CoinGrades

Professional Insights, Trusted Reviews

Ontology

By Victor & Grayson
May 11, 2020

Disclaimer

The following review is not financial advice. Coin Grades’ ratings and letter assignments reflect the technical and practical viability of these cryptocurrencies in the eyes of the Coin Grades team. As always, we encourage you to do your own thorough research from multiple sources before choosing to invest in any cryptocurrency. The Coin Grades team was not compensated for this review. Some members of the Coin Grades team do hold Ontology (ONT) in their personal investment portfolios.



Overview

Founded in 2017 by OnChain and created by Erik Zhang and Da Hongfei (also the creator of NEO), Ontology had no Initial Coin Offering (ICO). Instead, tokens were simply airdropped to NEO holders who signed up for their newsletter in 2018.

According to their website, Ontology is a “high-performance public blockchain and a distributed collaboration platform.” Ontology is a relatively new blockchain project. It was conceived in 2017 by the same team behind NEO, but wasn’t released until early 2018. NEO is the more liquid chain of the two, but goals for both are quite similar. NEO and ONT are both public blockchains designed to be easily implemented into a wide variety of systems, without developers needing to know too much about blockchain-specific coding languages. In this sense, both are versatile. However, Ontology focuses on businesses (enterprise-level blockchain), and there are some other key differences. NEO and ONT both reward holders with ‘dividend’ tokens, but Ontology offers extra rewards for staking (minimum 500 ONT required per stake), though it can be a little frustrating, since rewards aren’t often paid out as expected, and there is a minimum required ONG (Ontology Gas, their dividend token) to complete any transaction on the blockchain.

Additionally, Ontology is designed as a communicator between different networks. In that sense, it has the capability to store all kinds of data and communicate that data in a verifiable way through many industries. This is particularly important for medicine, finance, and education.


Decentralization

Ontology will only ever have 1 Billion tokens. Currently, there are close to 700 Million in circulation. Due to its distribution model, the network itself should be decentralized, but unfortunately, the community will only own about 12% of all remaining ONT tokens. The rest is reserved for NEO (yes, money from ONT goes to NEO community development), institutional partners, and ecosystem development. A small amount is also reserved for technical community rewards, with the remainder being for the team. With most of ONT being issued for people related to development, it seems fairly centralized in terms of who actually owns tokens and controls the network.

Ontology prides itself on its security. It uses a unique consensus mechanism called VBFT (Verifiable Byzantine Fault Tolerance). That’s a lot of words. The key to the VBFT mechanism is VRF (verifiable random function). Without going into the nitty-gritty tech, it basically relies on randomness to secure the consensus algorithm against attacks. Overall, their consensus mechanism is a combination of VRF, PoS (proof-of-stake), and DBFT (NEO’s protocol). Overall, there are three tiers to consensus. The nodes must reach a consensus to generate the next block. The first tier is Candidate Nodes. These don’t participate in consensus, but they help maintain the ledger (a record) and stay synced to the Consensus Nodes. VRF causes these Consensus Nodes to be selected at random to become Verification Nodes, which in turn verify the next block.

Despite all this effort to protect the security, there is the possibility for the chain to fork in the event of a breach, but the mechanism would likely result in that fork being unable to survive, keeping the main chain intact, without “malicious” forks being able to take over. Additionally, there are a lot of moving pieces to the Ontology network. Being somewhat complex, if anything goes wrong, there could be unforeseen problems. For example, ONG tokens sometimes don’t generate at the predicted rate. There are also cases where ONG tokens disappear entirely.

Ontology also provides a unique service in the ONT ID, which is a kind of Decentralized Identity (DID). This allows users to retain some uniqueness and self-sovereignty within the network. This also allows Ontology to establish authentication services within a decentralized trust system. This is great for interconnected enterprises and individuals who need to make absolutely sure information is correct.


Security

Security always depends largely on one’s preservation of their private keys. However, Tezos is interesting here. Each major stakeholder in the network is called a “Baker.” Bakers have the option of delegating their baking rights to others without losing token ownership. This is significant. This allows for consistency and mutability within the network. Additionally, the Tezos programming languages (OCaml and Michelson) are more easily read by humans, which lowers the risk of bugs and breaches. OCaml is the original coding language, while the smart contract is coded using Michelson. Both of these are Functional Programming Languages. Without going into the more complex mathematics, Functional languages are simply more precise than the other kind of programming language (Imperative). This should make Tezos rather secure.


Speed & Scalability

Ontology sacrifices a bit of speed for scalability. It’s a high-performance blockchain, which (in theory) should be able to process over 3000 transactions per second (tps). Because of its consensus mechanism, Ontology can be highly scalable, much more than other blockchains. This is yet to be tested with real adoption.

