IoTex (IOTX) review: fundamental analysis
In this article we will look at the IoTex project for the long term, answering 20 essential questions.
1) What is the main concept of the project?
Ucam: a camera where the user holds full control of the data. Nothing is sent to servers, it runs on the device natively. Videos are encrypted using a wallet the user creates when they log into the app. The decryption uses the wallet’s private key. It is possible to save videos to a third-party cloud service, where the video goes encrypted. Soon there will be integration with IPFS. IoTex is also working on a native solution using AWS. This camera won the CES award in the category innovation in cyber security and personal privacy in 2020.
2) What is the utility of the token (why not use BTC/ETH/USDC…?)
3) What is the technical basis of the project?
- General whitepaper about the project
- About its unique Roll-DPoS consensus protocol
- About authentication on IoT devices using DLT
- On privacy in IoT devices (this paper was accepted at the International Conference of Blockchain in 2018), presenting a more performant version for the DKSAP algorithm, with the goal of using it in IoT.
- On short-lived signatures in PBFT protocols (this paper was accepted at CASCON in 2018).
- On payments in smart devices, using a centralizing entity (banks) and no centralizing entity, presenting KYC/AML compliant solutions. This paper was published in IEEE Consumer Electronics Magazine.
- They also have a paper on Ucam and another on Pebble Tracker.
Mainnet is running since Q1/2019 without incident. The main narrative is to innovate technically before getting adoption (“technology first”).
4) Who is the core team?
There are 6 people focused on product/blockchain (all senior), 4 PhDs with experience leading teams in companies like Google, Facebook and Uber. Linkedins are up to date. Source: https://iotex.io/team
5) How active is the Github repository?
Active, although the total amount of commits is not impressive.
6) How engaged is the Community?
Average engagement. Telegram with 40k members, Twitter 200k, have own forum and Discord. Despite having incentives for participation and some enthusiastic ambassadors, I didn’t see a broad community engagement like MaidSafe, for example, which has 4x lower marketcap. The low adoption to staking (~30%) reveals that the engagement could be better.
7) Are there relevant partnerships?
Travala.com: they are exploring the idea of using Pebble tracker to save travel logs on the blockchain and create “proof of presence” NFTs. Source: Travala blog.
HealthNet: is built under IoTex and uses Pebble tracker in the niche of drug supply chain and clinical trials. HealthNet recently landed a $1.5M contract with the US Navy. This project was developed by Consensus, a company focused on creating blockchain solutions for institutions. Sources: PRNewsWire, IoTex blog.
Scaleout: is a machine learning startup. The partnership aims to use verifiable data from the Pebble tracker to make predictions. Source: Scale out Systems Post.
Hacken: is a cybersecurity company that rewards hackers for finding bugs. Source: Hacken Bug Bounty Program.
IoTex is also part of some standardization boards like Mobi, IEEE (IoTex’s cryptography director is vice-chair of the P2418.1 protocol working group, focused on the use of blockchain in the internet of things. Sources: IoTex blog, IEEE post, Coindesk, IIC Consortium.
IoTex has a relationship with Google Cloud Asia, having been invited to events like this one below where Raullen Chai speaks with Richard Widmann (head of strategy at Google Digital Assets):
8) What are the competitors and how does this project stand out?
The biggest direct competitors are IOTA and Vechain. IOTA is more focused on M2M communication, while IoTex is more focused on User-Machine-User interaction. Vechain does not seem to focus as much on privacy and data control.
There are also indirect competitors like Ethereum and other smart contract platforms, provided they develop integration with IoT devices.
Centralized companies like Apple, IBM, Xiaomi, etc. are competitors in the sense that they launch IoT devices and centralize operation on their platforms.
9) What are the network’s current fees and how does it intend to scale?
The network’s fees are around 0.07 IOTX ($0.01 at ATH). Concept of sidechains for scalability. So far it doesn’t seem to be congested once. Core architecture is already done.
10) Is the project really decentralized?
The consensus protocol used is original: Roll-DPoS (there are 70+ eligible delegates. To become eligible one has to meet some hardware requirements and place 1.2M tokens in self-staking. 36 delegates are elected by vote, and every hour, 24 of those are drawn to try to produce blocks. The voting of delegates takes into account the total in staking + time). Currently the network has 28% participation (Sources: IoTex Scan, IoTex Medium.
There is no extra incentive to run a full node. There are probably just over 70 full nodes running in total.
The decentralization of the protocol development will take place via voting on the parameters and improvement proposals. This is the governance hub: https://gov.iotex.io/#/
In summary, the decentralization at consensus level is medium, at full node level is very low, and at dev core level is medium.
11) How is the Rich list/concentration of tokens?
Highly concentrated, but excluding the function and addresses intended for burn, it is healthy. Source: IoTex Community. Only real concentration is in Binance with about 10% of supply.
12) How fair is the tokenomics?
24% ICO (private sale), 25% foundation, 15% team members, 14% community, 12% mining rewards, 10% burn. The system is deflationary, where new “Powered by Iotex” devices added to the network can get a certificate to have special features. This certification has a cost in IoTex, and these IoTex will be burned (Source: IoTex blog). This dynamic will start after a few years, when the Burn-Drop stage ends. In practice, Burn-Drop adds tokens to the market, because the logic of burning 90% and giving 10% airdrop only burns tokens that were not in circulation (I confirmed this in Discord). We are in phase 3 of 10. 10M tokens are distributed each phase via airdrop.
