IOST Price Analysis — Bright, savvy, and backed by the smart money

Only months old and launched without a public ICO, IOST has quickly built a respectable market cap and a sizeable community following. While its price has suffered under the cloud of the 2018 bear, it remains a project with great potential.

The Internet of Services Token (IOST) is a top 60 digital asset that you’ve likely never heard of, but its positioning statement is a familiar one — “on a mission to execute the best blockchain in the world — eventually replacing Ethereum with a faster, more scalable solution.” 

Conceptualized in 2017 and built by a coding team who were all medalists at the National Informatics Olympiad, IOST  launched in 2018. It is popular in Asia, and tradeable on major exchanges like Binance, Huobi and OKEx. The token is built on a blockchain that offers novel consensus and data distribution solutions, while also accumulating some eye-catching investors and partnerships. The token didn’t run a public ICO, and initial fundraising was purely through institutional investors — including $40 million from Sequoia China.

 

South Korea and Singapore dominate ‘IOST’ search queries in Google Trends 

The IOST ecosystem has recently launched a testnet (Everest v0.5), with a further testnet release scheduled for early 2019. The platform is early in its roadmap and is marketed as a long-term investment with high potential rewards. Time will tell if it will be able to realize its potential. Competition in the space is intense and a number of competitors offer similar characteristics and solutions. For example Ziliqa, the Singapore based Dapp hosting platform that also proposes blockchain scaling using data shards. In IOST’s favor, though, is the calibre and connections of its investors, and the recent unveiling of a $50 million incubator to support blockchain projects based on the IOST platform.

Exchanges and trading pairs

 

The most popular on-ramps for trading IOST tend to be crypto-to-crypto. The IOST/USDT, IOST/BTC and IOST/ETH pairs, make up over 90% of total trading volume, close to USD 9 million worth of 24 hr volume. The most popular fiat on-ramp is the Korean Won. The not-often-seen Huobi Token/IOST pair rounds out the top 5.

The most popular exchange for trading the USDT/IOST pair is Singapore-based Huobi, which is also listed as a partner in the IOST project. The next most popular exchange for the USDT/IOST is popular Hong Kong based exchange Okex , which is also the most popular exchange for the BTC/IOST pair, followed by Binance. The recently government audited South Korean exchange, Upbit, is the most popular pair for the KRW/IOST.

Sharding and proof-of-stake variation

The first layer of the blockchain, and likely where IOST gets its name from, is the implementation lightweight/IOT nodes. Meaning the integration of devices with minimal processing power i.e. drones, and mobile phones, into playing a role in verifying transactions on the IOST network.

Generally, IOT systems require a dedicated server to facilitate information transfer, however, the IOST blockchain circumvents this issue by designing a blockchain that breaks up network nodes into two tiers; First class nodes, that handle the bulk of network operations, and simple payment verification nodes (SPV’s), which are used more sparingly.

The other key distinguishing attribute of IOST, is its solution to the blockchain’s ‘bad actor’ problem. IOST implements a ‘Fair and transparent feedback system’ (FTFS), where users, services and contracts receive feedback on interactions within the network which feeds into an individual ‘believability score’.

The ecosystem also rewards users with ‘Servi’ tokens, for pro bono, voluntary actions made by network participants. These tokens have no tradeable value and are always tied to the user. Servi tokens play into a user’s believability score.

The believability score model is used for IOST’s unique consensus algorithm, Proof-of- Believability (PoB). PoB is a Proof-of-Stake hybrid, where network stake, along with Servi tokens, previous network actions, and positive reviews, accumulate to compile a node’s believability score.

The higher this score, the greater the chance a node will be allocated a block for production. Blocks are still allocated by a draw, however, so there is no guarantee even with a high enough score, of continuous block allocation.

The system is proposed to address some of the issues of Delegated-Proof-of Stake networks, where a fixed set of nodes are continuously allocated network rewards, and Proof-of-Work networks where the anonymous have incentives skewed to act maliciously, often failing the Byzantine Generals problem.   

Similar to other Byzantine fault-tolerant protocols, for transactions on the IOST network, censorship resistance and immutability are likely sacrificed for a blockchain where bad actors are more easily identifiable. This runs contrary to the original blockchain philosophies and may rub purists the wrong way.

The other issue may be how public nodes are incentivised to join the network. If stake and good behaviour need to be accumulated to increase the probability of receiving block rewards, prospective nodes may choose PoW networks where rewards are allocated more impartially.

It is important to note that the network’s public nodes will likely not be fully implemented until a main network roll-out pencilled for Q3 2019, with the network currently in an early testnet state. The PoB protocol may sacrifice decentralization and anonymity in favour of a more trust-based, community-focused protocol, but the IOST team have time on their side to engineer the network, and balance incentives to integrate public network participation.

The development team has also considered scaling, and take a blockchain sharding approach to address the issue.  

Sharding breaks up the processing power of a network, by splitting up operations into parallel segments. Essentially a blockchain is broken up into smaller shards, which each runs its own version of the consensus protocol.

