Back when I wrote the What’s Antshares/NEO and Why You Should Be Watching It? article on July 20th, one NEO was worth $7.31. Over the last few days, NEO reached an all time high of $40/NEO. Anyone who invested in NEO when the article came out would’ve seen a 447% return on investment in less than 3 weeks. That’s crazy, even in cryptoland.
I found NEO (back then, it was called Antshares) by accident and swiftly proceeded to do extensive research on the coin. I stalked NEO’s Slack group, subreddit, GitHub, and Twitter. I scoured their whitepaper. I tried to dig up any article or blog post I could find on NEO. Everything I learned told me that NEO was undervalued. Don’t get me wrong, I had my qualms. I was worried that NEO only had two developers, I was worried that they couldn’t keep their promises. But this is a game of probability and it was highly unlikely that NEO was crap. When Da Hongfei, the CEO of Onchain and the unofficial leader of the NEO project, conducted an AMA on Reddit providing more transparency into the project, it erased all my qualms. From then on, I was confident NEO was good.
The cold, hard research paid off and NEO exploded over the last few days. Going from $15 to $40 is impressive but also unsustainable and I believe it’s quite overbought. In the short term, NEO’s run is very likely over and it’ll settle on new support before the next round of good news triggers another price surge. NEO’s time to shine is over (for now) and it’s time to look for the next undervalued asset. I believe Qtum (pronounced quantum) fits this mold perfectly.
I came across Qtum soon after discovering NEO. The two projects are very similar. Like NEO, Qtum is a budding Chinese smart contracts platform with a similar marketcap of around $500 million (at the time). When I first researched Qtum, I found that it was technically very impressive. I have a software engineering background and when I saw what they were building, I knew that this was the platform that had one of the best chances at giving Ethereum a run for its money. I’ll elaborate further below. The only problem with Qtum was an allegation that one of its co-founders, Patrick Dai, was involved in a scandal in the past. This effectively put me off Qtum and I focused my efforts on NEO. With NEO’s impending consolidation, I started doing more research on Qtum and I’ve since changed my mind. Qtum is undervalued.
Before I dive into Qtum’s fundamentals and explain why its undervalued, I want to clear up misconceptions around allegations that Patrick Dai was a scammer. In almost every Qtum analysis, this topic is the elephant in the room and I want to address it right away.
Is Patrick Dai a scammer?
People like to claim that Patrick Dai, one of Qtum’s co-founders was a scammer. Apparently Patrick was once the Steven Dai associated with the 2014 BitBay scandal. The whole scandal centers around a claim by a disgruntled BitBay developer named David Zimbeck. Zimbeck accused Steven Dai, who was a leading member of the BitBay project, of manipulating BitBay’s price by faking volume and then crushing the market by dumping his share of BitBay coins.
As this Smith and Crown article concludes, there is no other “evidence” besides Zimbeck’s claim. Without concrete evidence, it becomes a game of trust. Should one trust Zimbeck or Patrick?
I will admit that it’s quite sketchy for Patrick to change his name to Steven. However, he is now part of a high profile, $900 million project with two other co-founders and a large group of angel investors consisting of billoinaires and blockchain magnates. Even if Patrick was in the wrong with BitBay, I believe in giving second chances. We’re in the business of making money here, not being the moral police. There is so much riding on Qtum that there is very little room for any shenanigans to occur. If I can’t fully trust Patrick, I trust Qtum’s two other co-founders and its billionaire angel investors. Will billionaires back Qtum without performing background checks on its founders? I highly doubt it.
EDIT: Patrick recently discussed his involvement with BitBay in Qtum’s Slack channel (qtumnexus.slack.com). Here’s a screenshot of his explanation behind his involvement with BitBay.
NEO and Qtum as competitors in a zero-sum game?
Many see NEO and Qtum as competitors in a zero-sum game. Their reasoning is simple: if Qtum is strong, NEO will be weak. Those that are heavily invested in NEO will thus be inclined to attack Qtum and I’ve definitely noticed certain individuals spreading unwarranted FUD (fear, uncertainty, and doubt) on Qtum, especially during times when NEO is expected to surge.
