Harmony - Issue #47
In this newsletter, we are profiling Harmony [ONE]. In previous newsletters, we have profiled Bitcoin, Cardano, Stablecoins, Uniswap and many others. Access all our newsletters in our archives at madcapx.substack.com.
The Short of It
This year has seen an explosion of value going into smart contract projects, some of them direct competitors to Ethereum and some as complimentary. Ethereum transactions continue to have substantial transaction fees hurting it but, in turn, bringing projects like Harmony and the ONE token that compliment the Ethereum network plenty of value.
Harmony was founded in 2018 by Stephen Tse, who has a doctoral degree in security protocols and compilers and had their mainnet running in 2019. Stephen has worked for Microsoft, Google, and Apple. ONE is their token that resides on the Binance Smart Chain (via Binance Launchpad) and is used for fees, staking, and running nodes. The blockchain exists as a second-layer solution to complement Ethereum by implementing sharding, allowing it to scale.
Harmony uses something called Effective Proof-of-Stake (EPoS) as a consensus mechanism which is a modified version of Practical Byzantine Fault Tolerance (PBFT) to create Fast BFT (FBFT). Around 13 billion ONE was minted upon launch with annual inflation of about 400 million (or 3%). Approximately the same number is burned in fees during the year, so overall the supply should stay relatively stable.
With the ability to run validator nodes added in 2020, the project is slowly becoming more decentralized. You need to hold 10,000 ONE to run a validator node, or then 100 ONE to delegate to a validator node. Staking returns range from 9 to 10 percent. Currently, the system can handle a theoretical 24,000 transactions per second but averages around 3000. It also features a fast 2-second transaction finality. One thousand delegating stakers are supported for securing the shards. There are currently four shards; the Beacon chain, Shard chain #1, #2, and #3. More will be added as the network usage grows and higher transaction speed is required. Verifiable Random Function (VTF) technology is utilized for randomized and fair shard membership control. Validator nodes are assigned and re-assigned in a completely random order. Slashing penalties are used to keep validators from acting maliciously, although there is no slashing for simple node downtime.
It is not entirely known how many validator nodes are run by Harmony themselves, thus making its decentralization status unsure. With the SEC looking specifically at the decentralization of a cryptocurrency to determine its status as a security, you can be sure this is an issue Harmony will want to address.
Harmony features trustless bridges that can connect any Proof-of-Work and Proof-of-Stake chains, providing great interoperability.
Like many other large blockchain projects, Harmony has been having a difficult time finding qualified developers. Development of smart contracts is done via the Solidity language and ether.js.
NFTs are another big part of the Harmony ecosystem, with their largest marketplace being Davinci. There are also thousands of fungible tokens that have been created on the blockchain. They claim that their browser extension is used by at least 80,000 active users daily. A properly configured Metamask could also be used but does not appear to be as popular of an option. You can also purchase subdomain name NFTs on the Crazy.one site. All fees from Crazy.one go toward a decentralized community treasury (Community DAO).
A governance dashboard with access to all the DAOs launched this year, but only validators can vote on mainnet changes, while delegators and validators can vote on the DAOs. As a delegator, if your validator votes in a manner that you do not like, you will need to change who you delegate to.
Sushiswap launched natively on the Harmony blockchain earlier this year. There is also a new partnership with Terra to facilitate the use of their UST stablecoin. Terra’s Anchor protocol is to deploy natively on Harmony.
If you believe in Ethereum and second-layer solutions, Harmony acts very much like a finished version of the Eth 2.0 blockchain. A solution that is actively being used by many and should continue to be for the foreseeable future.
This first chart has ONE paired against BTC on the weekly chart going back to May 2019 when it was listed on Binance. ONE opened trading at 125 Satoshi (sats) and rose over 200% in the first couple weeks to a peak of 398 sats. Over the next 80+ weeks, ONE went bearish until it hit its all-time low of 12 sats at the end of 2020. From there, we see it follow the broader crypto market upward, and on September 13, 2021, it hit its third peak of 2021 of 497 sats for a rise of 4079%.
On the daily chart over the last 189 days, we can see how volatile ONE has been, from the bottom support to the top of the resistance line is 136%. Will ONE be heading for another test of the support line around the 220-240 sat area?
Against USD, the Harmony token ONE had a crazy gain of 19937%. The all-time lows and highs are different than against BTC. Over a 55 week period starting from the pandemic crash in March 2020, it hit $0.0011 to the euphoric highs experienced a year later of $0.233. Though the values per token are super low, so don’t be fooled by tokens like ONE that minted billions of coins. As of today, it is ranked #74 on CoinMarketCap with a $1.3 billion valuation. For ONE to be in the top 10 today, it would need to unseat DOGE from that spot and gain another 21x to about $2.75.
The Other Trend Lines
The market, in general, is bearish today from the fallout from Chinese property debt issues, and it is affecting the broader market, including BTC and crypto as a whole. There are only a few green tickers in the top 10, mainly just SOL and ADA against BTC.
BTC had a bullish 47 day run from late July into early September, gaining 80%. There is a bit of a downward trend that started September 7th. On the daily chart, the 200-day moving average is at about $40,000 and presents a support line that hopefully stays intact.
This portfolio section gives you an idea of what sort of return you can get when investing in crypto assets.
BTC/USD FUND is up 305% since October 1st, 2020. Since this is a long-term holding, it is best kept in cold wallet storage or a safe custody solution. We continue to see a long-term hold position as our best stable alternative. This past week bitcoin has been ranging between $42,500 and $48,843 USD in value.
FUND 3 started on November 16, 2020, with $1000 USD in value and was invested into BTC, LTC, ETH, and ADA. The total amount of BTC value from the four coins has had a gain of 144% since the start. The USD fund value is up 540% since the beginning. We will hold these positions to see how well it does against our BTC-only portfolio. LTC is down -14% against BTC. ETH is up 155% against BTC since the start. ADA has a gain of 692% against BTC and 1957% to USD.
BLWX Fund started on February 22, 2021. They all are assets we have profiled in the last few months, and we are interested in how they will perform in 2021 against BTC. BAT has a gain of 51% against BTC since the start; LINK is down -2%, WAVES is up 166%, XMR is up 25%. Overall, against BTC, the fund is up 60% and 27% against USD.
Overall, Bitcoin should be your first choice as an investment in crypto, though many digital assets can give you amazing gains if you manage your risk. As a long-term investor, we see it as our largest portfolio investment. If you are a day trader, there are many great assets to put on your watch list. Look through our previous newsletters to find some.
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MadCapX research newsletter is written by the Madbyte Team. You can learn more about Madbyte and MadCapX on our websites.
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Disclaimer: Nothing in this newsletter is intended to serve as financial advice. Therefore, do your own research and due diligence before applying any of the techniques highlighted in this post. Any risks or trades based on this newsletter are committed at your own risk.