NKN

DIGITAL ASSET REPORT:

NKN Review and Investment Grade
Grade-B-minus

Crypto Briefing Research Department

November 15, 2019

Quick Facts

Price$0.028623 (Nov 15, 2019)
Market Capitalization$13,357,169
Buy Up To Price$0.0992
Top 10 Addresses Combined74.42%
ATH Price$0.545913 (Jun 02, 2018)
30-Day Average Price$0.030221
24H Volume$3,574,164
30-Day Average Volume$6,165,569
ICO DatesApr, 2018
ICO Price~$0.126
Public Allocation~$6,310,000
Earlybird Allocation~$4,200,000
Private Allocation~$16,520,000
Circulating Supply466,666,666 NKN
Total Supply1,000,000,000 NKN

Contents

Fundamental Factors

Market Opportunity 70;
Underlying Technology 74;
Ecosystem Development 63;
Token Economics 70;
Core Team 72;
Roadmap Progress 75;
Token Performance 65;

Combined Score: 7.0

Introduction

2017 was all about hype, 2018 was the year of development, and 2019 has been about building the foundation for adoption. Projects working to address real market needs, have been launching their mainnets, integrating solutions with partners and rolling out updates.

NKN has been doing just that. The decentralized solution for content delivery networks raised ~$27.03M during its 2018 ICO, but has been in the shadows for much of the crypto winter. However, as the second half of 2019 has come about, the market has started to see tangible progress.

NKN successful launched its mainnet, and quietly surpassed Bitcoin in terms of the number of network nodes.

The project is working on partnerships and meaningful use cases, while continuing to develop its suite of products.

With the need for content delivery growing, NKN offers a secure and efficient solution together with an incentive model to remove economic inefficiencies that are affecting the space today.

NKN has a target market, a specific solution, and a demonstrated track record of delivering on project milestones. This indicates a solid chance that the project can continue growing and developing its ecosystem.

Given the low level of competition in this particular segment, NKN has an opportunity to realize its potential and become a real gem.

A growing need for a growing market

With the internet space growing rapidly, the amount of content produced on a daily basis has become astounding. The demand for content has also been immense. One half of the world’s population is online, 5B videos are watched on Youtube every day, while a mobile internet user spends 2.8 hours online per day. That has put a strain on companies’ bandwidths, and elevated the need for CDN solutions.

CDN or content delivery network, is a geographically distributed group of servers that caches content (such as videos, or images) in proxy servers that are located closer to end users to allow fast delivery of web content. 

This is a growing market that is already valued at around $12.4B and is projected to nearly double by 2024.

The current centralized set up is incredibly inefficient, and according to NKN results in the loss of around 50-60% of network capacity due to the unused bandwidth.

NKN offers nCDN as a solution, aiming to eliminate this waste, reduce cost and improve the connectivity for the end-users. The project attempts to combine the benefits of traditional CDN services and the P2P services already available on the market.

The key players in the space, such as Akamai, Amazon and Google Cloud currently offer centralized solutions, but the project claims that its nCDN solution offers a much better quality of service, at a lower cost.

The project already signed a commercial contract for the nCDN product with the Chinese NETNIC. NETNIC provides cloud solutions for over 100,000 enterprise customers and is the largest value-added reseller for Baidu cloud and Tencent Cloud in Northern China.

nCDN vs. other solutions available on the market | Source: forum.nkn.org

Decentralized alternatives are few and far between. THETA is a promising project that is targeting the live video streaming segment, and is backed by a popular e-sports streaming service Silver.tv. There is also Substratum, which is trying to build a new decentralized

web but has seen many concerns from its community since the launch.  There are others, but ultimately, these projects are still just starting out on the path to adoption, and are not really competing with each other yet.