Here’s a great example. A Reddit user decided to post a friendly reminder that Qtum might be a scam based on Zimbeck’s account the day before NEO’s big event on August 8th. Convenient timing right? The user also included a pastebin chat log in his post that supposedly incriminates Patrick in the BitBay scandal. The only problem is anyone can fake chat logs. Such a disingenuous attack on Qtum and Patrick right before NEO’s big event is definitely suspicious.
Perhaps this user should be reminded that cryptocurrencies, and specifically smart contract technology, has so much potential to grow that it’s almost laughable to think of the space as a zero-sum game. $130 billion in market cap is tiny compared to other markets out there. There is no reason NEO will fail when Qtum succeeds. If NEO’s tech is sound, it will be used extensively and will thus be worth its valuation. If this wasn’t the case, how are NEO and Qtum surviving in a market dominated by Ethereum?
Why is Qtum undervalued?
Qtum is very likely undervalued since everyone’s focused on NEO after its recent price surge. Many have the idea that NEO is China’s Ethereum but the unfortunate truth is that its smart contracts platform just hasn’t been tested yet. Qtum on the other hand, uses the Bitcoin blockchain and the Ethereum Virtual Machine. Both are mature and proven technologies.
A deep dive into both projects will show you that Qtum has the team and technology to seriously challenge NEO for the title of “Chinese Ethereum”. The only ingredient it now needs is a big news cycle to generate hype and I can assure you, after speaking to the team, that Qtum is gearing up for a huge news cycle over the next 6 weeks.
Below is a list of reasons why I believe Qtum is overlooked and undervalued. I’ve also included a few upcoming noteworthy news items.
High profile project backers
Here’s a list of Qtum’s angel backers:
- Anthony Di Iorio - Co-founder of Ethereum
- Chen Weixing - Founder of Didi Chuxing (they beat Uber in China), billionaire
- Jeremy Gardner - Co-founder of Augur
- David Lee Cuo Chuen - Co-founder of Left Coast and Libai
- Bo Shen - General Partner at Fenbushi Capital
- Jehan Chu - Managing Partner at Jen Advisor
- Qingzhong Gao - Director of HuaWei SC
- Xu Star - CEO of OKCoin
- Lihua Yi - Partner at ZhongWo Investment
- Xiaolai Li - Bitcoin Startup Investor
- Roger Ver - Bitcoin Startup Investor
- Charles Xue - Billionaire angel investor
If you can’t make up your mind, might I suggest asking a few of these people?
Bitcoin++ and Ethereum++
Qtum is a fork of Bitcoin with the Ethereum Virtual Machine (EVM) running on top of it. That’s crazy impressive. Qtum gets the best of both worlds and much more. Bitcoin’s blockchain, using the UTXO (unspent transaction output) model, is known for its security and efficiency and the EVM is known for its smart contracts capability.
Although the account model sacrifices efficiency in order to ensure a similar level of security with the UTXO model, Ethereum uses it because it’s easier to design a smart contract system around an account model blockchain. Qtum has sidestepped this efficiency/security trade-off by decoupling the EVM from its underlying blockchain using what’s know as the Qtum Account Abstraction Layer (AAL). The AAL encapsulates the blockchain and makes it appear to the EVM as if the blockchain is using the account model, when in actuality Qtum’s blockchain is Bitcoin-based. The AAL is what allows the EVM to run on a Bitcoin blockchain. The architecture looks like this: Bitcoin/Qtum blockchain <-> Qtum AAL <-> EVM.
Decoupling the smart contract virtual machine from the blockchain has another advantage: Qtum is not limited to the EVM. One can technically run any type of smart contract virtual machine on Qtum using the AAL. By using a Bitcoin-based blockchain and the AAL, Qtum is not only more efficient than Ethereum, it’s significantly more flexible.
