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N.B: In the spirit of full transparency, the following Coin Report on HEAT is a Sponsored Post.
Welcome to the 17th Coin Report. In today’s report, I will be assessing the fundamental and technical strengths and weaknesses of HEAT. This will comprise of an analysis of a number of significant metrics, an evaluation of the project’s community and development and an overview of its price-history. The report will conclude with a grading out of 10. I hope you enjoy the read!
A couple of months ago, the team working on HEAT got in touch to book in a Coin Report to be published around the time of their recent platform release, which I shall cover a little later. Prior to this point, I had not heard of HEAT before and thus the research process truly began from scratch. In conclusion of said research, I found there to be many gaps, all of which shall be detailed. That said, there are certainly positives to take away from this report, too.
I hope the report will prove objective where it must be and fair on more subjective matters. For those who’d like to learn a little more about HEAT prior to reading this report, here are some primary links:
Algorithm: SHA256 (Proof-of-Stake)
Sector: Decentralised Asset Platform
Exchanges: HEAT Ledger & Cryptopia
HEAT, or HEAT Ledger, was launched in the summer of 2016, building on the work done by NXT to create a “Gen 3.0” cryptocurrency platform. It operates using a dual Proof-of-Stake/Proof-of Presence consensus mechanism with 25-second block times. Proof-of-Presence allows users to be rewarded for storing a copy of the blockchain. Current block rewards are 3 HEAT for each of the two consensus mechanisms. The codebase itself is written in Java to ensure suitability for applications within finance.
The coin was created following an ICO that raised around $900,000 and ran from July 11th to August 8th. This equated to 1632 BTC at the time and led to the creation and distribution of 25 million HEAT in January 2017.
Given HEAT’s launch in July 2016, the coin has almost three years of very interesting price-history that we shall tackle in the later sections of this report. For now, it will suffice to say that it made an all-time high against Bitcoin in March 2017 in a huge spike to 65k satoshis. It made its all-time high against the Dollar in January 2018 at $3.03. Since these highs, however, HEAT has lost over 99% of its value.
HEAT’s core development is its HEAT Ledger platform that integrates a decentralised exchange, block explorer and multicurrency wallet, optimising for security, speed and scalability.
We shall see how it fares in this respect.
Let’s begin with some Metric Analysis:
Below are listed a number of important metrics, all of which are accurate as of 31st March 2019. For anyone reading this who has yet to read a Coin Report, it might be worth reading this section of the first report, where any potentially unfamiliar terms are explained. For any terms or metrics specific to this post, I will provide explanations besides the figures.
Price: $0.014 (350 satoshis)
Exchange Volume: $2,163
Circulating Supply: 39,713,357 HEAT
Total Supply: 39,713,357 HEAT
Maximum Supply: 50,000,000 HEAT
% of Max. Supply Minted: 79.43%
Network Value: $569,206 (139 BTC)
Network Value at Max. Supply: $716,625
Exchange Volume-to-Network Value: 0.38%
Average Price (30-Day): $0.018
Average Exchange Volume (30-Day): $40
Average Network Value (30-Day): $709,831
Average Exchange Volume (30-Day)-to-Network Value: 0.01%
Volatility* (30-Day): -0.0538
Average Daily On-Chain Transactions (30-Day): N/A
Average Daily Transactional Value** (30-Day): N/A
NVT*** (30-Day): N/A
% Price Change USD (30-Day): +23.1%
% Price Change USD (1-Year): -93.4%
USD All-Time High: $6.74
% From USD All-Time High: -99.6%
Premine % of Max. Supply: N/A
Premine Location: N/A
Liquidity (calculated as the sum of BTC in the buy-side with 10% of current price across all exchanges): 0.115 BTC
Liquidity-to-Network Value %: 0.08%
Supply Available on Exchanges: 65,500 HEAT
% of Circulating Supply Available on Exchanges: 0.16%
*Volatility is calculated by taking the average price over the given time-period, calculating the difference between it and the highest price and it and the lowest price over that same time-period, and multiplying those figures together. The closer to 0, the less volatility during that period, and vice-versa. Read this for more on volatility.
Supply Emission & Inflation:
Block Reward Schedule: Current block reward is 3 HEAT for Proof-of-Stake and 3 HEAT for Proof-of-Presence for the next ~200,000 blocks. Following this, block rewards decrease to 2. More on this can be found on p27 of the whitepaper.
