Coin Report #29: X42 Protocol

Coin Report #29: X42 Protocol

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N.B: The following Coin Report on X42 Protocol is community-selected.

Welcome to the 29th Coin Report. In today’s report, I will be assessing the fundamental and technical strengths and weaknesses of X42 Protocol. 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!

Introduction

Prior to X42 Protocol being selected by the community as one of the projects to be featured in these reports, I had never heard of it. I was, however, impressed by the community engagement, given the size of the project.

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 X42 Protocol prior to reading this report, here are some primary links:


Fundamental

General:

Name: X42 Protocol

Ticker: X42

Algorithm: X13 (Proof-of-Stake)

Sector: Decentralised Applications and Feeless Transactions

Exchanges: STEX, Graviex and Altmarkets

Launch Overview

X42 Protocol was launched on August 1st, 2018, having been built upon the Stratis codebase and utilising a Proof-of-Stake consensus mechanism for its supply emission.

It launched with no ICO but did have a 25% premine, amounting to 10.5mn X42 of a maximum supply of 42mn X42.

Price-History Overview

Despite the fact that X42 Protocol has been in existence for around 12 months, there is only a few months-worth of price-history available, which I shall take a look at in the Technical section. For now, it will suffice to say that X42 Protocol formed its all-time high at ~2000 satoshis in late March, and has since continued to bleed along with the entire market, finding its all-time low at 125 satoshis in July.

Project Overview

x42 Protocol has broad and ambitious aims, in that it is seeking to facilitate effectively cost-less hosting for all manner of decentralised applications, allowing smaller developers to build projects with infinite scalability using X42 Protocol’s side blockchains and fee-less transactions.

As stated in their whitepaper:

“X42 allows for regular users to launch applications that would require big publishers to host them, at a much higher cost… the X42  protocol allows for anyone that is creative and driven enough to launch any type of project for a near-zero cost, and without any transaction fees after that.”

Given the size of the project at present and the numerous competitors in this space, I am intrigued to see how they have progressed over the past year.

Let’s begin with some Metric Analysis:


Metric Analysis:

Below are listed a number of important metrics, all of which are accurate as of 6th 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.

Metrics:

General:

Price: $0.0456 (389 satoshis)

Circulating Supply: 18,615,620 X42

Total Supply: 18,615,620 X42

Exchange Volume: $448

Network Value: $849,787 (72.41 BTC)

Maximum Supply: 42,000,000 X42

% of Max. Supply Minted: 44.32%

Network Value at Max. Supply: $1.917mn

Exchange Volume-to-Network Value: 0.05%

Category: Microcap

Average Price (30-Day): $0.033

Average Exchange Volume (30-Day): $647

Average Network Value (30-Day): N/A (no data available)

Average Exchange Volume (30-Day)-to-Network Value: 0.08%

Volatility* (30-Day): -0.353

Average Daily On-Chain Transactions (30-Day): 5.14

Average Daily Transactional Value** (30-Day): $542 (source)

NVT*** (30-Day): 1567.37

% Price Change USD (30-Day): +148.7%

% Price Change USD (1-Year): N/A

USD All-Time High: $1.61

% From USD All-Time High: -97%

Premine % of Max. Supply: 25%

Premine Location: N/A

Liquidity (calculated as the sum of BTC in the buy-side with 10% of current price across all exchanges): 0.061 BTC

Liquidity-to-Network Value %: 0.08%

Supply Available on Exchanges: 371,114 X42

% of Circulating Supply Available on Exchanges: 1.99%

*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 X42 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: Current block reward = 2 X42. This is the final block reward stage and will remain until the maximum supply is reached. 1,440 blocks minted daily.

Average Block Time: 60 seconds

Current Block Height: 463,114

Annual Supply Emission: 1,051,200 X42 (4.09 BTC at current prices)

Annual Inflation Rate: 5.65%

Circulating Supply in 365 Days: 19,666,820 X42

Staking & Masternodes:

Network Staking Weight: 5,570,723 X42*

Staking ROI (Annual): 5.65%** (18.8% with current network staking weight)

Masternode Collateral Size: 1000 X42

Masternode Price: $45.65

Masternode Count: N/A (not yet live on Mainnet)

Masternode Count Growth (30-Day): N/A

Supply Locked in Masternodes: N/A

Masternode ROI (Annual): N/A

Masternode Reward / Block Reward: N/A

Masternode Network ValueN/A

MNV / Network Value: N/A

*Network staking weight can be found in the Discord group.

