eCash (XEC): A 10 Point Fundamental Analysis

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Disclaimer: The following is for informational purposes only and is not intended as financial or investment advice. You should not rely on this information as a substitute for professional guidance tailored to your personal circumstances. Beware, investing involves risks, including the potential loss of principal.

eCash is a cryptocurrency that was created as a fork of the Bitcoin Cash project on November 15, 2020. In this article you will find information on 10 different aspects of the eCash project to assist in determining its intrinsic value and future potential.

Team: Development of the eCash protocol is led by Bitcoin ABC, which is the same team that previously created and led the development of Bitcoin Cash. Though the team is relatively small with less than 10 regular contributors, they’re arguably some of the most experienced professionals in all of crypto with most members of the team having worked on Bitcoin Cash for the first three years of that network’s existence in addition to the three years that eCash has been around. Throughout that time they have shown an unwavering commitment to their mission and a strong work ethic as evidenced by the consistent updates to their code repository. Their wealth of knowledge and expertise helps ensure that every upgrade is tested thoroughly in accordance with their high standards and provides the project with strong leadership and a clear vision for the future.

Funding Model (Runway): While other Bitcoin forks generally rely on sponsorships and donations to pay for protocol development, the eCash project has a self-funding mechanism that was introduced when the project was first launched. This means that instead of having to rely on donations from the community to fund their work, the eCash developers are paid directly out of the block reward. This gives the project a more predictable and steady source of funding to ensure that work continues uninterrupted while maintaining the superior quality that’s come to be expected by the eCash community. This approach also reduces the potential for conflicts of interest that can arise from external funding sources and aligns the incentives of the developers, miners, and holders alike. Additionally, it allows the development team to focus on long-term goals and improvements rather than short-term financial pressures. The developer fund is public and can tracked on chain here.

Roadmap: The eCash roadmap offers a blueprint of the technical direction of the eCash protocol so different technical teams can work together toward the common goal of advancing the project. The roadmap is broken down into three main categories of improvements: (1) Scaling transaction throughput to more than 5 million transactions per second (2) Improving the user experience by making payments instant and reliable with all transactions finalizing within 3 seconds (3) Extending the protocol to enable new use cases such as optional privacy and EVM capabilities.

Past Milestones: The eCash project already has a track record of achieving significant milestones, including: (1) The development of new infrastructure such as the Cashtab.com web wallet, the new eCash block explorer, and the Electrum ABC desktop wallet to allow users to store their XEC on Trezor and Ledger hardware wallets (2) Successfully launching the new eCash brand on July 1, 2021 that included a new website, logo, ticker symbol, and base unit (3) The successful launch of Avalanche post-consensus leading to many exchanges enabling 1-confirmation deposits for XEC (4) The recent launch of staking rewards, a first for a Bitcoin chain, creating a whole new incentive mechanism for holders to run their own staking nodes to increase decentralization and provide significantly greater network security than other Bitcoin forks.

Market Opportunity: The current market cap of XEC is $556M. Since the goal of the eCash project is to become the money of the future and replace all of the state-backed currencies in use today, the opportunity is enormous. While it is difficult to estimate the total value of the world’s money supply, it can be safely assumed to be in the tens of trillions, meaning that even if eCash were to only capture a fraction of that market, there is still plenty of room for growth. For reference, the current market cap of BTC is $725B, while the market size of physical gold is estimated to be about $13T. eCash is aiming to take on a market that is much larger than either by comparison.

Competitive Landscape: Considering Bitcoin was first introduced by Satoshi Nakamoto as a peer-to-peer electronic cash system, it may surprise people that much of the cryptocurrency industry today seems to have abandoned that use case. For example, BTC has largely pivoted away from trying to be a digital currency, or digital medium of exchange, in favor of being a digital store of value to compete with the physical gold market. Furthermore, if you scan the top 100 coins and tokens listed on CoinMarketCap.com, you’ll find many of those networks are focused on areas like smart contracts, oracles, file storage, layer 2 scaling solutions, exchange tokens, meme coins, stablecoins, and so on. While you might argue that some of these projects are also attempting to become the digital currency of the future, it’s clear they’ve made design decisions that weaken their ability to serve as a scalable payments network. As for the blockchains that are focused on payments, virtually all of them are considered “dinosaur coins”, or coins that have already been around for multiple cycles and have made limited progress both in terms of technical achievements as well as market recognition. This means eCash, which is based on Bitcoin’s original UTXO model, is advantageously positioned to compete as a scalable payment network of the future.