Average Block Time: 25 seconds
Current Block Height: 2298915
Annual Supply Emission: 5,402,136 HEAT (18.91 BTC at current prices)
Annual Inflation Rate: 13.6%
Circulating Supply in 365 Days: 45,116,493 HEAT
Network Staking Weight: N/A
Staking ROI (Annual): Minimum 6.8%* (assuming all circulating supply is being staked)
*Calculated by dividing the annual supply emission rewarded to stakers by the circulating supply: 2,701,068 / 39,714,357 = 6.8%
Well, unlike for most Coin Reports, there is a little less to work through for HEAT, as its recent developmental changes and the lack of a fully-functional block explorer meant that I could not evaluate the coin’s distribution. Further, HEAT does not have masternode functionality.
However, there is still a fair bit to discuss, and I’ll begin with the General metrics:
Firstly, let’s take a look at Volatility.
However, I must first mention that HEAT is currently only traded on one exchange (its own DEX) with extremely low volume and liquidity whilst Cryptopia is undertaking work to get itself back online. As such, volatility was expected to be high. HEAT’s Volatility came in at -0.0538, meaning that it has actually had less movement than Trittium, Altbet and MonetaryUnit over a 30-day period. This can be explained by the lack of volume, and thus the lack of movement in price.
Now, let us take a look at Liquidity measures, all the while keeping in consideration that there is only one exchange at present:
HEAT’s Liquidity was calculated to be 0.115 BTC within 10% of current prices on the HEAT Ledger DEX, which equates to 0.08% of its Network Value. If I’m honest, I was actually expecting worse Liquidity than that, but it does still place HEAT fourth from bottom amongst the coins in previous reports. What I was surprised at is that, despite the lack of volume or even multiple exchanges, it still had slightly greater Liquidity relative to its Network Value than Cashaa – a multi-million dollar ICO.
Regarding its sell-side liquidity, I calculated that there was ~65,500 HEAT available on the HEAT Ledger orderbook, equating to 0.16% of the circulating supply; by the far the lowest figure recorded in these reports. Again, though expected given the lack of exchanges, does give some indication as to lack of desire for the holders of the other 99.84% of the circulating supply to sell at current prices. Overall, it indicates to me that, at present, there is a general lack of interest from buyers or sellers, and that is perhaps to be explained a little later when we cover Development.
Now, before we move on to cover volume and conclude the General metrics, I’d like to briefly mention price. HEAT’s current price of around $0.014 is over 99.5% below its all-time high of $3.03. I would generally expect this of a coin that is now abandoned or fraudulent or something to that effect, and yet HEAT clearly is neither of those things, given their recent platform release and the PR campaign that they have organised to begin around said release… as such, it is likely that there is indeed an opportunity here, yet the lack of an even somewhat liquid exchange is likely the very reason it is trading at such a discount; no one is able to buy any significant amounts, at least not without going over-the-counter. I expect the dynamics to change when the HEAT market is re-enabled on Cryptopia, or, ideally, when they are listed on new exchanges.
To conclude this coverage of General metrics before we tackle Supply Emission, let us take a look at the volume-related figures:
HEAT traded $2,163 of volume over the past 24 hours, equating to 0.38% of its Network Value. Now, on the surface, that doesn’t sound all that bad (not great, no, but not abysmal either). However, this was an anomaly over the past 30 days, with the Average Daily Volume coming in at… wait for it… $40. In essence, zero. That is 0.01% of its Average Network Value – for the same period – of $709,831. Now, what this confirms is that there is simply no interest in HEAT on its own exchange at present. Unfortunately, I can’t determine OTC demand, and thus this is all I have to go on. There is a clear necessity here for more exchange listings in order to gain an audience of speculators that will at least drum up interest in trading HEAT, so that any fundamental developments can become more visible.
So, with that said, let’s now take a look at Supply Emission:
HEAT’s average block time is 25 seconds and its current block rewards are 3 HEAT to each of its consensus mechanisms (Proof-of-Stake and Proof-of-Presence). However, these rewards decrease to 2 each in the next ~200k blocks. I calculated that the supply emission for the next 365 days will be around 5.4mn HEAT, or 18.91 BTC at current prices. This gives HEAT a moderate annual inflation rate of 13.6%.
Given HEAT’s sustained lack of volume, it would be rather useless to determine the relationship between volume and its supply emission. Inflation is clearly not much of an issue at 13.6%, and there should be no real headwinds to price growth if the real issues of volume and liquidity are resolved. This is critical.
And that concludes this section on Metric Analysis. Onto the HEAT Community:
There are two primary aspects of community analysis: social media presence and Bitcointalk threads. I’ll begin with the former before moving on to the latter.
Concerning social media presence, there are four main platforms to examine: Twitter, Facebook, Telegram and Discord.
