Blockchain interoperability is a key bull theme at the Coin Agora and building an allocation towards interoperable blockchain solutions during the bear market should outperform the broader crypto market in the next bull cycle. The Quant Network (QNT-USD) and their Overledger Operating System (OS) is a unique approach to an integrated blockchain universe with a current focus on cross-border banking and payments.
Why do blockchains need interoperability? Because the future is one with multiple blockchains. We believe Ethereum (ETH-USD) will be the dominant blockchain, but there is plenty of room for others especially as more blockchain use cases are created. More importantly, blockchain technology is still difficult to use, especially for enterprises. An interoperable blockchain solution like Quant Network’s Hyperledger OS seeks to not only incorporate multiple blockchains, but also strives to provide a simple-to-use user interface to leverage the power of these blockchains.
Quant Network launched in 2018 and seeks to be the on-ramp geared towards enterprises to connect their operations to various blockchain networks, as Quant Network sees a gap between traditional business technology and blockchain. Quant Network ranks as one of the highest valued cross-chain products and is a leader in the space. It is a closed source project that requires a license to use which is a unique approach relative to their on-chain competitors; not only is Quant Network geared more towards business solutions rather than retail adoption, but the Hyperledger OS is in fact not a blockchain at all. More on this later.
Overledger OS, their flagship product, is a cross-chain operating system to facilitate multi-chain decentralized applications (Dapps). It currently supports Bitcoin, Ethereum, Ripple, Stellar, EOS, IOTA, Constellation, JP Morgan’s Quorum blockchain, and Hyperledger Fabric blockchains. In a nutshell, Quant Network is attempting to create a multi-blockchain interface for users to leverage multiple blockchains in a simple and consolidated fashion.
While the valuation of Quant Network has exploded over the last few years, it is approximately 75% off its all-time high at the time of writing. It is still an altcoin ranking among the top 50 cryptocurrencies by market cap.
Who Are Quant’s Target Customers?
Quant looks to solve the needs of banks, asset managers, financial institutions, fintech developers, and tech related enterprises by selling licenses to their Overledger OS, which is geared towards traditional developers.
The world of blockchain can be split into two categories: public chains and enterprise chains. Public chains (permissionless chains), such as Ethereum or Solana, can be accessed by anyone and transactions are public. Enterprise chains (permissioned chains) can only be accessed by specific parties via a licensing agreement and transactions are private. Quant Network’s Hyperledger OS is more similar to the latter.
What Quant Does
According to Quant Network, their objective is “connecting all the world’s distributed ledgers for faster, more efficient growth”. Quant Network’s goal is to integrate all blockchains into an easy to use operating system.
The main value proposition of Overledger OS is that developers can interact with several blockchains and IT systems at once all on the same platform. It is marketed as the Windows or macOS of the future where we live and breathe a network of blockchains. However, because it is not a blockchain the security of their operating system must be questioned. How centralized is the Hyperledger operating system? How scalable is the system? And most importantly, how secure is the Hyperledger OS?
According to a Fast Company report, “Quant spearheaded the Blockchain ISO Standard TC307 adopted by 57 countries and organizations worldwide and solved interoperability with the creation of one of the world’s first blockchain-agnostic API gateways, Overledger. It’s proved such a hit thanks to the use of low code, which enables users to create interoperable smart contracts and tokens more cheaply, easily, and in a matter of minutes instead of months, as it does not require the use of specialized programming languages.”
Who is running the show?
Gilbert Verdian is the founder and CEO of Quant. Gilbert has an impressive background when looking at his titles and organizations who have employed him, which includes PwC, BP, Bank of England, and the U.S. Federal Reserve. However, he never stays anywhere long, with the longest lasting position being at HM Treasury for 27 months. A track record of quick stints at various companies could mean he is extremely efficient, but it also could be a potential red flag that his personality or work style causes friction. It is something to note at the very least.
