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Komodo Price Analysis – Battling to stand out » Brave New Coin

Komodo (KMD), built by the team behind Bitcoindark, is often described as a 3rd generation blockchain because it has been built with core design elements utilized from the Bitcoin and Zcash blockchains (which itself is based on Bitcoin’s core code).

 It uses a modified version of Bitcoin’s original Proof-of-work consensus algorithm, and Zcash’s zk-snark protocol for added encryption complexity. It aims to add layers upon the fungibility, anonymity and privacy built into those networks, while adding features exclusive to the Komodo blockchain.

 From an initial listed price of $0.10911231, Komodo (KMD) currently trades at $1.6756, representing a 1435.665% return for early investors.

Komodo Performance chart since the initial list in February 2017. Orange line represents an index of trading pairs and exchanges converted to USD. Light blue lines represent price in USD of KMD/USDT and Dark Blue line represents KMD/BTC.  The barcharts represent the compiled volumes of BTC/USDT/ETH/KRW/TRY trading pairs.

Trading pairs and exchanges

 Komodo pairs

The most popular pair for trading Komodo is KMD/BTC, which is unsurprising as Komodo primarily serves as Bitcoin alternative. The next most traded pair is the fiat-to-crypto KMD/Korean Won pairing that makes up over 21% of daily trading volume. The popularity of the KMD/Turkish Lira pair is unique, with a 24hr volume close to 11,500 Komodo tokens.

BTCkmd pairs

The most popular exchange for the BTC/KMD pair is Binance. It handles close to 75% of the pair’s total trading volumes.

Additional to the movement of KMD on external exchanges, Komodo is an innovator in moving crypto via atomic swaps, which is exchanging cryptocurrency without the need of using a trusted third party. Komodo’s own Atomic swap platform Barterdex, has handled up to 72,496 KMD tokens daily, which make it the 4th most popular exchange for Komodo movement.

Innovating Proof of Work consensus

Komodo uses an extension of the Proof-of-Work algorithm, called delayed Proof of Work (dPoW). It operates in a similar fashion to Proof-of-Work, where network miners compete to earn a block reward based on their ability to solve the encryption problem of a given block of transactions.

Delayed-Proof-of Work (dPoW) adds a ‘notarization’ mechanism designed to minimize the effect of the type of double spend attacks which smaller PoW networks can be vulnerable to — as has been the case with Verge (XVG) and Bitcoin Gold (BTG) recently. Komodo uses a chosen PoW network as storage space for ‘backups’, every 10 minutes, recording recent transactions on the blockchain. This makes trying to carry out the commonly used 51% double spend attack, immensely more challenging.

Protection against attacks

51 percent attacks work by hackers accumulating enough processing power to solve solutions for their own transactions, and then not publishing these blocks for network miners to achieve consensus on them. They do this by forking the network and creating a separate chain for the unpublished blocks.

While the attack is ongoing, there is a rogue chain and a true chain simultaneously operating, with miners on the true chain unaware of the presence of the malicious chain. The attacker then enacts a transaction on the truthful chain, such as exchanging crypto for fiat, which then is confirmed by miners on the true chain. There is now a race for the attacker to ‘reverse’ this transaction (by publishing blocks from the fraudulent chain) before miners detect the fault.

The attacker will try to create blocks faster than the miners on the truthful chain, thereby creating a ‘longer’ chain then the original chain. This manipulated chain will then be published, with a reversal of the confirmed transaction, and the true chain is forced into accepting it.

Because the bad actor would need to have more processing power than the rest of the miners to produce blocks faster than the rest of the network, it is known as a 51 percent attack

What the dPoW consensus mechanism does, by keeping a constant record of ‘back-ups’ on a notarizing chain, is make the process of creating a ‘longer chain’ far more challenging for the rogue agent.

Accumulating at least 51% of the network’s block producing capabilities is no longer the sole determinant in a double spend attack being successful. The truthful miners have a constantly updating log of blocks being produced and can deflect any attempted attack based on information posted in the notary logs.