HEAT is present on all platforms except Telegram. To begin, let’s look at the various social metrics that I calculated from the HEAT Twitter and Facebook accounts:
Twitter Followers: 3042
Average Twitter Engagement: 0.22%
Facebook Likes: 5934
Facebook Posts (30-Day): 7
Average Facebook Engagement: 0.02%
As usual, I will be using RivalIQ‘s social benchmark report for evaluation purposes.
Given that HEAT has been around for almost 3 years, its Twitter audience is not particularly large and its engagement is not particularly strong. That said, in RivalIQ’s report, we find that the average Twitter engagement rate across all industries is 0.046%, which means that HEAT’s engagement rate is currently 4.78x greater. Further, the average engagement rate for the Media industry (the most relevant in the report) is 0.013%, thus HEAT’s is 16.9x greater.
However, its engagement rate relative to other cryptocurrencies is very much average, placing it in the middle of the pack of coins previously reported on.
Facebook, unlike for many cryptocurrencies, is HEAT’s largest audience, with close to 6,000 likes. The team do not post all too regularly, however, with 7 posts in the past month. Engagement is very poor here, with 0.02% being the average engagement rate for the past 30 days.
HEAT’s average Facebook engagement rate is also lower than the average across all industries of 0.16%, and lower than the Media industry average of 0.08%.
This needs work, as there is no point in having a solid working product (the platform, which we shall cover later) when no one is paying any attention.
HEAT’s Discord group is rather small relative to its other platforms, with only 359 members. There are plenty of channels for relevant topics but I could not find a channel with links to useful resources for new users.
As usual, General is the most active channel, with 20 members active over the past week (around 5.6% engagement). However, there are only a handful of daily messages posted, and the channel is lacking consistency in any real, meaningful discussion on the development of the project. The team are active, as are a small group of dedicated community members, but there is no palpable wider interest. What I did like was that the team, irrespective of the lack of heavy engagement, are consistently providing detailed updates on their progress, including their Business Strategy roadmap for 2019, which I cover later in the report. I also found out that new altcoins will be added to the DEX in Q2 to help improve volume; that a PR campaign is underway to help visibility of the platform release; and that HEAT will be sponsoring the Evolvement podcast for awareness. Heatwallet 2.9.0 (the multifunctional HEAT platform) was released a few days ago, featuring its integrated DEX and multicurrency wallet, as well as markets added for NXT assets, plus a blog post detailing the ins and outs of the release.
Overall, the team is clearly making an effort to inform the community of their progress, and that is highly commendable. However, engagement and interest is very limited and the group is quite subdued in its discussion.
The (new) HEAT BitcoinTalk thread was created on June 10th, 2017, and has since generated 1023 posts spanning 52 pages in 662 days. This equates to 1.54 post per day, on average. However, in the past 90 days, the thread has had 44 posts, giving an average of 0.48 posts per day; a serious decline in engagement.
The announcement itself is mainly just a series of links to key resources. There is little to no branding or design, and the announcement still features a roadmap from 2017. It does not even introduce the project nor provide any basic info on coin specification or the block reward schedule.
Regarding the content of the thread, there is some discussion concerning the Cryptopia hack, as this is the only exchange listing other than the HEAT DEX, which seems to be a sore point for the community. There seems to be a fair amount of bickering in the thread, with the new platform release being the only real useful post in the whole thread. Not overly impressed.
Community growth needs to be given serious attention, especially given the recent platform release, which has a number of positives that would be useful to users. My primary problem, however, is the severe lack of information; as someone who is spending an entire day on this research process, I struggled with finding certain information – what about new users and visitors who merely browse?
For the following Development analysis, I will be evaluating project leadership, the website, the roadmap, the whitepaper, the wallets and finally providing a general overview:
There are 6 core team members listed on the website and 7 contributors to the Github.
Of these, there is a CEO, CFO, CTO, Senior Developer, Head of Marketing and Head of Content & PR.
There is clear balance here, as well as experience, yet the research done thus far points to a heavy focus on development and a lack of attention or commitment towards marketing (something that is only recently changing, as per the website evaluation in the next section and the current PR campaign).
The HEAT website is perhaps the first sign of a changing tide regarding the project’s lack of commitment to marketing, which, in turn, implies a lack of commitment to user growth. I was very happy to find that the team have recently done an overhaul of the old website, with clear progress made in UI/UX and the overall visual appeal of the design.