**Minimum annual staking ROI is equal to inflation *if* all coins in existence are staked.

Distribution:

Address Count: N/A

Supply Held By Top 10 Addresses: 34.55%

Supply Held By Top 20 Addresses: 41.54%

Supply Held By Top 100 Addresses: 63.67%

Inactive Address Count in Top 20 (30 Days of No Activity): 6

 

Analysis:

There is quite a lot to work through here, so I shall refrain from any preamble; but let us first take a look at the most significant metrics for the aims of the project – those related to on-chain activity:

Using the X42 Protocol block explorer, I calculated that there have been 5.14 daily on-chain transactions on average for the past 30 days, amounting to $542 of on-chain transactional volume. This would give X42 Protocol an unimpressive 30-day NVT of 1567.37, indicating extremely little on-chain demand for X42 at present, relative to its Network Value.

Moving on, let’s take a look at Volatility, which I calculated to be -0.353. This is the highest degree of 30-day volatility amongst previous reports, although this is unsurprising given that X42 Protocol also has one of the smallest Network Values of these reports, thus volatility is expected to be higher than normal. That said, it is clear from this figure that the coin is not in consolidation, at least not against the Dollar, and thus unlikely to provide an opportune entry. We shall know more on this when we take a thorough look at price-history a little later…

Next up, let’s take a look at the metrics related to Liquidity:

With regards to buy-side liquidity, I found there to be 0.061 BTC within 10% of current prices, equating to 0.08% of X42 Protocol’s Network Value; the joint-second-lowest degree of buy-side liquidity amongst prior reports and not particularly promising, although this is undoubtedly a symptom of the lack of more popular exchange listings.

As for sell-side liquidity, I found that 371,114 X42 was available for purchase across listed exchanges, equating to 1.99% of its Circulating Supply. This places it somewhere in the middle amongst prior reports, indicating that though there is clearly no significant demand to buy at current prices, there is also no overwhelming desire to sell; in short, those that currently hold X42 are largely happy to continue holding but there is little indication that new holders are joining.

Moving onto volume, X42 Protocol has traded a measly $448 in the past 24 hours, equating to 0.05% of its Network Value. Further, its Average Daily Exchange Volume has been $647 for the past 30 days, equating to 0.08% of its Average Network Value for the same period. These are abysmal figures and not indicative of speculative interest in the project. This would likely change if new exchanges listed the project. Further, this is the second-lowest Average Exchange Volume-to-Network Value figure of all previous reports.

Now, let’s take a look at Supply Emission:

X42 Protocol is in the final stages of its block reward schedule, though this is expected to last until 2030, with 2 X42 created with each new block. With 60-second block times, we can determine that 1,051,200 X42 will be created over the next 365 days, equating to 4.09 BTC at current prices. This gives X42 Protocol an agreeable annual inflation rate of 5.65%.

More significant than this, however, is the relationship between supply emission and volume:

Given that 1.0512mn X42 will be created over the next year, this gives us 2,880 X42 of daily supply emission, equating to 0.011 BTC at current prices, or $131.50-worth. With $448 traded in the past 24 hours, X42 Protocol’s Exchange Volume covers its Daily Supply Emission by 3.4x, despite the nominal figure being so low; further, its Average Exchange Volume covers this by 4.92x. Lastly, even its poor buy-side Liquidity of 0.061 BTC covers this by 5.5x; thus, despite scoring poorly for liquidity and volume, there is no reason why current prices should be unsustainable for X42, with little to no headwinds for price growth, which is a positive indeed.

Now, let’s take a look at Staking and Masternodes quickly, before concluding this section with some Distribution analysis:

Well, the only point to highlight here is that the minimum annual ROI for staking X42 is equal to its inflation of 5.65% if all of the supply is staked, which, of course, is not likely to ever be the case. Thus, ROI would be higher than inflation, making it a sound proposition for holders. We would be able to determine a more accurate figure if there was a data source for network staking weight*.

Update: *having found a data source for Network Staking Weight (within a channel in the Discord group), we can determine a more accurate ROI. The current network staking weight is 5,570,723 X42, which offers annual ROI of 18.8%.

Further, as masternodes are not yet live on the mainnet, there is nothing much to say about them other than that the system will be tiered, with tier-1 masternodes costing 1000 X42, though more on this later…

As for Distribution, I could not find an address count to determine the total number of holders of X42 publicly; however, I did find that the top 10 addresses control 34.55% of the supply; the top 20 control 41.54%; and the top 100 control 63.67%.

As for the activity of the top 20-richest addresses, I found that 6 of these were inactive over the past month, with 13 addresses currently staking their coins and the remaining address a large distributor, having offloaded 230k X42 in the past 30 days.

And that concludes this section covering metrics. Onto the X42 Protocol Community:


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.

