Quantifying the Internet of Blockchains — $QUANT Fundamental Analysis

This fundamental analysis was published on August 10th, 2023, and is part of a weekly paid newsletter from the Crypto Consulting Institute that provides market insights, actionable trade signals, and monthly fundamental analyses. For more information on receiving FAs as they are released, visit: https://www.cryptoconsultinginstitute.com/newsletter

Cars are complex machines that rely on various components working in harmony to enable movement. At their core, cars are powered by internal combustion engines or electric motors. In internal combustion engines, a mixture of fuel and air is ignited to produce controlled explosions, which drive pistons that convert the energy into rotational motion. Electric cars use electricity stored in batteries to power electric motors, generating rotational force directly.

The engine’s power is transmitted to the wheels through a transmission system, which adjusts the speed and torque. Most modern cars have automatic transmissions, but manual transmissions are also common in some models. The transmission is connected to the differential, which distributes the power to the wheels while allowing them to rotate at different speeds, which is crucial for smooth turns.

Steering is achieved through a system of mechanical linkages or electronically-assisted systems that allow drivers to control the wheels’ direction. Braking is facilitated by hydraulic systems that apply pressure to brake pads, creating friction with the rotors and slowing down the car.

Suspension systems help absorb shocks from the road and maintain tire contact for better control and comfort. Fuel systems deliver the necessary fuel to the engine while cooling systems prevent overheating by circulating coolant. Additionally, electrical systems power lights, entertainment, and control systems.

Now, many of you, especially motoring enthusiasts, already know this. But to drive and operate a car you are not necessarily required to know about each of the above components that bring your car to life. You only need to put your key in the ignition and apply pressure to the break, acceleration, and clutch pedals, all while using a stick to change gears and turn the wheel to set your direction.

This analogy is apt when considering the value proposition for Quant. Businesses and enterprises are often deterred from utilizing blockchain technology as they do not understand the mechanics or cost/benefit. Those that do understand and appreciate it often lack the technical knowledge and abilities to implement it on their own, which often leads to a costly process of sourcing developers that can provide uniquely tailored solutions.

Quant is vying for the blockchain operating system and enterprise solution narrative. Throughout this fundamental analysis, we will dive into what Quant is, revisit the ISO-20022 standard and why it is important to the ongoing success of Quant, then close off with some final thoughts on where this is all headed.

TLDR Summary; Quant.

A big shout out to CCI superstar Elliot for canvassing many of the details and specifics that provided the contents of the TLDR summary.

A Different Breed of Quantitative Easing — What is Quant?

Quant is a tech company that offers advanced solutions for seamlessly sharing data and digital assets across diverse blockchain networks, platforms, and protocols. Their patented closed network, Quant Network, continues developing an operating system called Overledger. This system ensures applications can smoothly function across any blockchain or network, aspiring to become comparable to Apple’s OS or Microsoft’s Windows in blockchains.

Overledger Enterprise platform, positioned as the inaugural gateway to distributed ledger technology (DLT) for businesses. It is a user-friendly API conduit linking diverse distributed ledgers, streamlining the integration of existing corporate frameworks with blockchain systems. Furnished with a straightforward REST API, the platform establishes a standardized avenue to interact with various blockchains.

A REST API, alternatively referred to as a RESTful API, REST, which stands for representational state transfer, embodies an application programming interface that adheres to the principles of the REST architectural style, facilitating interaction with RESTful web services. REST API is a conduit for two computer systems to exchange online information securely. This mechanism provides a streamlined approach to accessing web services, characterized by its simplicity and flexibility, devoid of extensive processing requirements.

When juxtaposed with the more robust Simple Object Access Protocol (SOAP) technology, REST technology boasts several advantages. Notably, it consumes less bandwidth, boasts a simpler structure, and is particularly well-suited for internet-centric applications. Basically, it is one of the gold standards of the internet as we know it today.