Within IOST, using the sharding protocol, if a node becomes overworked the incoming workload is spread across new nodes and other devices in the ecosystem to ensure throughput is retained.

This means, rather than the whole blockchain having to achieve consensus on every network transaction, which can be power and time intensive, the consensus votes are contained within smaller blocks. This solution is proposed to be scalable, because as a network expands, the more shards there are contained within it, each dealing with a share of network operations.

At first glance, sharding appears to be a magic fix for all blockchain scaling problems, but its implementation comes with its own unique issues. For example, if not handled correctly,  there may be a safety sacrifice, because the whole blockchain doesn’t assess every transaction and true consensus can be compromised.

This being the case, some form of cross-shard communication is required to allow for nodes to communicate with validators from other shards. Other potential issues include single shard attacks, where a node operating within the smaller version network accumulates enough power to prevent transactions from being validated, or is able to push through invalid transactions within its own shard.

To address these potential issues, IOST has developed Atomix, which bundles interconnected transaction steps into a single unit. During network irregularities like double spends, interconnected transactions that impact each other are used to facilitate malicious attacks.

Atomix seeks to mitigate this by sending interconnected transactions across different shards in the network, and only passing through the individual transactions once the whole atomic block has been confirmed.

Recent price movements

 

 

The graph shows the normalized USD price, and volume, of five different IOST trading pairs over the last 90 days. IOST/USDT, IOST/BTC, IOST/KRW, IOST/ETH and IOST/HT. The orange line represents an Index of the prices, blue is IOST/USDT, yellow is IOST/BTC, green is IOST/KRW, navy is IOST/ETH and IOST/HT is turquoise. The bar charts below represent total trading volume in USD.

Given that IOST is still in an early stage of its development, and network fundamentals are therefore not a factor, recent price movements have generally been caused by promotions, exchange listings, and wider market conditions like the price of BTC.  

For example, the price of IOST surged during April 2018, coinciding with a competition on the Binance exchange to give away 5,000,000 IOST via a lucky draw, to holders of over 100,000 IOST on the exchange, with an additional specification to trade IOST/BTC volume during the competition period.  

The competition ran until April 13th and led to a surge in trading volume, price, and exposure. From the start of the competition on 04/06/2018, to 04/23/2018, the price of IOST rose ~81% climbing from $0.27 to $0.49. Over the same period the price of BTC, rose ~33%.

Another recent event that had a similar, albeit smaller effect, was the announcement of a listing on Upbit and a resulting Korean Won on-ramp for IOST. The news led to a one day change in price from $0.02404 to $0.031, a ~29% jump.

Technical analysis

Regression Channel and Long Term Trends

On the 4H chart, the bullish EMA cross (not shown), or Golden Cross, has not occurred which confirms IOST’s negative linear price trend, with a Pearson’s R Correlation between time and price of 0.90 since May (regression channel). Price is settling at its long term average which is providing support currently. Additionally, the volume flow indicator (VFI) has been beneath 0 since May and has attempted to breach above 0 twice with no success (black circles). 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.

If the current support level falters, a continuation of the overall downtrend within the regression channel is likely, with a commensurate fall towards the average of ~$0.015.

Ichimoku Clouds with Relative Strength Indicator (RSI)

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 4H 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 beneath 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.

IOST is sitting at ~$0.018 after bouncing from ~$0.016. Also, the RSI is currently at 39 and experiencing an uptick from previously, oversold territory. The RSI metrics may indicate that IOST will have enough buying pressure to re-attempt a Kumo breakout in the near future. The near support levels are ~$0.017 and $0.015, while longer term support is $0.01. Price will need to break above $0.021 for a Kumo breakout. Price targets for a successful Kumo breakout are $0.024 and $0.027.

The status of the current Cloud metrics on the 4H 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 beneath the Cloud and price.Again, the RSI is currently experiencing in uptick from oversold territory, which may provide some price support for a new Kumo breakout attempt. If so, price will need to break and hold above $0.027 (flat Senkou B) for a successful Kumo breakout with the resulting price targets of $0.029 and $0.033 (flat Senkou B and previous failed resistance).

Conclusion

With a sizable market cap of over $400 million, IOST has quickly emerged as a top 60 digital asset, building a sizable following and reputation in Asian markets. It is a coin early in its life cycle and it will be interesting to observe how it manages its mainnet roll out. Like most cryptos, it has been affected by the current downturn, but given its heavyweight investor profile there’s little doubt that it will still be around after the dust settles on the current crypto bear. 

The technicals for IOST are bearish despite the recent uptick in RSI and price. 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 $0.021 and $0.027, respectively, before entering a long position. Both trader’s support levels are ~$0.017, $0.015, and $0.01. The (10/30/60/30) trader’s price targets are $0.024 and $0.027, while the (20/60/120/30) price targets are $0.029 and $0.033.

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

Christopher BrookinsChristopher 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 DasAditya 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