Theoretically it would still be possible to carry out a 51% double spend attack on the dPoW Komodo algorithm, given that there is a 10 minute window in between when miners are informed of the snapshots. However, the Komodo consensus method adds an extra security layer beyond that of competing PoW networks.

Why Komodo? The use cases

Komodo has been established as a PoW blockchain with added security features, however in order for the platform to achieve long term success, there needs to be a unique reason to use KMD and make the most of its robust consensus algorithm.

One of the network’s standout features is its ability to run atomic swaps, eliminating middlemen exchanges, and allowing cross chain transactions to occur on the secured Komodo blockchain.

With options like 0x and Bitcoin’s Lightning Network, also already offering off-chain crypto transactions, Komodo joins a very select group of blockchains providing alternatives to the potential vulnerabilities, inherent in many centralized exchanges.

Barterdex is a Dapp developed by the Komodo team and is the first decentralized exchange based on Atomic swaps. It currently lists 95% of all tokens in existence, including ERC-20 and all Ethereum based tokens. Barterdex lets users trade BTC based coins with ETH/ERC-20 tokens (or ETH based tokens with each other), giving it additional options versus platforms like EtherDelta, which only allows for Ethereum based transactions. The cost of transferring tokens using Barterdex is approximately 0.15% the value of a transaction.

DEX’s need a large organic network to ensure liquidity is maintained, and users can buy and sell as they please, preventing price slippage. Large centralized exchanges can use liquidity bots and their own resources to ensure markets remain efficient. Additionally, if the Komodo network is congested with other transactions, users of Barterdex suffer, as there is no centralized clearing agent to manage transaction loads.

Another atypical feature of Barterdex is Agama, which can let a project host a decentralized Initial Coin Offering (dICO). ICO tokens are generally offered via a simple sign up sheet on the new coin’s webpage, and then tokens are confirmed and allocated based on the wallet address provided. The issue being that sign ups for the ICO are handled by a single server hosting the website, offering much less security than a proposed dICO, where user data is hosted across multiple servers.

Komodo will have to challenge existing institutions in order to establish Barterdex as a legitimate exchange and platform to host ICOs. The dICO system would add a layer of complication that many ICO participants would not want to deal with.

Addressing scalability – Komodo expands on dPoW

Scalability is one of the biggest challenges for PoW networks because the larger their ecosystems become, the more miners there are competing to solve transaction problems,  making them increasingly energy intensive.

Komodo has opted to address this issue by implementing sidechains to the main blockchain. Transactions will be allocated to smaller chains in order to ease traffic on the main Komodo blockchain. The blockchains will very much operate as individual networks that run autonomously, each having their own dPoW consensus operation running and being notarized by the main Komodo blockchain. 

During a recently conducted a speed test, using 64 side chains to fluidly manage transaction operations, Komodo was able to achieve impressive transaction speeds of 45,000 trx/second.

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Technical analysis

KMD is a technically advanced blockchain project that is solving a legitimate use case with a solid team. However, KMD has not been immune from the bear market, falling ~87% from all-time highs.

Bollinger Bands and Volume Flow Indicator

On the daily chart, price volatility for KMD is slowly compressing, visualized by bollinger bands, between $1.60 and $2.00 (dashed lines). Volatility compression typically precedes a price breakout which happened last May, August, and December 2017. However, given the overall market dynamics have changed to bearish, the next breakout being positive is not assured.

The volume flow indicator (VFI) on the daily chart has remained above 0 with a recent uptick in positive trend; all of which is positive for price. The VFI interpretation is: a value above 0 is bullish and below 0 is bearish, with divergences between price and oscillator being high probability signals.

 kmd TA1

Additionally, the 4 hour chart more clearly shows the compressing price volatility coupled with the VFI attempting to break above 0. VFI breaking above 0 and holding that level, will increase the probability of a positive price breakout for KMD in the near term.

