What Is Zilliqa (ZIL)?

Benzinga has explored all kinds of different crypto projects looking to solve the blockchain trilemma like Kadena Coin — the quest for security, scalability and decentralization. Many projects can achieve two of the three, but only a few have figured out how to capture all three.

Zilliqa, like Kadena, claims to have figured out a way to achieve scalability (fast transaction speeds and low transaction finality times) without sacrificing security and decentralization. The need for scalability has been a significant hurdle in cryptocurrencies attaining mass adoption. 

One of the most fascinating aspects of the crypto sector is the variation in the technology developed by each project to try and tackle the blockchain trilemma. Some will succeed, but the vast majority will fail. That is likely part of why over 20,000 crypto projects exist today — well, that, and all of the scam projects.

The rest of this article will take a closer look into the technology behind Zilliqa to see what path it takes to achieve scalability. 

Overview of Zilliqa (ZIL)

Zilliqa is a blockchain network that has achieved a high level of scalability with sharding technology. Sharding allows blockchains to divide into sub-networks and run some computations in parallel, thus increasing throughput. 

Zilliqa developers also created a programming language called Scilla (short for Smart Contract Intermediate-Level Language). Scilla was designed as a principled language with smart contract safety in mind. Scilla will also make applications more secure and ready for formal verification. 

The Zilliqa blockchain relies on two algorithms, Practical Byzantine Fault Tolerance (pBFT) for consensus and proof-of-work (POW) as an entry test. Any node wanting to enter the blockchain and participate as shards must solve the POW mathematical puzzle.

The Zilliqa ecosystem is growing rapidly with over 250 projects, including exchanges, wallets, DeFi, NFTs, gaming and educational projects, to name just a few. There are also numerous decentralized applications (dApps) on Zilliqa, each with a native token. A total of 3,795 tokens are available in the Zilliqa ecosystem.

Another useful platform built on the high-performance Zilliqa blockchain is Zilbridge. Zilbridge allows interoperability between the Zilliqa and Ethereum blockchains, with more chains to be supported in the future. Zilbridge was created in partnership with Switcheo Labs and Poly Network.

The native token of the Zilliqa blockchain is ZIL, with a fixed maximum supply of 21 billion and a circulating supply of 15,867,699,447. ZIL has a 24-hour volume of $65,020,362, and the market capitalization is just under $500 million.

Why Do People Use Zilliqa (ZIL)?

ZIL is not just a hopium token; it has real utility. You can stake your ZIL tokens with nodes that provide services to the network and earn rewards.  

Holding ZIL governance tokens (gZIL) permits you to vote on submitted proposals. Examples of proposals include updating rewards and fee structures, issuing grants and accessing new protocol features. ZIL holders can easily swap ZIL tokens for gZIL on ZILSwap, Zilliqa’s decentralized exchange. 

Another utility is as a ZIL token holder; you can interact with the ZIL ecosystem. Holding ZIL tokens allows you to buy and sell non-fungible tokens (NFTs); you can mint, own and sell NFTs on Zilliqa’s marketplace. Developers can also use ZIL tokens to launch dApps on Zilliqa.  

Zilliqa (ZIL) History

Development work on Zilliqa began in June 2017, and in March 2018, its testnet went live. In June 2019, a little over a year later, the mainnet was launched. Zilliqa is the brainchild of Prateek Saxena, an assistant professor at the National University of Singapore School of Computing.

He and several students published a paper in 2016 on how sharding could improve network efficiency and speed. Saxena co-founded Anquan Capital with Max Kantelia and Juzar Motiwalla. Kantelia is a lifelong finance and tech entrepreneur, and Motiwalla is the former president of the Singapore Computer Society. 

ZIL was first created as an ERC-20 token on the Ethereum network and made available through a token generation event that ended in January 2018. Once the Zilliqa mainnet was launched, ZIL tokens were transferred in a token swap event that ended in February 2020. 

Where to Buy Zilliqa (ZIL)

If you are interested in investing in Zilliqa, the ZIL token can be purchased from centralized exchanges (CEX) and decentralized exchanges (DEX). Some of the top centralized exchanges with Zilliqa include Uphold, OKX, Binance (or Binance.US for U.S. users), Gate.io and KuCoin. Decentralized exchanges include Biswap, PancakeSwap and ZilSwap.