The ability to run different virtual machines is great for the long term but what’s most important for Qtum right now is its short term outlook. This is incredibly positive as well. Using the EVM allows Qtum to hit the ground running as it’ll be able to leverage Ethereum’s developer community. Ethereum developers can quickly port over their existing smart contract programs and build new ones on Qtum without any learning overhead (e.g. learning a new language, learning a new programming paradigm, or setting up a new development environment). In addition, with the EVM, Qtum supports ERC 20 tokens which also means it can host ICOs. This is a big deal. If Qtum attracts just one or two big ICOs, it will generate enough momentum to seriously challenge Ethereum.
Qtum’s blockchain also improves on Bitcoin. For starters, it has SegWit. More signficantly, Qtum also has a built-in system leveraging smart contracts that will greatly reduce the need for hardforks. This system is called the Decentralized Governance Protocol (DGP) and it allows for blockchain parameters to be modified quickly and seamlessly without ecosystem disruption. Specifically, when DGP network upgrades occur, users of Qtum won’t need to download new software and network stakeholders and node operators won’t need to take any actions.
DGP could be applied to block size, block time, gas price, and many other blockchain parameters. Here’s the GitHub repo for Qtum’s DGP project.
Proof of Stake
Qtum, like NEO, has proof of stake. It’s widely accepted that proof of stake is a better mining model than proof of work. One of other the merits of POS that I really like as a trader is that it’s really great at stabilizing a coin’s price since people will tend to hold their coins to earn dividends.
Since Qtum uses the UTXO model, it’s also able to support Bitcoin’s Simple Payment Verification (SPV) protocol. SPV allows a wallet to prove that a transaction has been included in a verified block without having to analyze its contents. Since a block can hold thousands of transactions, SPV significantly speeds up transaction verification. Thus, the protocol enables smartphones to run lite wallets that can efficiently and securely send and receive payments.
What’s even more impression is that since Qtum uses the EVM, its lite wallets can use SPV to engage with smart contracts and decentralized applications (dApps). This means that a smartphone with a Qtum lite wallet will enjoy all the benefits of smart contracts and dApps without having to operate a validating node.
Again, this demonstrates how Qtum takes advantage of the best of both worlds through combining Bitcoin’s blockchain with the EVM.
Top-notch GitHub repos
A good way to differentiate between shitty and amazing projects is through GitHub. Many cryptocurrency projects have their codebase publicly hosted on GitHub. This allows anybody to see the full history of the codebase, how often developers make changes, and the kind of changes being made.
As part of my research, I’ve snooped around Qtum’s GitHub and I have to say, I’m quite impressed. The main Qtum repository sees a lot of activity. In fact, as I write this post, the last commit on the master branch was two hours ago. Looking at the commits each day over the past week, there are at least 2 commits in a day and sometimes up to 13. I couldn’t bother paging past July but if you want to be doubly sure, go check it out yourself. This is what a healthy GitHub project looks like.
Jordan Earls senpai
Jordan Earls is a co-founder of Qtum. He’s also the lead developer. I follow his Twitter account and his personal blog.
First of all, Jordan’s quite active on Twitter, which is always a good sign as it brings transparency to one of Qtum’s key leaders. What I find most impressive is Jordan’s blog. He’s clearly an avid and highly competent programmer and he has written highly in depth, technical blog posts on Qtum’s technology and blockchain in general.
Do check it out. As a software engineer myself, I am highly highly impressed. Be warned though, reading Jordan’s blog posts is not a walk in the park. They’re highly technical and even with a strong software engineering background, I find myself having to reread paragraphs constantly to fully understand what’s going on.
Strong Eastern interest
Before the recent Western hype train that brought NEO to its $40/NEO valuation, Qtum has always led NEO in Eastern adoption. The majority of Qtum’s trading volume comes from Eastern exchanges, whereas the majority of NEO’s trading volume comes from Bittrex. Only until recently did Eastern exchange volume for NEO come close to Qtum, and that’s from riding on the coattails of Bittrex.