Leveraging existing REST API technology to effectively “plug and play” into DLTs empowers enterprises to forge what Quant terms “multi-DLT smart contracts,” or MAPPs. These contracts transcend singular distributed ledgers, enabling decentralized applications (DApps) to harness the resources and capabilities of multiple platforms, ushering in novel functionalities. Quant further endorses multi-ledger tokens (MLTs), digital assets fortified by assets secured in escrow under financial supervision. These versatile MLTs represent stablecoins, coupons, loyalty points, central bank digital currencies, and more. Their issuance and utility span multiple distributed ledgers facilitated by Quant’s Overledger technology.

Recently, Quant launched Overledger API V3, a revamped suite of APIs designed to provide enhanced API flows and an improved user experience when engaging with the Overledger platform. This collection of REST APIs has undergone a complete redesign based on customer input and advancements in research on blockchain technologies.

While it may sound complex, it is a logical extension of what we have covered in previous FAs by identifying complexity as a primary barrier to facilitating blockchain adoption. The internet has become an essential tool to keep up with day-to-day life, and leveraging existing technology to simplify interactions with the blockchain is a minimally disputed notion for continued adoption.

However, this comes at a cost as the Quant network is effectively custodial, and the implications will be explored in the discussion section.

To access the Quant network, with the recent release of Overledger 3.0, a user is required to sign-up for a free trial and then select either pay-as-you-go or annual subscription. While this may sound familiar by alignment with Software-as-a-Service (SaaS) propositions that we all likely have a subscription to today (Spotify, Microsoft Office Suite, Adobe, etc.), the key difference is using blockchain technology by proxy facilitated by the Overledger protocol.

In previous FAs, we have alluded to grand visions around tokenizing business models as a DAO. In this model, existing businesses and enterprises can deploy their own suite of solutions through standardized factory contracts to tokenize business processes, whether financial transactions or inventory management.

While the QRC-20 standard enables the creation of tokens, these are largely for private use instead of publicly available and tradable assets. Businesses have incentive to tokenize their proceeds, treasury, profits, and even their inventory to access publicly tradable assets and global markets across a range of blockchains.

All For Quant and Quant For All.

It is not the first time, and highly unlikely to be the last, that we touch on the ISO standard. You would recall from our Ripple FA that we had spent a fair bit of time wrapping our heads around the significance of it. To reinforce its significance, we revisit what it is and the likely impact of technologies integrated into the standard.

The International Organization for Standardization (ISO) operates as an independent, non-governmental organisation comprising the standards organizations of 164 member countries. It is the world’s largest developer of voluntary international standards, facilitating global trade by establishing common standards between nations. With over twenty thousand standards covering various domains, including manufactured products, technology, food safety, agriculture, and healthcare, ISO plays a pivotal role in promoting market harmonisation and cooperation on a global scale.

The British Standards Institution (BSI) represents the UK in ISO and is responsible for advocating UK economic and social interests across European and international standards organizations. Within the BSI, Gilbert Verdian, also the CEO of Quant, is the chairman for Blockchain and Distributed Ledger Technology, leading efforts to set standards for these emerging technologies.

Quant Network, a pioneering figure in shaping the blockchain landscape for governments, has played a significant role in establishing the ISO Blockchain ISO Standard TC307, which involves the collaboration of 53 countries working to implement a globally adopted standard for governments, technology providers, and service providers.

Moreover, Quant Network has contributed to forming the International Association for Trusted Blockchain Applications (INATBA) as a founding member of the European Union. INATBA was launched to foster harmonisation and implementation of blockchain best practices at European and international levels, particularly within the banking and financial services sector. The association, comprising esteemed entities like Accenture, Banco Santander, BBVA, Consensys, Fujitsu, and more, aims to enhance trust and innovation in blockchain and other distributed ledger technologies. It seeks to promote guidelines and specifications for interoperable blockchain infrastructures, ensuring adherence to EU and international law, high cybersecurity, privacy standards, and transparent governance models.

Quant Network’s active participation in these initiatives reflects its commitment to driving mass adoption of distributed ledger technology, collaborating with governments, and facilitating the integration of INATBA with the ISO TC307 to advance global blockchain standards and practices.

Now let’s delve into the significance of ISO-20022 in the context of coin listings, an acronym you have undoubtedly encountered if you’re up to speed on CCI Fundamental Analyses. ISO-20022 is an international standard that unifies the coding language used by various financial institutions into a single language. This standard, known as the extensible markup language (XML), aims to streamline international transfers and enhance their organisation.

