspective of a daily active wallet, the past few months have generally been between 15k and 16k per day.
ZIL active addresses (daily) (ViewBlock.io)
That figure has now fallen to about 12k in September. As for a DeFi presence, approximately 5.5 billion of ZIL’s 13.3 billion circulating inventory is deployed and generates an average revenue of 12.6%, according to ViewBlock.
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At $0.0316 per ZIL, this would give Zilliqa a market cap of $421.5 million and about $165 million in TVL. At just over 2.5, Zilliqa has a smaller MC/TVL than larger competitors such as Ethereum, Solana (SOL-USD) and Avalanche (AVAX-USD). The general idea in DeFi is that the smaller the MC/TVL, the more undervalued a network’s potential is. Despite all that, it’s gaming rather than DeFi that made Zilliqa enter my purview.
Chance to earn?
One of the more interesting opportunities in crypto is in the latitude to earn. This year we have seen the rise and fall of the popular lifestyle app STEPN (GMT-USD) (GST-USD). And there are other play-to-earn games in the crypto space that have also become famous, for example Axie Infinity (AXS-USD), Splinterlands and Upland. One of the problems that public blockchains may solve for gamers is the time efficiency of gaming. When a player devotes months or even years to a game before losing interest, there is usually no payoff of all the time put into the game.
Video games often have in-game currencies, points or assets that are very valuable in the games themselves. Despite this, players generally have no way to easily convert those rewards or assets into currency that can be used outside of the gaming ecosystem. While the expectation that a player must be paid back in time may seem ridiculous to some, it’s not as crazy as it seems. Real-world gaming almost always involves some sort of conversion of in-game tokens.
For example, players of popular card games like Magic The Gathering of Pokémon have always been able to sell their valuable cards if they don’t want to play anymore. In addition, anyone who sets foot in a land-based casino uses their own chips instead of real currency. If they’re lucky enough to have some left, players can cash out their game chips for fiat currency when they’re done playing.
Gaming Hub and Zilliqa Console
While there is still a lot to discover from a sustainability perspective in terms of play to earn, Zilliqa takes an interesting approach to the P2E model by developing a blockchain-based gaming ecosystem and hardware console. According to the Decrypt article announcing:
Players can earn Zilliqa (ZIL) Tokens by completing in-game missions, tasks and quests. In this case, the tokens can be considered similar to coins or rewards in traditional games, but with the added features of blockchain technology.
This could mean that no matter what game the users play, as long as the game developer supports ZIL mining through the console, players have an incentive to play games within the Zilliqa gaming ecosystem. And we are already starting to see some of the vision that the Zilliqa team has through the development of the “Web3War” first person shooter game.
Web3War Skins (W3W.game)
Players of the game will reportedly be able to keep their skins, weapons, and gear as blockchain assets. They can then exchange them for other currencies such as ZIL. There have been several videos online showing off the gameplay, graphics and maps and there is definitely a Nintendo 64 feel to it. The challenge I think Zilliqa will face with this gaming approach is to keep players interested in a game that is several years behind the competition aesthetically.
Zilliqa via decrypt
The console itself, while visually quite slick, appears to be an EGlobal device using older Nvidia (NVDA) chips. I actually think this is the right approach for creating a blockchain-based gaming ecosystem, as it means that Zilliqa can essentially white-label a console and not have to worry about building an entirely new device from scratch. Instead, Zilliqa can focus more on building the blockchain gaming integration with an existing device to prove the concept. What is also interesting about the planned console is that the device will be able to passively mine ZIL when the user is not playing games.
risks
What is not yet known is how much the console will cost. I don’t see any way this console will be able to attract non-crypto native gamers if it’s over a few hundred bucks. Since the graphics of the games will be such a big downgrade from the leading systems like X-box and Playstation, there should be a much lower purchase cost in my opinion. If not, the console will likely only appeal to people who are already in crypto and already playing video games.
While that’s probably still several million people, I believe it makes that addressable market much lower than what it could be if the console is priced correctly. However, the other problem is that, even if it is attractively priced, some in the gaming community are adamant against crypto and may reject the Zilliqa console out of personal principle.
Overview
Zilliqa now has my interest, while it wasn’t before. If the development team working on Web3War can make a video game that is really fun enough to play despite its obvious aesthetic drawbacks, I think ZIL will get a passive bid as gamers earn the token. As for the network, I’m not too keen on Zilliqa. I think there are better layer 1 chains that have more going on.
I believe white labeling pre-existing technology is probably the right approach for what Zilliqa is trying to achieve with blockchain-based gaming integration. If there is strong demand for the gaming ecosystem built on the network, the company may reconsider an original console build if the economy makes sense. I’m not long ZIL today. I want to see what happens to console prices and sales first.
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