Social Media:

Concerning social media presence, there are four main platforms to examine: Twitter, Facebook, Telegram and Discord.

X42 Protocol is present on all four platforms. To begin, let’s look at the various social metrics that I calculated from the X42 Protocol Twitter and Facebook accounts:

Twitter Followers: 1,644

Tweets: 504

Average Twitter Engagement: 1.75%

Facebook Likes: 158

Facebook Posts (30-Day): 13

Average Facebook Engagement: 2.94%

As usual, I will be using RivalIQ‘s social benchmark report for evaluation purposes.

Twitter:

X42 Protocol has a small audience on Twitter of 1,644 followers, which makes it the 4th-least followed account from all prior reports. Despite this, the account receives consistent engagement, with an average engagement rate of 1.75%; the 9th-highest of all projects from previous reports. Relative to global benchmarks, this is 194x higher than that of the Media industry and 36.6x greater than the average across all industries.

Facebook:

Although X42 Protocol’s Facebook page has only 158 Likes, they seem equally committed to keeping that community updated, with 13 posts in the past 30 days. The average engagement rate is unsurprisingly higher given the significantly smaller audience at 2.94%, which is the 2nd-highest of prior reports. Relative to global benchmarks, this is 32.6x greater than the average across all industries.

Discord:

The Discord group has 2311 members. 45 new members have joined over the past week.

In the General channel, there is some degree of discussion on a daily basis, though this is largely comprised of general conversation rather than anything specific to the development of the project. There was some discussion on a recent masternode collateral giveaway, plus some support queries that were swiftly resolved.

There are several informative channels available for new users, including FAQ and Official Links, which offer a comprehensive list of resources for those seeking to learn more about the project. Staking provides regular updates on Network Staking Weight. Support answers queries and resolves issues swiftly. Suggestions is inactive, for the most part.

Announcements is updated, on average, 4 or 5 times per month, with recent updates including being added to the voting list for listing on Qtrade and a detailed 1-year anniversary update discussing the future of the project, including tier-1 masternodes going live on mainnet, private transactions and smart contracts, decentralised applications and side blockchains and new exchanges.

Telegram:

The Telegram group has 225 members but is inactive beyond mirroring messages from the Discord group.

BitcoinTalk:

The X42 Protocol BitcoinTalk thread was created on August 1st, 2018, and has since generated 805 posts spanning 41 pages in 370 days. This equates to 2.18 posts per day, on average. However, in the past 90 days, the thread has had 59 posts via 16 individual posters, giving an average of 0.65 posts per day; a significant decline in engagement.

The announcement itself is somewhat well-branded, with primary links clearly displayed. The tagline reads “Welcome to a feeless future.”

We are told of the key features, including feeless transactions, proof-of-stake consensus, customisable side blockchains, smart contracts and control over DApp publishing (although most of this is yet to be released).

The coin’s specification is provided with the 25% premine highlighted (10.5mn X42), with 5.6mn set aside for core development, 2.8mn for strategic partners, 1.3mn for third-party development and exchanges and 800k for bounties and airdrops.

There is a text-based roadmap provided, with the tiered masternode network described in detail: tier one masternodes will require 1,000 X42 and are live on the testnet currently; tier two masternodes will require 20,000 X42 and are expected for Q1 2020; and tier two masternodes will require 100,000 X42 and are expected in Q4 2019. There will be a progress bar available soon to track these developments.

Tier one masternodes will process smart contracts and host side blockchains and DApps; tier two masternodes will fulfil the same functions as tier one, as well as host the reputation system; and tier three masternodes will fulfil all of the previous functions, as well as process private transactions and atomic swaps in the future.

Beyond this, the roadmap describes the future of the project as having private transactions facilitated by the Breeze protocol of Stratis and Tumblebit, a user-friendly blockchain app store, a reputation system, contract identifiers for organisational purposes and a contract auction house.

Possible applications of the protocol are said to include: gaming; map applications; voting systems; VR and AR apps; remote control of equipment; decentralised exchanges; and smart power grid control, to name a few.

The announcement concludes with a comprehensive list of resources regarding the project.

And that concludes this section. Onto Development:


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:

Project Leadership:

There are 4 core members listed on website, and 3 LinkedIn employees. There are 65 Github contributors. They are currently looking to expand the team.

The core team currently comprises of a CEO, Chief X42 Officer, CTO and Chief Design Officer.

Website:

https://x42.tech/

The website is very well designed, with good branding and concise copy. The primary promise of the project is stated clearly on the homepage: “Open. Feeless. Infinite.” Social links are also all easily accessible, as is the navigation menu in the sidebar, which is well-organised and relevant.

