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N.B: In the spirit of full transparency, the following Coin Report on Constellation is a Sponsored Post.
Welcome to the 34th Coin Report. In today’s report, I will be assessing the fundamental and technical strengths and weaknesses of Constellation. This will be comprised 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!
Prior to conducting my research for this report, I had seen Constellation appear on my Twitter feed countless times, with many publicly and privately messaging me, urging me to take a look at it. Unfortunately, I was unable to find the time to do any more than some preliminary research, but the Constellation community stepped in and asked the team to book in a Coin Report. As such, the team got in touch and I was given the opportunity to do some deeper research, and I honestly wish I had taken the time several weeks ago. I shall refrain from saying much more at this stage, but, having completed my research, I can tell you that this was one of the more fascinating projects I’ve had the pleasure to cover.
I hope this 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 Constellation prior to reading this report, here are some primary links:
Algorithm: ERC-20 (until Mainnet launch)
Sector: Big Data
Exchanges: Hotbit, KuCoin, IDEX, Bilaxy and HitBTC
Constellation launched in 2017 with a private sale that raised $35.2mn in exchange for 756mn DAG – the utility token for the Constellation Network. This amounted to 18.9% of the original 4,000,000,000 DAG maximum supply; however, as a gesture of good will, the founders burned the 288mn tokens originally allocated to them, leaving the maximum supply at 3.71bn DAG. The team raised no further funds following this.
DAG was created as an ERC-20 token for accessibility purposes, but, upon the launch of the Mainnet in October, these tokens will be swapped for the native Directed Acyclic Graph tokens; hence the ticker, DAG.
Constellation has been in existence for almost two years at this point, but the token was first listed on exchanges in June, providing a little over a year’s-worth of price-history.
Whilst I shall cover this in depth in a later section, for now it will suffice to say that DAG formed its all-time high against Bitcoin at 600 satoshis shortly after its listing. Following this, price has continued to decline, along with the rest of the altcoin market, finding its all-time low at 20 satoshis in May 2019, with price having bounced since, currently trading at ~75 satoshis.
Though the concept of a Directed Acyclic Graph has been covered in these reports previously, and the term has most certainly made its rounds on Twitter, it is often the case that projects associated with the technology have experienced their hype cycles and subsequently disappeared. I expect that this is in part due to the lack of a real, clear-cut use-case for many of these projects, which instead seem to expect that technology alone will reap rewards. This, I was glad to find, was not the case with Constellation.
Now, having said that, the niche they have designed their technology for, if it can be called such, is Big Data. Though broad in its ambition, it is, nonetheless, a project with clarity: in short, Constellation is seeking to make high-volume data exchange trustless, inexpensive and secure, allowing for businesses to both monetise these data streams and drastically improve the efficiency of data transfers.
As stated on the About Us section of their website:
“Constellation is a distributed network that enables fast, scalable solutions for organizations who need to process and transfer data securely and build interoperability for connected sensors and devices. As computing moves increasingly to the edge, Constellation provides the only scalable, secure solution for a world with more connectivity, more centralization, and more concentrated risk.”
I look forward to evaluating their progress in this report.
Let’s begin with some Metric Analysis:
Below are listed a number of important metrics, all of which are accurate as of 29th August 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: $0.0069 (73 satoshis)
Circulating Supply: 842,330,834 DAG
Total Supply: 3,711,998,690 DAG
Exchange Volume: $655,520 ($219,520 excluding Hotbit)
Network Value: $5.843mn (614.9 BTC)
Maximum Supply: 3,711,998,690 DAG
% of Max. Supply Minted: 100%
Network Value at Max. Supply: $25.75mn
Exchange Volume-to-Network Value: 11.22% (3.76% excluding Hotbit)
Average Price (30-Day): $0.004
Average Exchange Volume (30-Day): $236,451
Average Network Value (30-Day): $4.61mn
Average Exchange Volume (30-Day)-to-Network Value: 5.13%
Volatility* (30-Day): -0.1773
Average Daily On-Chain Transactions (30-Day): 44.3
Average Daily Transactional Value** (30-Day): $125,189 (source)
NVT*** (30-Day): 46.68
% Price Change USD (30-Day): +78.8%
% Price Change USD (1-Year): -42%
USD All-Time High: $0.054
% From USD All-Time High: -87.2%
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): 0.559 BTC
Liquidity-to-Network Value %: 0.09%
Supply Available on Exchanges: 37,084,327 DAG
% of Circulating Supply Available on Exchanges: 4.4%
*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.