 Komodo TA2

Ichimoku Clouds with Slow Wave Trend Oscillator (SWTO)

The Ichimoku Cloud uses four metrics to determine if a trend exists; the current price in relation to the Cloud, the color of the Cloud (red for bearish, green for bullish), the Tenkan (T) and Kijun (K) cross, Lagging Span (Chikou), and Senkou Span (A & B).

The status of the current Cloud metrics on the daily time frame with singled settings (10/30/60/30) for quicker signals is bearish; price is below the Cloud, Cloud is bearish, the TK cross is bearish, and the Lagging Span is below the Cloud and price.

A traditional long entry would occur with a price break above the Cloud, known as a Kumo breakout, with price holding above the Cloud. From there, the trader would use either the Tenkan, Kijun, or Senkou A as their trailing stop.

KMD is currently sitting at ~$1.61 after bouncing off the $1.35 support level, which may have been enabled by the SWTO oversold levels at that time (black circle). Currently, SWTO has turned positive and pushing higher (orange arrow), which may offer the needed boost for price to re-attempt a Kumo breakout. The Senkou A level of $1.75 may act as price resistance while breaching above $2.47 (Senkou B) will be needed to for a Kumo breakout. If successful, short term price targets are $2.67 (previous failed resistance), $3.00 and $3.20 (flat Senkou B levels). The support levels to watch on the downside are $1.35, $1.20, and $1.00 (critical to hold).

 Kmd TA4

The status of the current Cloud metrics on the daily time frame with doubled settings (20/60/120/30) for more accurate signals is bearish; price is below the Cloud, Cloud is bearish, TK cross is bearish, and the Lagging Span is below Cloud and price.

Again, KMD is sitting at ~$1.61 with previous oversold SWTO levels offering a bounce for a Kumo breakout retest above $3.00 (flat Senkou B). If successful, short term price targets are $3.20, $3.50, and ~$4.00 (flat Senkou B levels).

 Kmd ta4

Conclusion

Komodo is an exciting cryptographic project, having the novelty of taking what works about early blockchain and improving upon existing solutions. Built upon the security provided by the delayed Proof of Work solution, it has expanded to become a leading atomic swap solution with capabilities to become a genuine decentralized exchange contender.

However, it finds itself struggling for mainstream relevance, competing with networks like Bitcoin as a payment/transaction solution, and centralized exchanges like Binance as a way to move crypto assets around.

KMD technicals are firmly bearish. Both, the prudent short term trader (10/30/60/30) and longer term trader (20/60/120/30) will await a positive TK cross and Kumo breakout above $2.47 and $3.00, respectively, before entering a long position. The key support levels for these traders are $1.35, $1.20, and $1.00 (critical to hold), while medium price targets range from $2.67 to $4.00.

Value investors may view KMD’s current depressed price as a bargain or offering a sufficient margin of safety to begin accumulating a long position at a lower cost average but should realize that price still may not have found a bottom.

Disclaimer: This analysis has been designed for informational and educational purposes only. Readers are advised to conduct their own independent research into individual assets before making a purchase decision.

About the authors

BNC Christopher Brookins headshot pic4Christopher Brookins
Christopher Brookins is the founder and CEO of Pugilist Ventures, a quantitative investment firm focused on digital assets and blockchain technology. Chris has a deep knowledge and unique perspective on digital assets formed by his polymath experience in equity trading, credit investing, and business development at two West Coast startups (one acquired). He has been involved in the blockchain community since 2014. Follow @chris__brookins

 

Aditya Author Profile

Aditya Das
Aditya Das is Brave New Coin’s in-house market analyst. Raised in Dubai, UAE, he holds a post-graduate honors degree in Economics from the University of Auckland and a BA in Economics from the University of Sussex. Prior to joining BNC his most recent roles were as a researcher and Economics tutor at the University of Auckland. Follow @Quartlifecrypto

 

 

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