Competition in the Blockchain space

However, NKN is more than just the nCDN service. The network can host dApps, and the team has been working on launching them to showcase the network’s capabilities, generate interest and bootstrap adoption. For example, D-Chat a decentralized chat with secure end to end encryption messaging, is already live. There is a number of other dApps, like Space cats, NKN Shell, and more. The number of dApps will likely increase with the

launch of TUNA or Tunnel Using NKN for any Application. It should enable “NKN users to turn any network-based application into service and monetizes based on usage”.

NKN is offering a solution for a real problem in the market. If the claims of efficiency and cost reduction prove valid under field conditions, NKN may have a real product market fit.

NKN Products & Applications | Source: nkn.org

A creative approach to achieving network efficiency

For NKN decentralization and scalability are not just marketing terms, but rather necessities for a functional business model. NKN is incorporating a blockchain layer on top of existing TCP/IP protocol, which is used to interconnect network devices on the internet. The network incentivizes users to launch NKN nodes, share network connection and utilize unused bandwidth. This should optimize data usage, improve speed and reduce costs.

The network recognizes two key entities:

— Nodes - send, receive and relay data; perform useful proof of work;

— Clients - send and receive, but do not relay data.

As such, nodes form the core of the network, and help clients communicate with one another. The nodes reach consensus by utilizing Proof of Relay and the MOCA (Majority Voting Cellular Automata) algorithm. The Proof of Relay (PoR) utilizes signature chains, or chains signed by network relayers, with the first element signed by the source. The MOCA consensus is based on the Ising model and cellular automata, and requires that nodes only reach consensus with neighbor nodes. The process scales linearly, and is not computationally intensive.

Nodes get rewarded for relaying the data on the network. The more data a node relays at a given time the higher the reward will be. 

The project’s team is well balanced with professionals having academic and enterprise experience. There are three co-founders:

Yanbo Li is in charge of Strategy & System Architecture, has over 10 years experience developing P2P/Mesh networks at Qualcomm and Nokia. 

Zheng “Bruce” Li is in charge of Strategy & Operation, also has extensive experience working at large enterprises and founded multiple internal startup projects at Nokia & Google. 

Yilun Zhang is in charge of Core Researcher & Development, and holds a Ph.D in physics from University of California San Diego 

The project was also able to onboard notable advisors, such as Whitfield Diffie (Inventor of public key cryptography, Diffie-Hellman) and Stephen Wolfram (Founder and CEO of Wolfram Research)

The team has two offices in Silicon Valley and Beijing, and has been supported by a number of funds, such as Fenbushi Capital, OKEX, and Node Capital. Moreover, in July, the team had a new round of strategic investment from BlockGroup ($200M M&A Crypto fund). 

It is important to note, that NKN has chosen to build its solution on top of existing internet architecture. The key factor that impacts the node’s prospects for reward are: latency, neighbor nodes, hardware and size of the network. 

Purchasing expensive hardware does not necessarily grant a big advantage, as internet strength and neighbor node specifications, have a large impact on the node’s earning potential.

The network is designed to allow for participation by both retail and commercial scale node operators, which may positively impact decentralization in the long run.

The network has already shown impressive growth in terms of the number of nodes, with the current number over 17K. The network targets 1M nodes and 10,000 TPS, which would make it one of the most scalable platforms on the market.

NKN’s technology appears to address the business goals of the project. The network looks to be scalable and has demonstrated impressive growth. As NKN continues to integrate commercial partners, the network could face more stress-related challenges, but for now its progress appears to be solid.

NKN Full Nodes | Source: nkn.org

An incentive model to support the growing network

NKN is designed to incentivize actors to join the network and operate nodes. 

The total supply of NKN totals 1 billion tokens, which have been allocated towards the Foundation, Developers, Miners, and Investors. The 350M allocated for investors have already been unlocked and are in circulation, while another 350M allocated for the foundation, developers and advisors were to be released over a three year period, in three equal parts in May of each year. There are two unlocks remaining. The remaining 300M will be distributed as mining reward over the next 25 years. 

