Some quick facts
- Energi is a blockchain project originally forked from DASH by founder TommyWorldPower
- Instead of ICOs, the team released NRG tokens in rounds of airdrops or “Earndrops” as they called them.
- The founder of the project TommyWorldPower is a cryptocurrency Youtuber.
- If you agree or disagree with Fez’s analysis of Energi, feel free to chime in here: https://cryptocanary.app/review/Energi
The whitepaper starts by announcing their plans for world domination… sorry, I meant mass adoption. They intend to do this by absorbing and innovating on the most advanced technology in the space – smart contracts and infinite scalability – and implementing their four step solution: Trust, Awareness, Usability and Availability.
The whole whitepaper is constructed of very nicely written fluff – there is not a single piece of substance in the entire 26 pages. Not a single piece of technical information. Just a lot of buzzwords and promises. Now I’m not asking for a 126 page whitepaper for which I need a PhD in computer science to understand, but I do want to know what their technical plan is and how they intend to achieve it.
An incubator program is also discussed to allow other projects to launch dapps on the Energi blockchain. These projects and end users will be supported by four programs run and created by the Energi team. These are:
- Energi Defense & Energi Bureau of Investigations
- Energi Development Portal
- Energi Marketing toolkit
Energi Defense & Energi Bureau of Investigations (EBI)
“Energi will work with relevant law enforcement agencies and as cryptocurrency exchanges and other institutions to provide more protection, wherever possible, for Energi projects to protect their respective users.”
What do they intend to do and how? If the project is going to aid law enforcement in tracking and identifying scammers and hackers, could they also enable the government to identify any or all users of their cryptocurrency? Or will they freeze the funds or even reverse the transactions? None of those scenarios sound very censorship resistant to me.
I have to admit, I am by no means an expert in economics, and the following section is purely my opinion – but the economics of the Energi project just doesn’t seem sustainable to me. I will go into my reasoning behind this shortly but first, let’s dive into some of the economics.
The first thing to mention is the lack of a supply limit. Each and every month, the supply will grow by 1 million NRG tokens, with no hard cap in sight. At the time of writing this currently stands at 20,143,894 NRG (31st August 2019). In under two years, their circulating supply will double.
The monthly emission is distributed as follows:
- 40% Treasury
- 40% Masternode owners
- 10% Staking Rewards
- 10% ‘Backbone’
As for the Treasury, it’s not unusual for a project to have a Treasury like this. This allows them to control funds via on-chain governance or a DAO, which is made up of masternode owners who are able to vote on how funds are allocated. No complaints from me on this element of the payout breakdown.
When we take a look at the masternode figures, we see that the 40% or 400,000 NRG are distributed across all the masternodes, so we can expect the payout to owner to drop once more masternodes are added to the network.
The cost of owning a masternode at the time of writing is 10,000 NRG which works out at approximately $53,000. This figure is slightly less than mentioned in this Youtube video. The discrepancy is due to a dip in the market between recording the video and finishing this article. Now I’m not sure about the rest of you but I don’t have $53k that I could gamble with on a mid-cap project like Energi.
Energi is the fourth most expense masternode to launch according to the masternode.online tables. But when you compare the ROI at 66% to that of DASH for example which is 6% you can see why people may want to own a masternode. If we think with a logical mindset, we should be asking ourselves if a 66% ROI is sustainable, and whether there is enough liquidity in the market to be able to sell if we decided we wanted out? With a current trading volume of $450k I would say that being able to sell is unlikely for most masternode owners (without taking a huge hit to their average price).
Again, Energi comes in at number four, but this time on Stakingrewards.com’s list of highest staking yields. With a yield of 44%. This is derived from the 10% allocation every month – 100,000 NRG. The reward breakdown to individual stakers is dependent on the total amount staked across the network.
- Estimated Monthly Reward Rate = (user stake / total stakes) * 100k NRG
But again, having liquidity in the network is essential for selling any gains that you may be able to make, and even stakingrewards.com labels this one as ‘Risky’.
I suppose the benefit to staking Energi is you can stake as little as 1 NRG token. Now I have no idea why you would want to do that, but you technically could.
The Backbone is the founder’s personal wallet, which will grow by 10% or 100,000 NRG indefinitely. At present that stands at 2,000,000 NRG, which can be spent by the founder without any oversight from the ‘DAO’. The white-paper justifies this as completely fair:
“The Backbone is allocated by Tommy, Energi’s creator. Its original design was to function as Tommy’s incentive to create Energi (as there was no ICO or premine, and Energi was fully funded by Tommy) At a modest 10% allocation, this was felt to be very reasonable to the early Energi community, who joined Energi from Tommy’s original Youtube fanbase.”
If the total supply had been capped and his funds locked away for a set amount of time, I may have accepted it more, but something just doesn’t sit well with me regarding a 10% cut of an undefined supply. Also this 10% is being allocated to one individual, not spread across the network. It is a potential 100,000 NRG that could be dumped on the market on a monthly basis. And at the current price, that represents a $500,000 dollar paycheck for Tommy every month.
Now I’m not saying that Tommy is gonna cash is his paycheck every month – he knows it would likely kill the project – but he could if he wanted to.
Another potential risk is that there’s nothing in place to stop him from taking a controlling share of the masternode network. Every month he could launch up to 10 masternodes. Again, he is unlikely to do this with his entire balance, but over time he could build a controlling share of votes across the network. Masternodes have only been active on the project for 11 months… How many of the 874 existing nodes are controlled by Tommy?
But my main concern about NRG’s economics is its sustainability. You have 600,000 NRG released every month and a considerable amount of that could very easily be added to open market. The market is determined by supply and demand, and from the current liquidity, it seems like the selling pressure every month could quickly dwarf any buy pressure. So without a repeat of the 2017 altcoin season or some serious project hype, seems like continued negative price action is in store for the future of NRG.
When you check out the Energi team page on their website, you may ask yourself why only 4 of the team members have a LinkedIn page tied to the website. With a little digging, you can find the other members of the team, but I found it somewhat disheartening that I had to dig so hard for it in the first place.
Furthermore, not all of their team members are experienced in their respective fields. I personally look for team members that have come from some corporation that really shouts top-level professional. In case that’s not there, I would settle for another cryptocurrency project that’s had previous success. But in the case of Energi, we have neither, and this concerns me.
Of course please don’t take this as me saying that they don’t know what their doing. In fact, they are far more experienced than I am… but are they experienced enough for me to trust them with my money? I am afraid not.
There are two main things I found in my research that concerned me:
- A post on Reddit creatively titled; ‘Where are my tokens?’ It discussed the lack of distribution of funds from the airdrop across all of the rounds undertaken. This lack of organization to release funds on time rings some alarm bells. This has been attributed to a delay in the audit required before sending funds. But regardless of the reason, it is not the best way to keep your community happy.
- Their Github is dead. No commits in three months… I am hoping this is due to all the team working hard on implementing the smart contract protocol so it can be released on time in Q3 2019. But I am not sure if this will be the case.
I have to be honest and say I kinda feel bad about this article and the associated video. I am usually so positive about new blockchain/crypto projects. I particularly like fresh, interesting, and innovative projects, but in my personal opinion there is nothing like that in this project. And I am super concerned about their token economics model.
Of course as I have repeated several times this is my opinion, and rather than take my word to be final, I would prefer each and every reader that is considering investing in Energi to do their own due diligence.
If you have a differing opinion about the Energi NRG project and would like to share it with the rest of the crypto world, you can chime in here: https://cryptocanary.app/review/Energi
I have included a list of reference I used in my own research as a starting point for you below.