These exchanges have user-friendly trading platforms, and setting up an account at the centralized exchanges is pretty straightforward. You will have to complete the KYC identification verification on the centralized exchanges. No account setup or KYC is required on decentralized exchanges, but you need a hot storage wallet like MetaMask or Binance wallet to connect to the exchange.

Zilliqa Blockchain vs. Other Blockchains

Zilliqa runs on its own Layer 1 blockchain, although it was first launched as an ERC-20 token on the Ethereum blockchain. Zilliqa is the first blockchain to rely entirely on sharding to tackle the issue of scaling. 

The Zilliqa blockchain takes a three-layer approach to shard, as detailed below.

• Network-level sharding mechanism: Blockchain nodes are divided into subgroups called shards. Each shard is tasked with processing and reaching a consensus on a subset of transactions.
• Transaction sharding: The Zilliqa blockchain employs an account-based design. This design allows transactions to be sharded according to the account from which they were sent. Zilliqa makes two deliberate choices in creating transaction sharding to improve scalability. 

• Atomic transaction commits are used without cross-shard communication, which can be complex and costly. 
• Transactions will be processed asynchronously with the blockchain consensus processes.

• Computational sharding: Computational sharding allows applications running on Zilliqa and users to specify the sizes of consensus groups to compute for each of the subtasks.

As the ecosystem grows, Zilliqa is designed to scale as needed through the induction of additional nodes and miners, which will allow for additional sharding. As the number of shards increases, the network's throughput also increases. 

Zilliqa employs pBFT as a consensus mechanism that keeps all nodes in sync and secures the network. The blockchain also uses a POW algorithm to generate shards and assign node identities. 

In contrast, let's take a look at Ethereum’s blockchain. The Ethereum blockchain executed The Merge on Sept.15, 2022, and transitioned from POW to a proof-of-stake (PoS) consensus mechanism. 

The Beacon chain launched on Dec. 1, 2020, before The Merge, and ran parallel to the mainnet. On Sept. 15, 2022, both chains merged, and PoW was permanently replaced by POS.

Even after The Merge, Ethereum can still only handle about 15 transactions per second. It plans to enable sharding to improve scalability sometime in 2023 or 2024, but developers are working on Layer 2 scaling solutions. 

Layer 2 is a separate blockchain built on top of the Ethereum blockchain. Layer 2 blockchains are independent projects that inherit their security from Ethereum. They are designed to enhance speed and reduce congestion by processing transactions off the Ethereum mainnet.

While Zilliqa relies on sharding to scale, Ethereum relies on other Layer 2 blockchains to improve scalability, with plans to add sharding later.

How to Store Zilliqa (ZIL) Safely

One of the most critical responsibilities of a cryptocurrency investor is securing their crypto assets. Using crypto requires personal accountability and self-reliance, as no one will bail you out if the worst happens. 

Don’t store large quantities of crypto on exchanges. If you do, you accept the risk of losing everything. Keeping crypto on exchanges is unnecessary as most cryptocurrencies, including Zilliqa, offer multiple wallets to store your crypto. 

There are quite a few different wallets that support ZIL tokens:

• Mobile wallets: 17 wallet choices (including Exodus and ZenGo, 2 top software wallets)
• Browser wallets: 4 wallet choices
• Desktop wallets: 4 wallet choices
• Hardware wallet: 1 wallet (Ledger)

Any of the self-custody wallets above would be more secure than storing your crypto on an exchange. Self-custody means that you control the private keys to your crypto, which prove ownership. If you don’t hold and control the private keys, is it really your crypto?

Most of the wallets above are hot storage wallets that are connected to the internet. They are more convenient, but if you want the highest level of security, you want to use a cold storage wallet. Cold storage wallets like the Ledger store your crypto assets offline; you only connect them to the internet when interacting with them. Ledger hardware wallets are among the best available and they support more than 1,8000 different cryptos including Bitcoin, Ethereum, Zilliqa and all ERC-20 tokens.

Is Zilliqa (ZIL) a Good Investment?

It is the responsibility of each investor to do their due diligence before investing in any project. Zilliqa appears to be in an excellent position going into the next bull market. The Zilliqa ecosystem continues to expand, and the diversity of the ecosystem is an asset. That diversity ranges from financial services to entertainment, esports and gaming to Web3 and digital advertising.

The Zilliqa team appears to be experienced by looking at their LinkedIn profiles and through Google searches. The price of ZIL is down about 88% from its all-time high, so the upside potential seems to outweigh the downside risk. Employing a dollar-cost-averaging strategy could prove rewarding from these price levels.