**Transactional Value in $ is calculated by taking the daily transactional value in DAG and multiplying it by price.
***NVT is calculated by dividing the Network Value by the Average Daily Transactional Value. See here for more on NVT.
Supply Emission & Inflation:
Block Reward Schedule: N/A
Average Block Time: N/A
Current Block Height: N/A
Annual Supply Emission: 0
Annual Inflation Rate: 0%
Circulating Supply in 365 Days: N/A
Staking & Masternodes:
Network Staking Weight: N/A
Staking ROI (Annual): N/A
Masternode Collateral Size: 250,000 (Foundational Validator Node, unreleased)
Masternode Price: $1,734
Masternode Count: N/A
Masternode Count Growth (30-Day): N/A
Supply Locked in Masternodes: N/A
Masternode ROI (Annual): N/A
Masternode Reward / Block Reward: N/A
MNV / Network Value: N/A
Address Count: 2,524
Supply Held By Top 10 Addresses: 79.85%*
Supply Held By Top 20 Addresses: 84.19%
Supply Held By Top 100 Addresses: 93.32%
Inactive Address Count in Top 20 (30 Days of No Activity): 17
Now, whilst there is plenty to work through here, the lack of staking, masternodes and an ICO rids us of a little weight. Further (and unfortunately), as the Constellation Mainnet is not yet live. evaluation of on-chain usage is still not indicative of non-speculative demand for the DAG token. Nonetheless, at least these metrics will provide us with some insight as to the interest in the project itself.
I’d like to begin by taking a look at the metrics related to transactions, before working through the remaining General metrics, followed by Supply Emission and concluding with some Distribution analysis:
I found that there were 44.3 Average Daily On-Chain Transactions over the past 30 days, amounting to an impressive $125,189 of Average Daily Transactional Value. This means that the average on-chain transaction over the past month was worth $2,825. Using this data, we can work out that the 30-day NVT of Constellation is 46.68; this is around 40% less than that of Bitcoin, indicating a degree of undervaluation. However, this would be more convincing if the data was from Mainnet usage rather than transfers of the ERC-20 token; as such, undervaluation is yet to be determined.
Moving on, I’d like to take a look at Volatility, which I calculated to be -0.1733 for the past 30 days; this places Constellation 6th-highest amongst prior reports for 30-day volatility, indicating that a new cycle may be underway, as price as emerged from consolidation, at least against the Dollar.
Next up, we have the metrics relating to Liquidity:
Firstly, I found that there was 0.559 BTC of buy-side liquidity within 10% of current prices to be found across all exchanges, equating to 0.09% of its Network Value. This places Constellation 7th-lowest from prior reports, indicating relatively little demand at current prices.
As for sell-side liquidity, I found that ~37mn DAG was available for purchase in the orderbooks, equating to 4.4% of the circulating supply. This is the 3rd-highest figure ever recorded in these reports, suggesting that there is no overwhelming desire to hold DAG at the moment. Overall, the liquidity metrics are currently pointing to weakness rather than strength, which is somewhat in conflict with our volatility and transactional metrics. Perhaps, however, this is in part a symptom of the lack of larger, more popular exchanges; the only exchange listing of some significance is currently KuCoin. Nonetheless, buy-side liquidity is clearly quite weak and sell-side liquidity suggests that more incentives need to be created for holding DAG.
Moving onto volume, Constellation is reported to have traded $655k of Exchange Volume over the past 24 hours, equating to 11.22% of its Network Value. However, a large part of this volume derives from Hotbit, which is known for wash-trading; as such, discounting the Hotbit volume, the figures are $219k and 3.76%, respectively. Still, these are impressive figures. Further, Average Exchange Volume was $236,451 for the past 30 days, equating to 5.13% of Constellation’s Average Network Value for the same period. This is the 12th-highest figure recorded in these reports and certainly indicative of speculative interest.
Now, let’s take a look at (the lack of) Supply Emission:
Given that DAG was initially distributed via a private seed round, which was followed by an airdrop, there is a maximum supply of ~3.7bn DAG that is already in existence, thus there is effectively no supply emission beyond the release of vested tokens over the next several years. Thus, annual inflation is 0%. Further, in practice, there is engineered deflationary pressure, as Constellation have committed to burning 10mn DAG with every new enterprise client for their services (up to a maximum of 150mn DAG). As such, the on-boarding of 15 clients over the next 12 months would decrease the total supply in existence by 4%, and the current circulating supply by a whopping 17.8%. Given these facts, I do not expect there to be headwinds for price growth when Constellation experiences its (first) bull cycle, but we shall come to that a little later.
Finally, let us take a look at some Distribution:
Using the rich-list, I found that there are currently 2,524 holders of DAG.
