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Exclusive Fundamental Analysis [July 2020]

Black Thursday has ravaged the cryptocurrency market. Some were not able to recover, others had a decent recovery and others went to all-time highs; this is one of them. Since Black Thursday, this asset has blown through the stratosphere with a 400% increase in the span of a few months. Is it fundamentally sound? And what does the future hold for it?

Introduction

The Crypto.com project, originally known as “Monaco”, aims to accelerate the global transition to cryptocurrencies by overcoming access and usability obstacles faced by the public using a mobile wallet app.

The company, MCO Technology GmbH, are creating their own blockchain: Crypto.com Chain. They claim that it is highly scalable and fast and are aiming to engineer it in a way that would allow it to reach a processing power of 50,000 transactions per second and a confirmation time lower than 1 second.

Their objective for this particular network is to enable seamless, secure and cost-efficient global transactions between merchants and cryptocurrency users.

Blockchain Architecture

The blockchain consists of four different types of nodes:

  • Council Nodes: These will initially be run by Crypto.com chain servers and will start including third-party entities once the network scales. CRO collateral must be posted to run a council node. These must execute settlements and verify all transactions.
  • Acquirer Nodes: Running an acquirer node requires a CRO collateral. These nodes serve merchants and customers, helping them settle their transactions and provide them with an escrow service.
  • Settlement Agent Node: These nodes must ensure price stability and fiat payouts for merchants. Running a settlement agent node also requires posting CRO collateral.
  • Community Node: This type of node can be run by anyone and is the only type that does not require posting CRO collateral, although it remains an option. These are targeted by merchants looking to settle their own transactions without going through acquirers.

Consensus Algorithm

Governance on the network is the council nodes’ responsibility as they must maintain a transparent audit log of all the nodes. Between each other, council nodes run a Byzantine Fault Tolerance (BFT) consensus algorithm. The initial prototype utilizes the Tendermint Core software to achieve BFT.

BFT is an old theory based on the “Byzantine Generals Problem” that has recently become popular with the rise of blockchain technology. This consensus mechanism ensures full functionality of the network with as much as 1/3 of all nodes being dishonest.

Trusted Execution Environments

Trusted Execution Environments (TEEs) represent an isolated area on the main processor. They offer a way to ensure core functionality of the Crypto.com nodes. One of the important features they offer is local and remote attestation. Allowing any external node to verify that they are dealing with a certified Crypto.com node.

Staking

By holding a sufficient amount of tokens and staking them, they are able to run a partial or full node (10,000CROs minimum for partial node and 100,000CROs for full node) and as a result, verify transactions. Staking is a profitable venture for users as they are paid for transactional costs. According to www.crypto.com, users running council nodes can earn 12% per annum on the originally staked amount.

Fundamental Value Analysis

The protocol has two distinct features seeked for fundamental analysis: awareness and tokenomics. Crypto.com has a wide user base that they have built over the past few years through building a functional product and extensive marketing campaigns. Unlike many different projects, their product is in the hands of many.

MCO, their first token was sold for platform features (different card tiers) which performed decently well during the 2017 boom. While the ethics are debatable, the introduction of CRO will unlock different features features and benefits to users, such as higher APY on lending which may be very lucrative especially for stablecoins (sort of better performing savings account). This could, and has, pushed many individuals to purchase CRO.

The second part of the equation is the supply. While high, the staking section will decrease the coins available in circulation which makes it a good tokenomics combination.

Broad Market Conditions

The following is a speculation.

It seems that DeFi (decentralised finance) may become the next upcoming crypto bubble. While the aftermath would be dissatisfying to investors, the first section can be lucrative. If that were to happen, and old ERC-20 tokens that previously boomed remained in ruin, CRO would likely be amongst that group even though its protocol is different. Why? Because while it isn’t decentralised in the same sense as other DeFi projects, it has somewhat similar offerings which are easier to access for the everyday person.

 

Disclaimer: The report does NOT constitute financial advice nor a recommendation in any sort of way.

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