Picolo Research: Comprehensive analysis of high-performance public chain Elrond ecological development and market value potential (www.blockcast.cc)

The report written by Picolo Research pointed out that high rewards and the upcoming DeFi plan are the main support for the increase in the value of Elrond tokens, and the payment application Maiar has provided impetus for widespread adoption.

Original Title: “Elrond Independent Research Report (EGLD)”
Written by: Picolo Research

Company overview

Elrond created a novel structure through two key innovations: 1) Adaptive state sharding technology and 2) Proof of Stake (PoS) consensus. The protocol can achieve the scalability of the interoperability ecosystem while maintaining the decentralization, security and fairness of the public chain.

Since our last report in January 2020, Elrond has reached key milestones this year: the launch of the mainnet (80,000 accounts were created and the transaction volume exceeded 1.2 million), the release of a new token economic model (1,000 ERD = 1 EGLD), and exceeded our previous price target, achieving a return of 750% for the year (after readjustment).

Project highlights

For Elrond, this year is a successful year because they have achieved many milestones and established themselves in the top high-value projects. We would like to review the previous analysis and judgment to update our views and determine the potential price target that Elrond can achieve by 2021.

In this report, we focus on the development of the Elrond network and investment judgments about EGLD.

• The target price is US$68.24, and the upside is 212%
• High rewards and the upcoming DeFi plan are the main drivers of EGLD value growth
• Launch of Maiar, a global payment application, providing momentum for widespread adoption and growth

Aerial View

Thematic views

With its advantageous position, it will gain a larger market share in the first layer of agreement

The scalability of blockchain has always been the bottleneck of major blockchains such as Bitcoin and Ethereum, and currently reaches approximately 3-4 tps and 15 tps, respectively. Corresponding centralized peers (such as VisaNet) have achieved throughput that is several orders of magnitude higher. The current bottleneck has led to a large number of new projects entering the field to solve this barrier to mainstream adoption.

Ethereum is the most widely used blockchain in the world, clearing more than $1 trillion in transactions and hosting $100 billion in assets. However, in its current form, Ethereum cannot be used as a globally distributed infrastructure. The DeFi boom of the past summer has clearly demonstrated this: the increase in on-chain activity has blocked the network, and for most use cases, gas has increased to unsustainable levels. Mitigating these problems requires the ongoing ETH 2.0 network upgrade. However, since it is estimated that it will take another two years to implement basic transaction functions, ETH 2.0 cannot be an extended solution in the short term. This leaves many opportunities for low-cost, high-throughput competitors (such as Elrond) to challenge the monopoly of Ethereum.

Just as Metcalfe’s law reasoned, the value of the network grows exponentially as the number of its users grows. Therefore, user adoption of this factor becomes the most important indicator for evaluating new projects, and it can be replaced by community participation statistics. Elrond has created a vibrant ecosystem of users, developers, and partners, and is actively collaborating with other projects to develop new features. It has become the service provider of preferred infrastructure programs for high-throughput applications such as Orion Protocol or PlotX.

Elrond community participation statistics

As Elrond’s co-founder and CEO Beniamin Mincu rightly pointed out : “Through the development of design and implementation, Elrond lays the foundation for a new solution space in which the current possible obstacles are no longer It’s a technical obstacle. Tomorrow’s Google and Amazon may be only one smart contract away from us.”

With expertise in marketing and community management, they can maintain user engagement. Since the last report, the Elrond community has become one of the largest communities in the first-tier blockchain project.

Comparison of community participation with other first-tier blockchain projects

Although the Elrond mainnet has a history of only 140 days, it has realized more than 1.2 million transactions from 80,000 accounts. In contrast, Hedera Hashgraph launched the mainnet in September 2019 and has about 81,000, Polkadot about 56,000, and NEAR about 6,000 active accounts (wallets).

Although the initial adoption is critical in the boot phase, users will only wander and not use the product when there are no advanced features. Elrond has strong execution capabilities and is expected to achieve the goals listed in its roadmap. According to data from Flipside Crypto, in terms of developer activity, Elrond is the top 20 blockchain project. In addition, data on Coingecko shows that Elrond’s Github development activity ranks first in the world in the past 4 weeks. All these confirm the strong development and delivery capabilities of the team.