Overall evaluation of tokenomics is good, deflationary system very attractive. But community percentage could be higher to the detriment of the team (something like 5/25). 15% for the team members is quite high.
13) What is the incentive for validators?
Transaction fees + 12% of total supply in mining rewards. Protocol requires at least 36 candidate delegates; currently there are more than 70.
14) What is the long-term sustainability?
25% of total supply (2.2 bn tokens) goes to foundation for long-term development (Source: Onboard IoTex). This corresponds to $530M in ATH, $16M in bear market assuming 97% drop. Core team additionally owns 15% of supply. Private sale raised about $30M (25,000 ETHs) in 2018, kept most of it to date in ETH and BTC, so cash is still fat (info obtained by Larry Pang on Telegram).
15) What is the current adoption of the project?
Transactions: currently about 120k transactions per day (Source: IoTex Count), which is very good (ETC with 5x bigger marketcap has 60k, LTC has 100k, BTC has 250k, ETH 1.2M). At the June-July lows there were 40k.
TVL (Total Value Locked) = $30M, position 49 among all chains according to DefiLlama.
Mktcap/TVL ratio = 8.6. Too high (Ethereum= 2.8 and Solana = 4.62, for example).
Has 13 DeFi dApps, 3 of which are unique to IoTex. Reasonable for its marketcap level. Source: IoTex on DefiLlama.
It has about 50 XRC20 tokens. The most significant are: GFT, GFS, SHIBEX, MAX, XIM, USDT, BUSD. Source: IoTex Scan.
There are about 10,000 devices registered on IoTex today, the vast majority are Ucam cameras.
It is worth pointing out that most of this data (TVL, dApps, tokens) appeared in 2021, when the adoption stage started in a more expressive way.
On June 7, 2022 it was announced that MachineFi lab raised $10 million, putting MachineFi’s valuation at $100 million. Samsung was among the investors. The money will be used to attract applications to the platform.
16) Is interoperability with other projects facilitated?
They currently have two interoperability fronts: Cross chain Iotex (CIOTX) and MachinefI Cross-Chain data bridge. They are also approaching IBC Cosmos, have already made some partnerships with SDKs projects.
17) Is there a roadmap?
Yes. Current focus is on MachineFi implementation, relevant deliveries + completion during all quarters of 2022. Source: Machinefi Roadmap.
18) Is there transparent communication?
Yes. Site with lots of information and a community willing to answer questions. They do live broadcasts on Youtube weekly showing data, interviewing guests and giving presentations.
19) What is the regulatory risk?
Very low, private sale was made for non-Americans.
20) What extra rewards can I get?
5% APY for staking. Block 3 days for redemption. Sources: IoTex Onboard, Staking Rewards.
IoTex has as its biggest differentiator being one of the few serious projects in the IoT branch. Even projects in the industry like IOTA and Vechain operate in slightly different sectors. So it would not be incorrect to say that IoTex is fighting alone for its space in a fairly new and gigantic sector.
One of the biggest highlights I see is practicality: concern with every step from theory to the connection of the device in the user’s hands. They launched two products of their own (Ucam and Pebble) to serve as proof of concept of the platform and to initiate adoption.
One thing that caught my attention was the lean team. For such a large project, I expected more people involved. But so far the deliveries are going well. Some advantages of a smaller team are organization and a small payroll.
As it uses a lot of smart contracts, there is a long term risk of applications and projects being launched on platforms like Ethereum acting in the same niche, but this movement is not happening yet.
Technically I was in doubt about microtransactions, as some IoT applications require almost zero fees. Apparently IoTex will implement off-chain solutions for this purpose, but it was not very clear to me and the guys in the community I talked to don’t seem to be worrying about this.
The biggest risk of the project is adoption and lack of predictability about the IoT movement. There is no doubt that this decade will mark the rise of the internet of things, but this market is just beginning and it is hard to predict how it will unfold. I believe there is demand for automated runs, logging, and paid interconnectivity of devices. But much of this may be done directly by companies like Apple, IBM, etc. The issue of data privacy is a prominent point for IoTex, as it may be the main trigger for adoption, and the project invests heavily in this area. The idea of open source dApps can also be a differentiator.
Since there is no intrinsic community passion radiating out, and in terms of decentralization some points are lacking, I believe the future of IoTex is much more contingent on practical utility (people using it out of convenience/own choice) than philosophy. This makes it a more direct competitor to centralized companies. Data privacy, cross-platform interoperability and an eventual large store with several open source dApps options are the differentiators that can make IoTex successful.
On a positive note, if there is some demand, even if only occasional, it may be enough to keep the project within sustainability. The negative point is that the current cash flow is fully exposed to cryptocurrencies, but even very negative scenarios for the next 4-5 years would hardly put its continuation at risk.
More important points to follow in the medium term are the adoption of the Pebble tracker and the arrival of new dApps on the platform.
*This is not financial advice
The information in this article was reviewed and updated on 6/22/2022