DeFi hype and upcoming mainnet upgrade back Zilliqa’s (ZIL) 69% rally

In the past month, Bitcoin (BTC) and Ether (ETH) basked in the limelight as each rallied to new yearly highs. Investors tend to focus their energy on the larger cap altcoins, which leads to smaller cap coins that reside outside of the top-10 being ignored. 

For example, Zilliqa (ZIL) has rallied 69% in the last 30-days. Despite this impressive performance, the altcoin has significantly underperformed Ether in the past six months.

The project was founded in 2017 by National University of Singapore researchers who w looking to bring scalability to smart contracts. Currently, ZIL is ranked 49 on CoinMarketCap, ahead of some well-known names such as Decred (DCR) and Basic Attention Token (BAT).

Decentralized finance (DeFi) may have fueled the recent uptrend, but staking and governance voting by itself does not seem enough for a sustainable price hike.

The project now desperately needs dApps users adoption and total value locked to display strength against the leader Ethereum.

The chart above shows how ZIL has underperformed Ether (ETH) price by 42% in the past six months, despite its nominal price gain. Coincidently, Zilliqa's design is based on sharding, which allows parallel data processing, similar to Eth2 proposal.

As the DeFi sector exploded with a new influx of users seeking high-interest returns from yield farming, it became clear that the industry required additional options to handle surges in transactions and fees.

Zilliqa uses practical Byzantine Fault Tolerance (pBFT) across each shard, besides a proprietary programming language called Scilla. Thus, comparing its performance with the smart contract industry leader makes sense.

Staking and partnerships are behind the recent price hike

April marked Zilliqa's v.6.2 release, which focused on usability, memory, and performance optimization, along with support for staking. This version also changed the number of Zilliqa-owned shard nodes from 520 to 250, a significant increase in community participation.

After several months of expectation, the project finally announced its staking in mid-June, including partnerships with KuCoin and Binance. The announcements were followed by a rally, which brought Zilliqa’s highest price in Ether terms since April 2019.

Recent developments bode well for Zilliqa price

On Oct. 5, Zilswap, the first Zilliqa-based decentralized exchange, was launched. Interestingly, the DEX was built by Switcheo, whose own DEX runs on the NEO blockchain.

The rollout of Zilliqa's non-custodial staking took longer than expected, and it eventually launched on Oct. 14. Nevertheless, it was an instant hit with the community and investors who staked more than one billion ZIL staked in the first few hours. By Oct. 15, over 25% of the circulating supply had been staked.

The team also revealed governance voting, which is another long-promised feature the community has looked forward to. The positive momentum of announcements and price recovery continued in October with Pillar Protocol's launch, an algorithmic stablecoin dApp.

Zilliqa’s v7.0 mainnet update is scheduled for Dec. 21, and the upgrade will reduce storage use and allow miners' votes to be attached to PoW submissions.

Data from TheTie also shows that price spikes have been accompanied by increases and decreases in ZIL’s daily sentiment score. Historically, these have been moments of ZIL price stagnation.

Fortunately, if there is enough substance behind the upcoming v7.0 mainnet launch, the token price could continue its recent uptrend.

Nevertheless, Zilliqa investors have been hooked to monthly updates and partnerships. Thus, it is only natural for the price to stagnate in the absence of groundbreaking announcements over the past 30 days.

So far, there hasn't been much traction in Zilliqa's dApps ecosystem, which could be limiting its price upside. The fact that Zilliqa's DEX is built by a NEO blockchain partner could also be a potential concern to investors as it does not transpire confidence from newcomers.

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