Quant’s interoperability incorporates ISO 20022, which facilitates international cross-border payments, especially concerning Distributed Ledger Technology (DLT) or blockchains. Notably, SWIFT and the Federal Reserve have already endorsed ISO-20022, suggesting its potential to replace SWIFT. Quant is among the few DLTs that are ISO-20022 compliant, alongside Algorand, Ripple, XDC Network, Hedera, IOTA, and Stellar.

The impact of ISO-20022 will likely be profound, as it covers more than 200 different payment types. Moreover, it will accommodate Central Bank Digital Currencies (CBDCs), making it highly relevant in financial technology and blockchain-based transactions.

A distributed ledger is considered ISO-20022 compliant if it meets the following criteria:

• It uses a messaging standard compliant with ISO-20022.
• It supports exchanging financial messages in various formats, including XML and JSON.
• It provides a secure environment for the exchange of financial messages.
• It is interoperable with other systems that use ISO-20022.
• It is compliant with all applicable regulations.

In simple terms, ISO-20022 is an international standard for the exchange of financial messages. It is designed to improve the efficiency and accuracy of financial transactions by providing a common messaging standard that different systems and organizations can use.

A distributed ledger that is ISO-20022 compliant can benefit from a number of advantages, including:

• Increased efficiency: By using a common messaging standard, ISO-20022-compliant distributed ledgers can reduce the time and cost of financial transactions.
• Improved accuracy: ISO-20022-compliant distributed ledgers can help reduce errors and fraud by providing a more secure and reliable environment for exchanging financial messages.
• Increased interoperability: ISO-20022-compliant distributed ledgers can interoperate with other systems that use ISO-20022, which can help to facilitate the exchange of financial data between different organizations.
• Increased compliance: ISO-20022-compliant distributed ledgers can help organizations to comply with regulations by providing a secure and auditable record of financial transactions.

You may look at the above chart and realize Quant is not there. The above are registered ISO-20022-compliant blockchain and distributed ledger technologies. Quant meets ISO-20022 compliance requirements but is not formally integrated into the “interledger protocol family” at this time. Despite this, it is important to be across ISO-20022 as it has interoperable capabilities with ISO-20022-compliant DLTs that will likely host and facilitate liquidity or functions of CBDCs as they emerge.

These partnerships, including a recently announced partnership with the Bank of International Settlements (BIS), increase the likelihood that, one way or another, Quant will be a key component of the interledger protocol. Furthermore, Quant lists partnerships with companies and government institutions with significant financial backing. All seek to integrate blockchain technologies into their daily operations, and their interest is not limited to financial transactions.

$QNT Tokenomics

Price: $101.95

Market Cap: $1,481,269,143

24 Hour Trading Vol: $13,534,053

Fully Diluted Valuation: $1,488,226,954

Total Supply: 14,612,493

Max Supply: 14,612,493

ATH (USD): $421.49

ATH Date: September 11th, 2021

% Down From ATH: -75.81%

Cycle Low (USD): $41.84

Cycle Low Date: June 13th, 2022

Please note, there is scarce available third-party information on specific details of the $QNT token in terms of whether it is available on alternate blockchain platforms or is limited to Ethereum. For continuity, we are predicating our tokenomic assumptions on the latter, based on the information from Etherscan 21% of tokens are held by the Quant Foundation.

Quantitative Risks — Discussion

Go on … Say the line … NOT YOUR KEYS, NOT YOUR CRYPTO!

Yes, this is the most glaringly apparent limitation of the Quant network. While you can sign up for a free trial to access Overledger’s features, it is not a permissionless blockchain. In this sense, there is very little “freedom” when utilizing their services as a proxy to interact with standalone blockchains and DLTs.

However, for the sake of balance, it is worth taking a deeper look at the caveat, specifically that it is not and was never intended to cater to the individual user but for enterprise adoption.

It has been said a number of times that one of the biggest issues facing cryptocurrencies as a value proposition is the increased fragmentation of liquidity. Interoperable protocols seek to tie all that liquidity together, but in many cases, complexity remains a significant barrier to entry.