The Web Wallet login is clear and accessible, and branding is much stronger than elsewhere within the HEAT ecosystem. The platform’s use-cases are front-page to ensure new visitors are made aware – overall, it is just much better tailored to the end-user than anything covered so far in the report. The multi-currency wallet is emphasised, as is the ability trade anonymously and securely on the integrated decentralised exchange. Further, I discovered that HEAT are branching out into ETOs, with asset issuance and market creation available on their platform; something unmentioned elsewhere. The HEAT platform is available on all operating systems and these are clearly linked, as are HEAT’s social channels.
I can definitely see the direction that the projects wants to move towards just from the differences between this new website and all of the older material in the ecosystem. Further, HEAT is providing free ETO evaluations for businesses, with the HEAT platform committed to providing support for successful issuances. The platform itself will allow businesses to create their tokens and a market for them, as well as allow users to store the tokens.
Far more impressed with this than anything I have seen thus far.
I was provided with this Business Strategy roadmap by the HEAT team, which gives an overview of what is to come for 2019. It can also be found on their website, though the size is not quite large enough to read for some reason; at least not on my PC.
In truth, it does not give away much detail on what’s in store for the project, but it does show that they are indeed thinking ahead and that they plan to develop a number of products and services related to HEAT. I would like to see more detail, however.
The whitepaper is 32 pages in length, and is dated August 2016, thus likely out-dated. It is very much a technical whitepaper, not necessarily meant for the layman, with much of the prose jargon-heavy and highly technical. They do mention that the document will be “amended and expanded” over time as the project develops, but this doesn’t seem to have been the case.
There is much here on the technology being developed and its applications, in particular the “complete removal of the embedded database” in HEAT, which means that, unlike most cryptocurrencies, HEAT does not have a single, ever-increasing blockchain file, but rather uses “serialized blockchain files”. This is where Proof-of-Presence comes in, which rewards HEAT users that store copies of the blockchain.
There is, however, also important information on block reward schedules, consensus mechanisms, the decentralised exchange and other useful material for those perhaps considering investment, but overall I feel that the paper is very much aimed at those with a degree of technical proficiency, rather than being utilised as a tool to onboard more potential users of the platform (who are often laymen). In fact, the entire project feels very much like this, as was the case when I wrote reports on Arionum and Bismuth; HEAT feels similar in its priorities and thus is clearly experiencing similar issues.
The HEAT platform with integrated multi-currency wallet is available online and on all operating systems.
In general, the key issues for HEAT are self-evident: community engagement and liquidity. Given sufficient commitment to resolving these, I believe there is promise here, but these are no small tasks.
The positives are largely tied to the recent platform release, which, though it needs some polishing up with regards to design, is highly functional and would be a very useful tool if and when it begins to receive some volume.
It is clear that the development-heavy approach has left holes in key areas for HEAT that must be remedied now that the platform has been released. That said, I must emphasise how impressive I find it that a project that has experienced a 99.5% decline in the value of its coin has continued to work tirelessly at developing a working product.
That concludes the Fundamental analysis, onto the Technical:
Above, I have provided the Weekly and Daily charts for HEAT. Before I begin any analysis, I must first mention that the lack of liquidity means that I would not be able to take a position, in any case; there is simply not enough buy-or-sell-side liquidity. As such, this analysis is largely for the sake of study and to be returned to when HEAT becomes more liquid (although price, I imagine, will likely be higher by that time).
It is clear from the Weekly chart that we have seen progressively lower peaks on the bull cycles, culminating in an all-time low being formed around 150 satoshis. Levels of prior support became resistance on the way down, such as at ~3600 and ~1650 satoshis, though those levels are a long way away from where price is currently trading.
Looking now at the Daily chart, we can see that the downtrend from 2018 has ended, and price is largely range-bound between 350-600 satoshis. This would usually imply potential accumulation, but the lack of volume makes it unlikely, unless there is volume being traded OTC. (A rich-list would have been useful here). The last period of significant volume was in November 2018, when price rallied above 1100 satoshis; since then, volume has been exceedingly low.
I would like to see new exchanges added for HEAT, or a serious increase in the volume of their own decentralised exchange, before taking any position. As I have likely made clear, there is some promise here and price is certainly attractive, but it is currently too illiquid and at the mercy of the growth of its own exchange.
This report is now over 4,000 words, and it is time to draw it to a close.
My final grading for HEAT is 6 out of 10.
Here, you can find my grading framework, for reference.
Lastly, here is a link to a Google Sheets file with any significant data from previous reports compiled for cross-comparative purposes. I will keep this updated as I continue to write these reports.
I hope this report has proved insightful and that you’ve enjoyed the read! Please do feel free to leave any questions in the Comments, and I’ll answer them as best I can.
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