Technology: Perhaps the greatest strength of the eCash project is its technological innovation. It is currently the only cryptocurrency to integrate the battle-tested Nakamoto consensus mechanism used by Bitcoin with the revolutionary new Avalanche consensus mechanism first introduced in 2018. By combining these two algorithms, the eCash network is able to leverage the strengths of each while minimizing their respective weaknesses, resulting in a more robust, efficient, and secure system. This hybrid approach enhances transaction throughput, reduces latency, and improves overall network scalability, making eCash well-suited for a wider range of applications and users.

Security: One of the most important aspects to consider when researching cryptocurrencies is network security. For proof-of-work coins like BTC, this can be measured by the total amount of mining power securing the chain. BTC is considered one of the most secure blockchains due to the sheer amount of hashing power that is pointed at the network. Anyone who wants to execute a successful 51% attack of the BTC network would need to amass an enormous amount of computational power constituting more than half of the total network’s hashing power. According to crypto51.app, the current cost to 51% attack BTC for one hour is $1.4M. By comparison, the cost to attack BCH, which uses the same sha256 mining algorithm would only cost $9K per hour. While crypto51.app shows it would cost only $600 per hour to attack XEC, this is incorrect because they overlook the fact that eCash not only relies on proof of work, but also has a proof of stake component requiring an attacker to have enough staked XEC to take control of the network. As of this writing, the total amount of staked XEC is more than 186B valued at approximately $5.2M. This means that for someone to try and attack the eCash network, they would need to have enough hashing power as well as accumulate well over $5.2M worth of XEC. This would drive the price of XEC even higher, at which point the attacker “ought to find it more profitable to play by the rules, such rules that favour him with more new coins than everyone else combined, than to undermine the system and the validity of his own wealth.”

Potential Catalysts: It is impossible to predict price movements in any market, but here are some potential catalysts that might positively impact the price of XEC moving forward. With the recent activation of staking rewards and the simultaneous increase of the developer fund, the number of newly mined coins hitting exchanges is expected to be significantly reduced on a go forward basis. While miners tend to sell their coins on exchanges as soon as they are able, you can see by looking at on-chain activity that very little of the staking and developer rewards have moved. Additionally, the amount of coins going to miners will be reduced another 50% after the halving that is scheduled to occur sometime in April 2024. Keep in mind these reductions in newly made available XEC is only a small fraction of the total supply, so chances are the impact on the price may not be as noticeable as compared to past Bitcoin cycles. Other potential catalysts could come from various technical advancements as well as new partnerships. Developments such as Avalanche pre-consensus that will enable exchanges to accept 0-confirmation deposits for XEC could help showcase the project to both traders and enthusiasts alike. The upcoming launch of eCash aliases will give users a new way to experience using the network, while the planned integration of the Chronik indexer directly into the eCash client could attract developers looking to build on top of the chain. The eCash team also continues to seek more listings on exchanges, payments processors, and other platforms to broaden its appeal for users worldwide.

Risk Factors: Aside from the inherent risks common to most cryptocurrencies such as volatility, regulatory changes, and overall macroeconomic conditions, other factors worth considering for the eCash project specifically are (1) the small number of developers currently working on the project (2) the large concentration of XEC held in a single wallet (3) the lack of a presence on any US exchanges, and (4) the possibility that large amounts of unsplit XEC (aka Bitcoin Cash UTXOs that haven’t moved since prior to the network split on November 15, 2020) can be airdropped to Coinbase, Gemini, Kraken and Grayscale customers at any time. With that said, while each of the above factors are certainly worth monitoring, they should not be seen as existential risks to the project overall. Regarding the small number of developers currently working on the project, the hope is that as eCash grows and evolves, more people will discover XEC and compete for the developer rewards that are available. Though some argue that the developer fund is a potentially centralizing force that poses a threat to the project’s long-term survivability, the eCash network’s distinctive governance mechanism gives stakeholders the ability to prevent that from happening. As for the fact that over 20% of the total XEC supply is sitting in a single address, this is unfortunately rather common in the industry. For example, over 23% of Doge coins are held in a single address, nearly 20% of BCH is held in only 14 addresses, and over 15% of all BTC are held in just over 100 addresses. While it would be more ideal to see eCash, and cryptocurrencies in general, have a more distributed ownership structure, the current situation merely reflects the early stages of market maturation. Finally, with regard to the lack of XEC being listed on any US exchanges and the potential that trillions of XEC are sitting untouched with the entities listed above, this could be seen as both a risk as well as a potential opportunity. It will depend on whether or not these institutions still possess the eCash that belongs to their customers, and if they do, what they ultimately decide to do with those coins.

Summary: In conclusion, while eCash faces the typical risks associated with virtually all cryptocurrencies, its innovative technology, experienced team, self-sustaining funding model, and strategic roadmap position it as a promising player in the digital currency space. In the next article we will be covering how to buy eCash if it isn’t available on your exchange.

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