Given the number of blocks produced per day, and the number of nodes in operation, at the current price, this amounts to around $2.05 per day (3,928 blocks per day * block reward of 11,41NKN / current number of nodes 19,297 * current price of NKN $0,02948)

However, this is only the mining reward. On top of it there are nCDN and other transaction

based rewards. As the project onboards commercial customers, it plans to distribute most of the profits to the node operators, buying NKN from the open market and transferring it to the node owners. 

However, the centralized entity will always remain as a middle layer between commercial customers and node operators. It helps to have a centralized entity when working with enterprises. It simplifies business development and helps the project move forward.

The team believes that the rewards for nCDN and other services will be greater than the mining reward, even with relatively low CDN payouts in China. While it is too early to tell if this will be true, this would serve as a good sign for the network’s health.

Given the impressive growth of the network, and the prospects of tangible on-chain activity, NKN could see its token model start working to its benefit at an early stage.

Things to think about

One of the key concerns regarding NKN is the centralization of the network. This is an issue on two levels. First of all, while there are a lot of nodes in the network, many belong to only a few players. Given that location and performance of neighbor nodes matters, if certain network participants stop operating, it may have an outsized impact on the overall network performance.

Moreover, the network is heavily influenced by the core team, both in terms of development, ecosystem growth and governance. The team is responsible for negotiating commercial contracts and delivering payout to the operating nodes. Furthermore, it also operates nodes to support the needs of commercial clients. On top of that, the team also develops products for the ecosystem.

Third party development is currently very light, with only a few individual contributors working on ecosystem components. The situation is expected to change, with the launch of TUNA. However, it is unclear how much developer interest the project will be able to generate. There have been a few hackathons, and there may be more in the future. However, without a strong third party developer following, and a focus on large clients NKN may shift itself into the enterprise sector where competition is tough.

Conclusion

NKN is one of the projects in the space that is building a solution to address a real problem in the market. The project is targeting a space with a large potential, and is showing some traction in terms of commercial adoption. 

Given that the team has launched its mainnet in July, the project has shown good

progress so far. If the project onboards more commercial customers, the demand for NKN token and the value of the project should rise accordingly.

Therefore, NKN receives a grade of B-.

The author(s) of this report is/are invested in the following coins: BTC.

How to buy NKN

Step 0. Choose your preferred exchange.

NKN can be purchased from several cryptocurrency exchanges, the full list of available exchanges can be seen ​here​. 

Step 1. Head over to your preferred exchange.

If you want to purchase NKN, it is a good idea to use Binance​. Not only it is one of the biggest liquidity providers for the token but the exchange is also among the most reputable on the market.

Binance allows withdrawals of up to 2 BTC without the KYC. However, users may be required to show evidence that their account registrations are consistent with Binance’s Terms of Use. In case of violation you will not be able to use the platform.

Step 2. Create an account on the exchange of your choice if you don’t already have one.

Step 3. Top-up your exchange balance with some of your BTC, USDT or BNB.

On Binance, NKN can be purchased with either bitcoin, tether, or Binance Coin, so make sure to first send over some of the tokens to your exchange wallet. (Don’t forget to double-check that the address you are sending your coins to is correct!)

*Optional​: If you don’t own BTC or USDT, the easiest way to buy them is through ​Coinbase​ and Bitfinex. To obtain BNB you can choose from Binance’s offerings.

Step 4. Choose your trading pair

Head over to the exchange and choose the currency (BTC, USDT or BNB) you prefer to purchase NKN with.

Step 5. Purchase NKN with a market or a limit order.

If you want to buy just a small amount instantly, it is easiest to use a Market Order.

Input the amount of NKN you want to purchase and press Buy.

If you need to purchase a large amount of NKN, it is best to use a Limit Order to get the best possible price.

Input the amount of NKN you would like to purchase, and the price at which the order should be filled at and press Buy. (It might take some time for the whole order to be filled if you are purchasing a large amount).

Step 6. Store your NKN on one of the supported wallets for increased security.

To store NKN, you can use Trust Wallet​, Trezor or Ledger for improved security.