It wouldn’t shock most of you that we believe in the potential of cryptocurrencies and the underlying technologies to unlock financial freedom. Still, all technology is agnostic, and whether one wishes to attribute binary notions such as “good” or “bad” depends entirely on what end it is used.

In an increasingly stringent regulatory environment with little sign of providing wiggle room for decentralized projects, many projects we have previously covered in FAs, except for Ripple, would not align with the ISO-20022 standard as a standalone piece of technology. Through the ISO-20022 standard, we can expect most of the major institutional and sovereign liquidity to flock to custodial solutions, given the clear hostility toward cryptographic assets that enable the user control over their finances. If there is doubt about such an Orwellian notion, look no further than the hundreds of Bitcoin obituaries, which at last count is 474 according to 99bitcoins.

While most of us desire sovereign liquidity to be backed by $BTC, as it stands, few players control an overwhelming share of the world’s liquidity. They have not concealed their desire to further the means of control through their endorsement of programmable features that are antithetical to financial freedom and are the core value proposition of CBDC. Even though we don’t like it, there is clearly movement toward replacing or substituting fiat value with CBDCs.

To this end, custodial solutions will likely play a role, and those solutions need smart contracts and blockchain technology to enhance the security of the underlying liquidity and automate enterprise functions that are administrative in nature, making them prone to error, excess costs, and time.

Quant as a middleware, plug-and-play, blockchain/DLT proxy is well suited to facilitating a user-friendly and ISO20022-compliant option for central banks, institutions, and enterprises. While Quant is not a tangible foundation of the interledger protocol, it will most certainly play a role in facilitating enterprise solutions at the very least and as payment rails for CBDCs at most, which is not improbably given QRC-20s boast smart token contracts or programmable, functionality.

In a recent press release, the Quant team described their role in the partnership with the BIS: “​For maximum security, we combine private blockchains with the same technology that central banks and national payment firms use.”

Those with a deep understanding of cryptocurrencies, specifically $BTC, know that the network’s permissionless, decentralized, and censorship-resistant features give it value.

However, it is very much the case that the ones holding the keys to the floodgate to enable mass adoption are the ones that already enjoy significant market dominance across a range of different products and control of institutional liquidity. As an investment, having these key players in Quant’s corner is a feather in their cap that cannot be overlooked.

While there are many other great decentralized alternatives, such as LayerZero, Polkadot, and Cosmos, that may facilitate interoperability and lower barriers to entry for new users, the funnel they are receiving liquidity is like a drip compared to the pent-up faucet of institutional and enterprise liquidity.

It is worth noting that this discussion isn’t to foment doom and gloom on principle, but to enable us to circle back to a notion conveyed specifically in previous $SHIB and $XRP fundamental analyses: do not let your principles get in the way of making a profitable investment decision.

While you still require discipline in knowing when and how to take profit for both of these assets, there are abundantly clear telltale signs of when to enter. SEC dropping the case against Ripple Labs was an obvious signal to enter a position. We covered this play in the initial FA and subsequent project update that building a position leading up to a regulatory decision to take profit comfortably is commonly known as “buy the rumor, sell the news.”

$SHIB, and similarly $DOGE, are often a litmus test to determine whether we are in a bull market; it often indicates that retail liquidity, which can be fairly characterized as irrational, is entering the market. For uneducated investors, it is often those projects that bark the loudest that capture retail liquidity rather than projects we may consider to have far greater merit.

While, in principle, many of us do not believe in or align with these cryptocurrencies that lack merit or do not align with our principles, there is a time and place to hold when the opportunity presents itself. The outcome of being neutral on principle enables you to take profit back into your bank account or take profit into your conviction plays.

There is a method to the madness of this preface, and it is that $QNT is no different.

While they clearly need to step up their marketing, and with limited publicly available information, their focus is clearly on partnerships, and their most recent one with the BIS has paved a clear course toward them playing a role in the implementation of CBDCs. Secondly, they provide a solution, albeit a custodial one, to reduce the complexity for enterprises to implement blockchain solutions in their day-to-day processes.