According to Quant Network’s website, Quant’s use cases include: digital currencies, payments, supply chain and trade finance, capital markets, compliance, and insurance. According to the same Fast Company article, one of their more high profile projects is LACChain, which seeks to help Latin American businesses with their global banking needs. LACChain was founded in 2018 but brought in Quant in 2021 to assist with cross-border payments, domestic payments, and remittance using the Overledger operating system. According to a recent Fast Company article, ” LACChain uses blockchain and integrates it into the core banking infrastructure, enabling users to receive payment in the form of a new digital Latin American dollar straight away and then redeem it as local currency from their bank.”
It is unclear how the LACChain’s success may impact the QNT token’s value, however, if LACChain gains adoption and becomes a model for connecting banking systems across the world to various blockchain networks, Quant Network may be in a prime position to benefit from this inevitable trend of cross border payments and improved global banking.
Below are a list of Quant Network’s “partners”, which should always be taken with a grain of salt. The term “partner” can encompass a wide range of actual business ties.
However, a concrete business relationship is one with Oracle (ORCL), which designated Quant Network as an interoperability solution for their Oracle Blockchain Platform. How did this come to be? Quant joined the Oracle for Startups program in 2019 and was able to leverage their platform to work directly with Oracles existing client base and blockchain affiliates.
A key component for Quant Network’s growth strategy is staying in compliance with global financial regulatory bodies, including the Financial Action Task Forces (FATF) framework for virtual asset service providers (VASPs). In addition, the U.S. Financial Stability Board published a roadmap in 2020 in regards to cross-border payments infrastructure, this roadmap clearly focuses on API powered solutions, which happens to be the main focus of Quant as well. Lastly, there is speculation across the Quant Network community that the U.S. government is working with Quant representatives to find favorable approaches to blockchain and digital asset regulation.
Tokenomics and How Quant Makes Money
The main source of revenue for the company are selling annual licenses to access their Overledger OS, as well as a transaction-based fees, both of which are paid in QNT. For the annual licensing fees, the Quant Network treasury locks up the QNT received for 12 months or until the license expires, at which point the QNT is converted into U.S. dollars. This artificially limits the supply of QNT in circulation, and in theory the more demand they have for licenses the more the circulating supply should decrease, increasing the price of QNT.
An operational risk to this strategy is the price fluctuation of QNT during the lockup period and the difficulty that presents is forecasting or budgeting for the Quant team. This makes it difficult to determine a valuation for the QNT token and Quant organization as a whole.
The tokenomics for Quant Network are somewhat concerning as well. They held an initial coin offering in 2018 which was not met with much fanfare. As a result, they announced they would be burning approximately 14.6 million tokens, only to then burn 9.5 million tokens with little explanation. You can see here as the largest token “holder” on Etherscan is the wallet containing the burned QNT. While this is not overly concerning, tokenomics are a key focal point here at The Coin Agora and it should be noted when evaluating any crypto investment.
Here at Coin Agora, we believe the cross-chain or “multi-chain” sector has huge price potential and the entire sector has a 10% target allocation in our model portfolio. Does Quant Network deserve to be a part of this 10% allocation? At the moment we rate QNT-USD a HOLD. On the positive side, they have real world adoption with the LACChain project in South America and they’re plugged into the Oracle ecosystem. On the negative side, since they are not technically a blockchain themselves the visibility into their organization is opaque at best. It is nearly impossible to determine if their $1.5 billion market cap is overvalued or undervalued since revenue and adoption metrics are not available. In addition, the announced burned token amount versus the actual burned token amount mentioned earlier is a concern. And finally, the projects founder and CEO Gilbert Verdian’s short tenure at various organizations along his career do raise concern he has the commitment to see this project through.
Quant Network is an exciting project, particularly if it continues to gain traction in the cross-border banking and payments ecosystem. The continued success of LACChain will be crucial, and if they announce additional sovereign partnerships that will be a bull catalyst for the QNT token. As new information becomes available, and some of the red flags are put to rest, QNT-USD may earn a spot in our model portfolio. For now, we wait and see.
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