Further, I found that the top 10 richest addresses control 79.85% of the total supply; the top 20 control 84.19%; and the top 100 control 93.32%. However, this is not accounting for the fact that the 1st, 2nd, 3rd, 4th and 6th-richest addresses are all team-owned, seed round tokens or burned tokens, and the top 20 also contains 4 exchange-owned addresses, controlling 7.07% of the total supply. The 1st-richest is the 1.6bn DAG reserved for validator node rewards, to be released over the next decade, though we shall discuss this at length in a subsequent section. In short, the surface-level figures are hardly reflective of reality, with the top 20-richest privately-owned addresses controlling a far more reasonable 10.19% of the total supply.
Regarding the activity of the real top 20 addresses, I found that 17 were inactive over the past 30 days. Of the remaining 3 addresses, 2 were actively distributing, with 20mn DAG shed between them over the past month; the remaining address has added 11mn DAG to its position over the same period.
And that concludes this section. Onto the Constellation 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.
Constellation is present on all four platforms. To begin, let’s look at the various social metrics that I calculated from the Constellation Twitter and Facebook accounts:
Twitter Followers: 14,173
Average Twitter Engagement: 0.57%
Facebook Likes: 106,746
Facebook Posts (30-Day): 5
Average Facebook Engagement: 1.91%
As usual, I will be using RivalIQ‘s social benchmark report for evaluation purposes.
Constellation has a moderately-sized audience on Twitter of 14,173 followers, which is the 10th-highest of prior reports Its engagement, however, is a little less impressive, at 0.57% on average; somewhere in the middle of the pack. Relative to global benchmarks, this is 63.3x greater than the Media industry and 11.9x greater than the average across all industries. I think there is work to be done here on fostering engagement within the Twitter community; this despite them clearly being vocal about the project (enough to repeatedly appear on my feed).
Unlike with the vast majority of cryptocurrency projects, Constellation’s Facebook page is actually primary to its Twitter account, with a huge audience of 106,746; the largest of all prior reports. Further, its engagement rate is 1.91%, which is almost 4x that of its Twitter account despite the vastly larger audience. That said, this engagement rate was significantly skewed by one recent post that garnered over 10,000 Likes, whilst other posts have barely any interaction. Nonetheless, it is good to see an equal commitment to maintaining the Facebook audience as that of Twitter, with 5 detailed posts published over the past month.
There are 401 members of the Constellation Discord; a very small group, considering the size of its audience elsewhere online.
I expect this is also why there is little to no activity in the group, with the vast majority of the channels unused in many months. The Discord itself is well-organised, with relevant menus and topic channels, and an Information channel with basic details concerning the project, as well as links to relevant resources and further reading. Beyond this, the only two channels with any real activity are Announcements and General, the first of which tends to be updated once a month. Though not particularly active, there was a key announcement made over the past week: that Constellation have signed a working contract with the United States Air Force, with the latter being the most recent clients to have utilised Constellation’s technological solutions for its problems; namely, the organisational issues that arise with the mass of data sources being handled by the USAF and the subsequent struggle to make this data interoperable.
Rather than gloss over this, I’d like to emphasise just how huge this is, not just for Constellation but for the space, as a whole: being contracted to secure and validate data for the United States Air Force (as well as solve more complex issues such as interoperability of the given data) undoubtedly imparts a legitimacy on the cryptosphere, the significance of which few projects besides Bitcoin have likely contributed to. Further to this, it – almost in one fell swoop – eradicates the most stubborn of the Bitcoin maximalist ideologies: that there is no possible value to be attributed to any distributed ledger technologies besides Bitcoin. Though an obtuse idea at best, it is nonetheless one that pervades Twitter, at times; clearly, the United States Air Force disagrees, and that is important.
Beyond this, there is very little of note in General, with only a handful of messages since the beginning of August.
There are 11,633 members of the Constellation Telegram.
Clearly, Telegram is Constellation’s primary community, with a group almost 30x larger than their Discord. It should comes as no surprise then that, in stark contrast to the inactivity of the latter, the Telegram is almost too active to keep up with. Though there are hundreds of messages on a daily basis, with constant discussion on the project, I shall refrain from attempting to cover it all, instead opting to provide my key takeaways:
- Native wallets are being built for the DAG token and will be released upon the swap in Q4.
- 20mn DAG was burned when the United States Air Force contract was announced, due to the size and longevity of the contract (as opposed to the 10mn committed to be burned with each new enterprise client).
- The community are very much engaged with the project, often offering suggestions on numerous aspects of future development and marketing. Further, there is palpable excitement, particularly following the USAF announcement.