Quant is a blockchain/DLT proxy using APIs — it is middleware. As we have discussed extensively, a significant difference exists between blockchain and distributed ledger technology. The former is often permissionless and cannot be tampered with by central authorities; the latter is designed to facilitate the needs of a centralized entity and cares little for the average user. While Quant has proof-of-work and proof-of-stake functions to host validators that facilitate middleware transactions, it is not a standalone blockchain. It relies on existing blockchains and DLTs to deploy smart contracts for its stakeholders. While such a technology may be too centralized for some, there will likely be a contagion effect through increased transaction volume on DLTs and blockchains to achieve a target function for the enterprise. This will only occur once we see evidence of institutional liquidity migrating from traditional finance to DLT/Blockchains.

The issue remains that there does not appear to be a private key or ZK user credentials for individual users. However, they are partnered with Sia, which provides blockchain storage and cloud computing solutions. With this arrangement, a centralized web 2 solution, such as creating an email address and password, would be satisfactory if more information were forthcoming from the Quant camp on how this partnership can enhance user data security. For the most part, it does not appear Quant is interested in decentralized solutions beyond what their middleware can plug into.

It is not strictly a matter of favoring principles of decentralization, but the lack of publicly available information presents challenges in risk management and making plays on the fundamentals. Given there does not appear to be a concrete roadmap, it is difficult to ascertain the project’s future direction. Indeed, it is unsurprising that if the focus is onboarding enterprises and institutions seeking to implement CBDCs, many finer details would be kept close to the chest. Indeed, Quant should be viewed more as a traditional publicly traded company that leverages blockchain and DLT technology rather than a blockchain technology project seeking to make blockchain accessible and permissionless for all.

To counterbalance this observation, it is important to consider not only the relationships with institutions that Quant appears to be forming but also the time the project has existed.

One of the variables of ‘trust’ is time, and for projects that have continued operations and appear to progress toward their initial goals, Quant is, by and large, a trusted project. Given that many of the exploits, rug pulls, and scams that occur in cryptocurrency tend to come from projects that appear overnight or have a short shelf life, Quant has managed to prove it has staying power, and should it continue to stay the course it is highly likely to perform in the next bull market.

As for setting benchmarks, there are a number of narratives to consider. If Quant is to assume the role of an institutional-grade piece of technology in the ISO-20022 Interledger Protocol, then one may be inclined to compare it with Ripple. $XRP reached an all-time high market cap of $82B in April 2021. However, there appears to be little correlation in performance compared to $QNT reaching a peak of $5.2B market cap in September 2021.

Polkadot ($DOT) is the leader by market cap in the interoperability narrative, having reached $52B in November 2021, but again, there appears to be little correlation with $QNT.

It is quite possible that $QNT will likely more closely align with the business and enterprise narrative that has remained comparatively dormant through the last two bull market impulses. Vechain ($VET) likely has set the ceiling in terms of benchmark for projects focused on tokenizing enterprise capabilities, specifically supply chain management, having reached a near $17B market cap in April 2021. Vechain dominates Asian markets, and based on Quant’s pedigree, it is possible that enterprise solutions, such as supply chain management, could fill the void in North American and European markets in lieu of Vechain.

With enterprise-based solutions come several sub-narratives, such as real estate tokenization and identity management/KYC solutions, leaving the door open to facilitating future innovations as competition in these sub-narratives continues to gain traction. Ultimately, for the enterprise solutions narrative to take flight, it needs a ‘Chat-GPT-like event’ that grabs attention and prompts investors to gain exposure to the narrative. Based on anecdotal observations, Quant has been one of those projects hyped up by some die-hard investors (XRP army sounds familiar?) but has little tangibility for regular investors that do their diligence upon finding scarce available information.

Time will tell. Still, it seems apparent that Quant has demonstrated it has sufficient staying power as it continues to cozy up to CBDCs and form partnerships with institutions that have the power to shape regulatory policy going into the future. CCI Head Analyst Sam “Scoop” McDonald has been providing regular updates to clients on short-term opportunities for $QNT, and it is apt to defer to his recent technical analyses rather than reinvent the wheel. But as for Quant’s long-term prospects, if you have set aside a portion of your portfolio into ISO-20022-compliant projects to capitulate on enterprise adoption, and believe that Quant will be the interface of choice for enterprises and institutions; then it may be worth building exposure to $QNT.