Scrolling further down the homepage, we find a four-point outline of the vision of X42 Protocol, segmented by Idea; Design; Build; and Launch, with the main points here covering the aims of the project (to aid small developers that are unable to publish and build due to high fees), its rooting in the pursuit of freedoms and its technical grounding in C# programming.

Beneath this, we find the key features of the blockchain, including zero fees, scalability through side blockchains, instant and private transactions, simplicity and its reputation system.

The premine is then highlighted, with the relevant details provided on where these coins are being spent and where they will continue to be spent. Further to this, we are presented with a brief roadmap that I will cover in the next section.

The team are presented with some degree of transparency, as well as a link to new opportunities.

Finally, we find a list of partners and listings, including STEX, Graviex, AltMarkets, CoinGecko and Delta. This is followed by a brief FAQ and a contact address.

Overall, the website is informative and well-designed. It navigates nicely, too, though aspects of it could be expanded upon (like the roadmap, as I shall cover next).

Roadmap:

The roadmap can be found native on the homepage, but it is not very detailed. It is merely a brief overview of the key components of development.

Of these, we are told that the launch day was the 1st August 2018; that a tiered masternode system will be released on testnet in 2019; that private transactions and smart contracts are expected in Q3 2019 with Breeze Privacy and Tumblebit, as well as the reputation system integration and contract identifiers; and that, in Q4, there will be a blockchain app store release and contract auction house.

This is all far too vague and there is no further reading provided.

Whitepaper:

https://x42.tech/docs/v1/x42-WhitePaper-01_08_2018.pdf

The X42 Protocol whitepaper is 13 pages in length and was published on 1st August, 2018, thus likely to be out-dated.

It begins with a Summary, wherein we are told that application publishing is currently costly and that X42 wants to solve this for small developers, with a focus on scalability; if an app grows in popularity, the network is incentivised to run those app nodes. These apps can be hosted on any device including VMs, with the network utilising a reputation system. There will also be private transactions and smart contract functionality.

The next section covers blockchain basics, so I won’t cover that here.

What is the X42 Protocol?: the protocol is based on Stratis and designed to be “a multi-chain solution for DApps”. Scalability is paramount for developers that “want to launch games and applications… with minimal initial investment”. There is a primary X42 blockchain that hosts all other coins and three node types, with side blockchains (sidechains) created instantly and allowing for extensive customization. Regarding the coin itself, there is a 42mn X42 maximum supply to be in existence by 2030, with zero fees for transactions and Proof-of-Stake consensus, with a tiered masternode network scheduled for the future.

My question at this point would be, “what is the benefit of using X42 over Stratis, which is doing the same thing in the same programming language (C#)?

Key Features: in this section, we are told that the primary benefit of the network is that a single X42 coin could feasibly be used to launch a game, for example, with zero transaction fees following this. Further, there are staking rewards for holders, and anyone with over 1000 x42 can host a masternode, with masternode operators  given a portion of revenue from side blockchains/apps. Also, these operators can also choose to only host projects that they would like to, though access to do so  is required by the developer; the point of this being that projects sharing more revenue with hosts will likely be hosted quickly and with longevity. There will also be a reputation system to grade apps and users, as well as smart contracts in C# and Breeze privacy from Stratis.

Later in the document, and importantly, there is a section covering Scalability and Side Blockchains, which mentions that on the main blockchain there will be a transaction throughput of 60tx per second but most transactions are expected to take place on side blockchains, which can be created instantly in perpetuity.

Overall, the document is informative and concise, though it does not answer the primary question of why this would be used over any competitors and whether there is current or expected usage.

There is an internally-circulated v2 whitepaper that is intended for release when the masternode network goes live on mainnet.

Wallets:

There is a local wallet available for Mac, Windows and Linux but no other wallet options currently available.


Technical

X42/BTC

X42BTC4H

There is very little price-history available here, as X42 has only been listed on exchanges for 6 months. That said, we can see that price formed its all-time high shortly after being listed on exchange in March, at ~2,000 satoshis. Following this, price has continued to bleed, turning old support into new resistance on the way down for the past few months. In July, this culminated in an all-time low of 125 satoshis, from which price has recently bounced, turning old resistance into new support at 300 satoshis. That said, there is so little volume or liquidity that any analysis in somewhat inconsequential, and as such I would not be a buyer here, personally. Risk/reward is not particularly attractive for shorter-term trades and the project is too illiquid right now for long-term positions.


Conclusion

This report is now over 4,000 words, and it is time to draw it to a close.

My final grading for X42 Protocol is 4 out of 10*.

*My grading for X42 Protocol would actually be a 6 were it not for the serious liquidity issues – if these are resolved, I will immediately alter my grading to reflect this.

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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