Overview
What does the company/project do?
Elrond is designed to solve the scalability constraints that current blockchains suffer. The technology that Elrond proposes to solve these problems is called adaptive state sharding. The Elrond protocol enables communication between blockchains. Elrond is designed to support 10,000 transactions per second.
How advanced is the project?
A first prototype for Elrond is expected to be released in early July 2018. Elrond claims to have completed its communication layer, the cryptographic layer, the blockchain core and the execution engine. Elrond plans to launch its mainnet in Q1-Q2 2019, at a time when the mainnet of competitors such as NEO and EOS will be active for already one year.
What are the tokens used for and how can the token value appreciate?
The tokens used by the Elrond network are called Elronds (ERD). In analogy to Ethereum all costs incurred for processing transactions and executing smart contracts are paid in ERD. The token value will appreciate with the usage and adoption of the Elrond blockchain.
Team & Advisors
The Elrond team consists of an executive board of three founders and counts with two researchers, five developers and one Head of Communications.
Benjamin Mincu is the CEO of Elrond and was previously part of NEM.
Lucian Todea is the COO of Elrond and is an experienced entrepreneur and investor.
Lucian Mincu is the CIO of Elrond and an experienced infrastructure engineer.
Among the advisors of Elrond are Alex Iskold, the managing director of Techstars New York, Patrick Storchenegger, a Swiss based attorney and lawyer, and Andrei Pitis, a Romanian angel investor.
Product
Elrond is not a token that is backed by an asset or a service. Instead it is designed as a wholistic blockchain platform such as Ethereum. It offers smart contract execution and comes with the Elrond Virtual machine.
Elrond uses the Secure Proof of Stake consensus mechanism, its own variation of the Proof of Stake consensus mechanism. Proof of Stake requires that the node that proposes the next block is selected by a combination of stack, randomness and coin age. Stack is based on the number of coins held by an account. Coin age is derived from the number of days a coin has been held. Randomness is achieved by using different mathematical formulas and taking into account variables such as hash value.
Some sort of Proof of Stake consensus mechanism is used by Cardano, EOS and Neo among many other cryptocurrencies and will be used by Ethereum in the near future. Proof of Stake is a consensus mechanism that is designed to secure the blockchain network without consuming high computational resources as it is the case with the Proof of Work consensus mechanism. Proof of Work is currently used by Bitcoin and Ethereum and can process only few transactions per second.
Strength and Opportunities
Elrond’s objective is it to achieve a better compromise for the conflicting goals of scalability, decentralization and security. This is the holy grail of cryptocurrency and the blockchain that can find the best compromise among these conflicting goals may take a lead over competitors.
The team had significant previous blockchain exposure and experience, particularly in the areas of marketing and community management. Several developers and researchers are already working for Elrond.
Weaknesses and Threats
Both major blockchain platforms, which are Bitcoin and Ethereum, that Elrond wants to outperform recognize their current scalability constraints. Ethereum is close to release its Casper update. In combination with sharding Ethereum plans to be able to process 100,000 transaction per second. This is an order of magnitude higher than the proposed transactions per second by Elrond. At the same time the Lightning Network will soon get ready and will provide a solution for Bitcoin’s scalability constraints. Since both Ethereum and Bitcoin are already widely used and accepted, with large developer communities and a proven record of immutability, it will be very hard for a new blockchain to overtake these platforms. This is particularly because blockchain adoption comes with a network effect, which gives an advantage to first movers.
Current blockchain platforms are aware of their weaknesses and are working hard to solve them while still remaining decentralized. Besides the mentioned dominant blockchain platforms there is a large number of more recent blockchain projects trying to solve these problems. They were created in a response to the shortcomings of Bitcoin and Ethereum and are proposing different solutions to solve their problems such as EOS, Cardano and Neo to name just a few. The Proof of Stake consensus mechanism that is presented as novel by Elrond is already applied by these blockchains and some of them have launched their mainnet and have billions of USD in market capitalization.
Most of the blockchain development happens with open source code. This means the knowledge in blockchain research is easily shared and can be duplicated. This setup gives the blockchains that were created earlier an advantage because of network effects. Cryptocurrencies are free to change their consensus mechanism and adopt their protocol. What is critical for the success of a blockchain is its number of adopters. Blockchain projects that were started earlier and have already gained a large number of investors and a solid developer base have a significant advantage.
Verdict
It feels like the proposed solution by Elrond comes at least one year too late. Elrond essentially wants to dethrone Bitcoin and Ethereum from their current cryptocurrency dominance. An analogy would be a startup that wants to replace Google as the default search engine. While this is not an impossible endeavour, it is still a highly unlikely outcome. For all the investors that do not have an incredibly high risk tolerance it is better to let this ICO opportunity pass.
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