This clearly shows that the East has a much longer and deeper interest in Qtum. Was this why NEO chose to market heavily to the West? Afterall, the “Chinese Ethereum” branding just won’t cut it in a Chinese market dominated by Qtum and Ethereum. Kudos to NEO’s marketing team since its Western marketing strategy has clearly worked out but it’s important to ask the question: why has Qtum seen historically stronger Eastern interest when NEO is supposed to be the “Chinese Ethereum”?
ICOs accepting Qtum tokens
Energo, an energy distribution company based China, recently ran an ICO only accepting Qtum tokens and BTC. That’s a statement in and of itself. Instead of accepting Ethereum, Energo decided to accept an ERC 20 token of a project without a main net yet. This speaks to Energo’s confidence in the Qtum project.
Agrello, a company looking to build AI-powered, legally binding smart contracts, is currently conducting an ICO accepting BTC, BCH, ETH, NEO, LSK, Qtum and ETP.
Update: since the time of this writing, many many more ICOs have announced their acceptance of Qtum tokens in their crowdsale. There are so many that I’ve decided not to iterate through all of them out of laziness…
Blockchain startups are building on top of Qtum
Yes, it’s cool that some ICOs are accepting Qtum tokens in their crowdsale but what’s even better is that many blockchain startups are building on top of Qtum. This means that these blockchain startups are planning on using Qtum to host their ERC 20 tokens and run their decentralized applications. That’s huge, Ethereum huge.
It has been confirmed that at least 10 such companies are building on Qtum and the rumour is there are actually 17. 4 companies have officially announced their Qtum adoption: Energo, Vevue, Inkchain, and Bodhi. All 4 are Chinese companies.
This is probably the most bullish signal for Qtum. There are, as of right now, no other smart contract platforms out there with actual companies building on them besides Ethereum and maybe Neo. The problem with Neo is that the platform has been out for a few years now and only recently had one company, Adex, decide to build on them. There are some questionable aspects to Adex but I don’t want to get into that for now. In any case, Neo’s current valuation is $2 billion but it only has 1 company building on it. Qtum, on the other hand, has a $900 million valuation but has at least 10 companies building on it. Can we spot the undervalued asset?
Let’s take a step back and look at the broader picture. Ethereum catapulted from $10 an Ether to $400 an Ether because it slowly became the primary platform for new blockchain projects to crowdfund and build decentralized applications on. Qtum is doing the exact same thing, except it arguably has much better tech and the additional advantage of proximity with China’s thriving ICO ecosystem. If so many companies are already building on Qtum before its main net release, what do you think will happen after the release? I would argue that there is a very high chance Qtum will see an Ethereum-style run up in price over the next few months.
Upcoming news: test net 2 launch in August 16th and main net launch in September
As of right now, Qtum only has test net 1 up. Test net 2 will be launched on August 16th and the main net will swiftly follow in September. Qtum tokens are currently ERC 20 tokens and will be convertible to main net currency once the main net launches. With two huge events coming up for Qtum (when test net 1 was launched, Qtum’s price reached $18 from $3), there is a very positive outlook for Qtum’s price in the coming months.
Upcoming news: big exchanges are adopting Qtum
It has been hinted in Qtum’s Slack group that a few large exchanges in South Korea and China will be adding Qtum. Qtum is already well known in the Chinese market so the real kicker here will be South Korean exchanges. Cryptocurrencies are extremely popular in South Korea and the top exchange for both Bitcoin and Ethereum in terms of volume is South Korean (Bithumb). Once there’s more awareness of Qtum in the South Korean market, it’s highly likely there’ll be strong adoption given that Qtum effectively bridges Bitcoin and Ethereum. The whole is greater than the sum of its parts.
Upcoming news: Qtum’s founders are meeting the Government of Thailand
Patrick has confirmed that he and another co-founder will be meeting the Government of Thailand this week. There are no other details about this but governmental interest definitely speaks volumes about Qtum’s team and technology.
Upcoming news: … even larger announcements coming?
These two screenshots are all from a public channel in Qtum’s Slack group.