- The CEO is actively involved in the community, answering questions on a daily basis.
- In the future, a revenue share model is expected to be constructed.
The Constellation BitcoinTalk thread was created on January 7th, 2018, and has since generated 246 posts spanning 13 pages in 600 days. This equates to 0.41 posts per day, on average. However, in the past 90 days, the thread has had only 4 posts, rendering it effectively dead.
Regarding the announcement itself, it is pretty poor. There is no branding or sense of identity; just plain text. Further, there are no details concerning the token itself. The whitepaper, website and Telegram are linked (the latter for an airdrop at launch); other than that, there is only an overview of the project provided. It states that Constellation is a “horizontally scalable blockchain (DAG/ExtendedTrustChain) operating system with smart contracts as microservices.” Full node capability on mobiles is mentioned, as is Proof-of-Meme as consensus, though none of this is explained. The purpose of the project is stated to be to allow for consumer grade applications to be built on Constellation.
Overall, this clearly is in dire need of an update. Despite the thread itself being dead, BitcoinTalk remains a key resource for new users seeking to learn more about projects, and this does not paint a great first impression.
And that concludes this section on the community; let’s take a look at some development.
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 12 team members listed on the website, 13 employees to be found on LinkedIn and 14 Github contributors.
The team itself is impressive, with depth and breadth of expertise across relevant fields. Prior experience includes senior positions at Google, Oracle, NASA and experience working with the ECB. It is well-balanced, for the most part, although there doesn’t appear to be anyone with much marketing expertise. As would be expected of such a project, the team is tech-focused. Full transparency is provided, with LinkedIn profiles available for further information.
The website is very clean and modern in its design. It is also well-branded with a relatively clear identity (although this could be improved). The navigation menu is fairly comprehensive and user-friendly, although the inclusion of a roadmap and FAQ would be helpful for potential new users or investors. Also, all social links are
hidden away at the very bottom of the footer of the homepage. This makes community growth more difficult than it needs to be; make it seamless so that those that visit the site and are interested can quickly join social platforms and get involved in the conversation around Constellation.
The homepage itself begins with a brief summary of the project under the tagline Big Data Democratized. Here, we are told of Constellation’s focus on solving validation and provenance issues with big data for enterprises with seamless, inexpensive solutions.
Beyond this, there is a section on the core traits of Constellation’s technology, with the three primary use-cases being Big Data Validation, Big Data Notarization and Scalable Interoperability. Below, we find links to further reading on the token itself, the network and protocol and the SPORE platform, which serves as a monitoring interface.
Further down the homepage, we find a list of partners, including Hyperledger, MOBI, ChainRock and ParJar. We also find recent news, including the most pivotal announcement on the signing of a working contract with the United States Air Force.
In the footer, we find a list of further reading material, as well as social links. There is also a native blog that is regularly updated to keep the community informed.
The roadmap is native to the Fact Sheet (covered in the following section). It is well-presented, visually appealing and relevant.
The roadmap is segmented by Release, each with its own identity for greater clarity and allowing for community accountability. It begins with August 2019, which is titled Big Bang, and comprises Node Validator selection with a first draft round, followed by Mainnet launch and nodes going live in September. The next phase is titled Planck, beginning in October, and comprises the Mainnet swap for the DAG token from ERC-20, the second round of the draft for nodes and governance and voting mechanisms being transferred to the community. Following this, in December, Quark begins, with application demos and a third draft round with the release
of developer documentation to assist with building out the network. In January 2020, Hadron begins, comprising application support, State Channels and a fourth draft.
Overall, informative and ambitious.
There is a technical whitepaper and a business paper available. However, for our purposes, we shall be looking at the most recently updated
company Fact Sheet, which presents a great deal of important information in a concise manner.
The tagline for Constellation is The Blockchain For Big Data.
An overview is provided, which discusses how Constellation facilitates data validation and query, with seamless integration into organisations via their API. The purpose of the business is stated to be to secure, notarise and monetise data.
We are then given a brief outline of the team, though full details can be found elsewhere (as aforementioned in this report); here, we are told of their experience in Oracle, Google and NASA, as well as in Silicon Valley and the ECB. The company itself is registered in Delaware, whilst the Constellation Foundation is in the Cayman Islands.
Regarding the Constellation Protocol, we are told that the network organises the servers, whilst the nodes validate the data on the servers. This data is transferred through the network. The protocol itself is written in Scala and utilises Proof of Reputable Observation. There is no further information provided here to clarify this; however, PRO is effectively a consensus mechanism centring on reputation, whereby each node in the network is scored based on its historical behaviour within the network, incentivising honesty. For further reading on this, take a look at this article.
