Should You (or Anyone) Buy Zilliqa (ZIL)?

Zilliqa just launched a metaverse, but where will it be in five years' time?

Zilliqa (ZIL) gained over 300% in March and is up about 100% so far this year, according to data from CoinMarketCap. The smart contract crypto was overshadowed by other high-profile Ethereum alternatives like Solana (SOL) or Avalanche (AVAX) last year. So much so that it got pushed out of the top 100 cryptos by market cap.

However Zilliqa is staging a bit of a comeback, with recent events propelling it back into 66th position in the crypto charts. The big question is whether its recent gains are sustainable and what's behind them. Find out more about Zilliqa, its recent growth, and its long-term potential.

Zilliqa basics

Zilliqa is a peer-reviewed ecosystem for decentralized applications. It has almost 200 projects running on its network and was the first crypto to introduce sharding. Sharding has since been adopted by several blockchain projects as a way to make their networks more scalable. Interestingly, the final part of Ethereum's (ETH) long-awaited upgrade is to introduce sharding.

• What it does: ZIL is the native crypto for the Zilliqa blockchain.
• Management team: Founded by Amrit Kumar and Xinshu Don. Don has moved on to other projects, but Kumar is still the President and Chief Scientific Officer.
• Date launched: 2017.
• Market cap: $1.7 billion (CoinMarketCap, April 4).
• Availability: Several top U.S. cryptocurrency exchanges.

What's driving Zilliqa's growth?

The crypto industry as a whole has recently erased some of 2022's losses. But those gains are minor when compared with Zilliqa's recent surge. The main driver behind Zilliqa's growth is the launch of its Metapolis metaverse. The launch included several big partnerships, such as a recent deal with Agora, a global talent awards app. Zilliqa wants to use these agreements to make Metapolis stand out in sectors such as esports, luxury, and music.

It boasts that this is the first ever metaverse as a service (MaaS) platform on a layer 1 blockchain. A layer 1 blockchain is the base network, such as Ethereum or Bitcoin (BTC). MaaS essentially means it provides a framework that other companies or projects can use to develop their own virtual worlds. Metapolis also wants to focus on ways to integrate what's real and what's virtual.

Should you buy?

Zilliqa has a lot going for it. It may have slipped out of the public eye last year, but it is a relatively well-established cryptocurrency with a solid management team. Smart contract and metaverse cryptos both performed well last year, which is both a pro and a con when it comes to evaluating Zilliqa.

What's particularly challenging is that both sectors are extremely competitive. CoinMarketCap lists almost 150 smart contract cryptos and over 200 metaverse cryptos. There's a good chance only a handful of each will emerge on top in the long run. Each project has slightly different technologies, different strategies and goals, and it isn't easy to pick the long-term winners.

One way to evaluate programmable cryptos is by the number and quality of the projects on its ecosystem. Zilliqa has a mix of decentralized finance and other applications. If we look at the total value locked (TVL) -- the amount of money on the network, DeFi Llama puts it in 54th place at time of writing. It has almost $30 million in TVL, a fraction of market leader Ethereum's almost $130 billion.

When it comes to the metaverse, we don't know how these virtual worlds will evolve. These crypto projects are also competing with the wider tech sector. In evaluating metaverse cryptos, we have to factor in the fight between the community-driven decentralized world and the centralized universes created by tech giants like Meta.

That's not the only difficulty in evaluating Zilliqa as an investment. When a project's price starts to spike as Zilliqa's did recently, crypto traders sometimes try to ride the wave. They buy in the hope of selling quickly and realizing short-term gains -- a high-risk strategy for retail investors. This speculation makes it hard for longer-term investors to know how much of its growth is short-term speculation and how much is based on real value add.

Bottom line

All cryptocurrencies carry risk, but that risk increases after a significant price surge. Don't buy Zilliqa because you're scared of missing out on the next big thing. Instead, take time to research the project and consider where it might be in the coming five to 10 years. This technology has evolved extremely quickly and may continue to do so. As such, Zilliqa will need to compete with existing players as well as any new entrants.

As you research, look at how Zilliqa stands up against the competition in both the smart contract and metaverse sectors. The big question is whether it can hold its recent gains in the long term, or whether it will lose ground again if Metapolis falls out of the public eye.