Many of Elrond’s technical advantages further differentiate it from major Ethereum competitors that have sprung up recently. Its high-performance virtual machine (VM) Arwen can be used with all major programming languages ​​and is one of the fastest virtual machines in the blockchain field. The rich tool set allows developers to easily access Elrond’s technology, including dApp development templates, Elrond IDE for Visual Studio Code, rich APIs and Rust Smart Contract framework.

Virtual machine (VM) comparison

The generous pledge yield and the DeFi launch plan may cause a shock to the supply of EGLD

In the proof-of-stake network (PoS), the security and consensus of the network depend on the economic interests of the verifier. Elrond’s validators are rewarded for their contribution, which was initially paid for from the inflationary supply. The team adjusted its economic model when the mainnet was launched and renamed the token from Elrond (ERD) to eGold (EGLD). The idea is to simplify and enhance communication and be able to convey values ​​immediately.

More importantly, the supply that used to grow at a rate of 5% per year without other maximum caps is now limited to the theoretical maximum of 31,415,926 EGLD. This change strengthens the concept of scarcity. As network adoption increases, inflationary rewards will be replaced by transaction costs, ensuring that the maximum supply will not be reached and will only become smaller (see EGLD Economic Papers ). We believe that the embedded concept and positive measures will cause a positive impact on the token supply.

In order to guide the network, Elrond initiated a four-phase staking campaign:

• Phase 1: Incentive node queue (started on October 14, 2020)
• Phase 2: Validator queue ( launched on December 1, 2020 )
• Phase 3: Public pledge (expected to start in January 2021)
• Stage 4: High-level pledge function

The event is progressing smoothly so far, and approximately 55% of the tokens in circulation have been pledged. The third phase is expected to start in early January 2021, which will allow more nodes and Egld tokens to participate in the pledge (current limit is 2500 EGLD per person). Elrond currently provides 29% of services for delegators, 36% of services for validator nodes, and up to 20% of services for those in the queue. Rewards are significantly higher than other blockchains, coupled with the strong demand for mortgage assets, we expect the effective supply will be greatly reduced, which will cause a benign shock to the supply.

Our research shows that higher staking returns are related to higher returns, and the greater the proportion of tokens invested in the network, the greater the appreciation. Therefore, we believe that EGLD has the potential to surpass its peers. In addition to the attractive benefits, with Elrond’s partnership in the DeFi field, the attractiveness of EGLD will also increase. One of the most important collaborations is the collaboration with Orion Protocol; Orion is an aggregation protocol that will gather liquidity from centralized exchanges and distributed exchanges on multiple chains to create a meta-liquidity on the Elrond network Floor.

Users can obtain Elrond pledge benefits while making better use of liquidity solutions to try more opportunities to reduce opportunity costs. For example, Stafi will pledge Egld tokens to tokenize or Ramp will pledge Egld tokens to lend. At the same time, Egld will be a part of the multi-asset mortgage stablecoin BAI, which will work with Bidao to mint ESDT tokens on Elrond.

EGLD will also be part of the Bonded Finance index basket, which groups altcoins to use capital for more efficient production. The distributed derivatives platform Injective Protocol and Elrond are working together to explore how Elrond technology can use the trading platform while introducing new derivatives for Egld.

With the progress of multiple interoperability projects, Elrond users will soon be able to interact with other major blockchains, such as Bitcoin, Ethereum, NEO, Ontology and Cosmos (via the Poly Network) or use stability on Elrond Coins and DeFi contracts based on Ethereum (via xDai Stake).

These projects will not only bring a large number of transactions to the Elrond blockchain, but also bring more practical value to EGLD, and will also increase Elrond’s position in the DeFi field.