While not being extraordinarily fast, Ontology is fast enough, with confirmation times often under 30 seconds. Mentioned throughout this review is one of its major drawbacks: the 0.01 ONG transaction cost. This is often overlooked, and is one of the attributes preventing Ontology from excelling in the speed department. Although both fast and secure, it can be frustrating to make an attempt to transfer ONT, when one realizes they do not have enough ONG to pay for the transaction. This could be improved if there were a way to automatically convert ONT into ONG, when there isn’t enough ONG available. The good thing is that the community is relatively responsive, in terms of sending people enough ONG to pay for transactions when this obstacle is encountered. Still, it leaves something to be desired.


Energy Consumption

Ontology’s network is relatively complex when compared to other cryptocurrencies. By extension, one can say that in total, a lot of computing power may be required to maintain the network. The consensus mechanism it uses, however, causes the network to be decentralized enough where power consumption is minimal.


Community

Ontology benefits from being directly connected to NEO (a bit more popular) and also strong financial backing. There are no disgruntled ICO investors––only those who missed out on the original airdrop and detractors who believe Ontology has stolen some of NEO’s thunder. This has been since disproven, considering NEO has outperformed Ontology for quite a while, in terms of market value, and the fact that Ontology works with NEO, not against it.

With all this in mind, Ontology’s community is a bit lackluster. There is not much activity on Reddit or Twitter, though its supporters are from all over the world. Their Telegram community is the most active. The community is also quite responsive, in that users will send others ONG if they encounter the transaction cost requirement issue. It is still unfortunate that this is a major issue in the community. There’s always a post about people needing ONG for their transactions.

Overall, there are coins at a similar market value with much more enthusiastic and active communities. Possibly, this can be traced back to when Ontology launched and many NEO community members assumed it was trying to take NEO’s place. The sourness has remained, and it might be irreparable. This might not be a great sign for the cryptocurrency, but it continues to plough ahead in development nonetheless.


Team

There is not much information about the team, but being a public blockchain, its 200+ contributors are from all over the world. We do know that the founders (Erik Zhang and Da Hongfei) have decent track records, particularly Hongfei. There has been some confusion and skepticism surrounding their business relationship, and how funds are allocated between the two. Additionally, there is not much information about who owns the majority of ONT tokens.


Adoption

Ontology has a long way to go in terms of the ideal adoption, but it has some significant partnerships in terms of document verification and some supply-chain solutions.


Liquidity

Ontology sees relatively low trading volume compared to others, and its dividend coin (ONG) has even lower liquidity. On top of that, the 0.01 ONG requirement for wallet transfers can slow the buying or selling process down, since it’s easy to forget. Until now, Coinbase has not considered listing the coin, but it does have several pairs on Binance, which all trade at relatively low volume. In the future, Ontology would benefit from more liquidity.


Potential

While Ontology’s mechanism seems unique and potentially quite useful, there are already other blockchains which have made Ontology’s cross-chain compatibility arguably obsolete. For example, Chainlink provides interoperability services, and other more liquid blockchains are working on this as well.Ontology will need to achieve some more industry adoption and reclaim some of its thunder.

One great thing about Ontology is its wallet integration. The O3 wallet is perhaps one of the easiest to use and informative apps in the cryptocurrency sphere. It also supports staking for ONT and NEO tokens. The app also includes stores and a built-in exchange.

Summary

In general, Ontology remains an interesting blockchain project with some promise. As mentioned above, it needs to be brought back into the crypto public eye. For now, other projects seem like they have more potential. Ontology is uniquely positioned as a partner to NEO, and a force within the Chinese blockchain industry. They seem to have plenty of financial backing, but it’s dubious as to how much ONT is sold by the team/founders onto the open market. According to medium, much of the ONT tokens are actually held for ecosystem development and for the founders. That’s a staggering 88% total, which also includes 10% for NEO development. This means only 12% is reserved for Average Joe token holders. On top of that, Ontology’s total supply (1 Billion tokens) is not even close to being reached, with the circulating supply still under 300 Million. One can see why NEO or other cryptocurrencies may be a more attractive option.

There’s also the ONG requirement, which really hampers some of ONT’s strengths, such as its wallet integration.

Coin Grade


C

If you enjoy our reviews and would like to support our team, check out our donation’s page for a list of our donation addresses. Any and all tips are greatly appreciated and help us stay the most objective and unbiased review site in crypto!

ONT/USD Price Chart




⬅️ Read about Tezos