The next section discusses the Spore API Platform, which is a paid platform providing licensed State Channels. A State Channel is a microservice that is specific to a given data set, with rules constructed by the user for data validation. (For more on State Channels, see here). This allows for businesses to build distributed applications on the Constellation Network whilst allowing for monetisation of data streams.
The Constellation Network itself is comprised of Validator Nodes. An analogy is provided here with Chainlink: “Just as Chainlink is an onramp for data onto DLT technology, we too provide an onramp for existing systems to transfer data onto our DAG Network. Emphasis is placed on the trustless exchange of data, which
Constellation believe will “enable the data economy of tomorrow.””
Moving on through the document, we find a section on Value Proposition, which states that Constellation’s purpose is facilitating efficient, secured and trustless exchange of data at high volume, with seamless integration into existing infrastructures. This is expected to reduce costs (and possibly raise revenues) of businesses dealing with Big Data.
Regarding the token itself, we are told of U.S and Maltese legal opinion that DAG is a utility token. Further, it will be used within the network to purchase above-average throughput, attributing value to the data being exchanged. Beyond this, 10,000,000 DAG will be burned with each new enterprise client. In short, as a token, DAG is representative of tokenised bandwidth, allowing for transactions above the rate limit and the monetisation of data streams between businesses.
Following this, we find that Foundational Validator Nodes will require 250,000 DAG. These nodes will receive rewards from the 1.6bn DAG reserved for their validations over the next decade.
Next, there is a section on token supply with a great deal of detail and transparency. Here, it is mentioned that there were originally 4bn DAG but the team burned 288mn of this, thus maximum supply is ~3.712mn now. Further to this, wallet addresses are provided for team-owned tokens and private sale tokens, with accompanying balances. Most significantly, as mentioned above, 1.6bn DAG is reserved for Validator Nodes. Beyond this, there are 66mn DAG in the community wallet, 114mn for advisors and partners that is vesting until June 2020, 355mn for the private sale that is also vesting and 500mn for the Foundation that is illiquid.
In short, a large percentage of the tokens in existence are either illiquid or vesting for another ~10 months, at least.
Regarding funding, there was a private presale for 730mn DAG, with 80% of the funds secured in USD and 20% in Bitcoin. Effectively, there is runway for years of development.
Following this, there is a mention of the Constellation community, with over 40 global ambassadors, Hyperledger and MOBI partnerships and over 200,000 followers across all platforms.
Transparency is provided with a link to the Github repository. Further, governance is described as initially centralised but will evolve to become gradually decentralised with the growth of the network.
Regarding competitors, it is stated that there are no direct competitors for real-time, on-chain Big Data. However, indirect competitors include IOTA,
Hashgraph, Fantom and Splunk.
There is a 2019 roadmap presented, but this is covered in the earlier section.
Further reading links are provided at the end of the document.
Overall, thorough and insightful given the length; certainly sufficient to garner a fuller knowledge of the project and prompt further reading.
The token can currently be stored in any ERC-20-compatible wallet.
Though DAG has been listed on exchanges for over a year, there is no discernible full market cycle that has played out. Rather, there is a pronounced bear cycle that began upon the token first being traded in June 2018. At this time, price formed its all-time high at 600 satoshis, proceeding to make lower highs and lower lows for another 11 months. Support became resistance and DAG fell victim to the classic emotional stages present in a bear cycle, as I have depicted. Ultimately, price found its all-time low at 20 satoshis in May 2019.
However, from November 2018, price has effectively been range-bound between the all-time low and resistance at ~70 satoshis; the Depression stage of the cycle that has remained in play for 283 days. Further, price remained capped by the 200-day moving average, once breaking out but being slapped back down again in June 2019. More recently, following the USAF announcement, price has broken above the 200-day moving average and out of its protracted range, retesting short-term resistance at 60 satoshis as new support and continuing on above 80 satoshis.
I believe that the USAF announcement was the trigger for Constellation’s first ever bull cycle, with Disbelief likely to occur once price gets back above 100 satoshis. I am absolutely buying a position at current prices and holding cyclically; there are few projects I have been as bullish on in recent history, and I only wish I had spent the time to research it earlier, affording me the opportunity to buy within the accumulation range, closer to the all-time low.
Nonetheless, I will be buying some DAG here.
This report is now over 5,000 words, and it is time to draw it to a close.
My final grading for Constellation is 8 out of 10.*
*As is often the problem, fundamentally strong projects can have low liquidity; this prevents me from grading Constellation at a 9, which I most certainly believe it is deserving of. Once liquidity issues are solved, the grading will be changed to reflect that.
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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