The highly anticipated Maiar global payment application will be widely adopted, and 180,000 waiting list users will use it together when it goes live

For non-technical users, interacting with DeFi applications is still challenging and poses a huge obstacle to the user experience. Elrond aims to change this situation with Maiar (a highly intuitive, non-custodial payment application), which allows users to send and receive funds globally using a simple mobile phone. The Maiar application has been well received by the community, and more than 180,000 users have joined the trial list, and we look forward to its global launch on January 31, 2021.

Maiar will become the easiest way to interact with the Elrond ecosystem and allow users to buy, store, pledge, lend and use EGLD tokens. EGLD is currently available through some compliance channels. For example, MoonPay helps users to access and use directly in the APP.

The Maiar application stands out among other blockchain wallets because the access is very intuitive, and there is no need to memorize complicated 24-word mnemonics, which are very unfriendly to newcomers. Instead, Maiar seamlessly creates a digital identity with the user’s phone number or selected username. Maiar has therefore become a decentralized, privacy-protected version of popular payment applications such as PayPal or Venmo. The difference is that users have full control of their funds with private keys.

In a world where yields are scarce, the interest on average deposit accounts is zero or even negative, and the 29% annualization easily accessible through the app is definitely a good selling point, and it is likely to attract more users to participate in the Elrond ecosystem through Maiar System. We believe in the upcoming DeFi plans, such as the use of Ethereum-based stablecoins on Elrond, the release of liquidity from secured funds or the financing of EGLD through derivatives, plus the large potential user base provided through the Maiar application , Will greatly empower Elrond.

route map

Valuation

Our research analysts use several assumptions and methods to analyze the potential return of EGLD and determine its valuation. The two-pronged approach combines regression models and relative valuation analysis.

Regression model-based on equity return and market value

The rate of return determines the price trend this year, which forms the basis of our valuation regression model.

As mentioned earlier, Elrond’s pledge income is much higher than other similar projects with high market value. Considering the relationship between yield and valuation, we assume that Elrond can behave as a higher valuation. To start our hypothesis, our analyst performed a simple regression calculation using the market value and adjusted the pledge reward (%). The results obtained show that the value of Elrond is greatly underestimated, as shown in the table below. Based on current earnings, the market value of the project should be slightly higher than $1 billion.

With positive preliminary observations, we further conducted multiple regression analysis to include more variables, namely, market value, pledge reward after pledge reward adjustment, and total pledge percentage. Based on the results of the analysis, the model predicts that Elrond’s market value is $1.9B, which makes it ranked in the top 20 of all cryptocurrencies. Analysis estimates that the market value of Elrond is about 5 times the current market value, which is equivalent to about $128 per EGLD, which means a 450% upside.

Compared with the pledge income and market value of other projects, data source: Coingecko, Stakingrewards.com (December 16, 2020)

Relative valuation model

Our analysts use comparable blockchain projects to build the relative value of Elrond. By deriving the multiples of the transaction volume/market value (Vol/MV) of each item, we extracted the average track ratio for our analysis. Similar to the regression model, this ratio indicates that EGLD is underestimated, meaning that the token price is $48.32 per EGLD, which means that the price has 120% upside.

Picolo’s expected EGLD valuation

To reduce the bias and limitations of the two models, we introduced a weight that favors relative valuation (RV). This is based on the limitations of the regression model and its sensitivity to marginal errors, as well as the relative valuation that can better reflect current market behavior.

Applying a weight of 75% to the relative valuation and a weight of 25% to the regression model, we have a target price of US$68.24 for EGLD and a potential upside of 212%.

to sum up

Overall, Elrond has made significant achievements in technology development, community participation and adoption. In addition, the launch of the Maiar app is another milestone, which reduces friction for new users when using the platform. This has generated more active users for the Elrond ecosystem, and the demand for EGLD tokens has also increased. Our analysts believe that the project is in another favorable position for explosive growth, similar to what we stated in our previous report: Elrond exceeded our original price estimate by 750%.

Taking into account these main driving factors, coupled with our valuation argument, Picolo Research believes that the value of EGLD is greatly underestimated, which means that there is a potential for unexpected performance. In view of the above situation, we recommend to assign a “Buy” rating to Elrond (EGLD).

Source link: elrond.community