Waves Review: Pioneering Decentralised Exchange Protocol

Waves is one of the few cryptocurrency projects which has stood the test of time. Whereas Waves generally refers to the cryptocurrency itself (WAVES), it is also the name of the Waves Blockchain Platform. As you may have guessed, the Waves cryptocurrency is the token used on the Waves Blockchain Platform.

Initially created to simplify the process of asset tokenization and both crypto and fiat transfers, the Waves Blockchain Platform has since evolved to support smart contracts and dApp development. Waves is the currency used to mint tokens, process transactions, and reward miners within this ecosystem.

Since its inception, Waves has had a single goal in mind: the mass adoption of blockchain technologies. To achieve this goal, it has focused on user experience and building relationships with legacy institutions in both the public and private sector.

As you will see, Waves was and continues to be one of the leaders in crypto, introducing technologies such as one of the first decentralized exchanges (DEX) and securing multiple partnerships with legacy institutions at a time when other projects were just getting off the ground in the world of cryptocurrency.

Who Made Waves?

Waves was founded in 2016 by Ukranian theoretical physicist, Sasha Ivanov. Prior to making Waves, Ivanov was one of the co-founders of the fiat-to-crypto platform Coinmat. He was also heavily involved in the development of the NXT (NXT) blockchain, which was noted in the Waves whitepaper as being the primary inspiration behind the Waves Blockchain Platform.

Ivanov noticed a critical flaw in cryptocurrency and blockchain: ease of adoption. According to him, this issue is two-fold. First, the user experience of people buying, trading, and storing cryptocurrencies can be extremely confusing. As a result, learning how to buy, trade, and store cryptocurrency usually involves a steep learning curve, fundamentally making crypto less palatable to the average person.

The second issue is that legacy institutions are skeptical of decentralized, open source blockchains. Many consider the notion of things such as a distributed ledger as being a security risk rather than an operational benefit.

To make matters worse, those who are in charge of deciding whether or not blockchain solutions should be integrated into their business can have significant difficulty understanding the underlying technology, causing them to dismiss it entirely.

What Was Waves Made For?

Waves was designed to address the confusing cryptocurrency user experience and bring blockchain technologies to legacy institutions. It is dead set on creating the most seamless user experience possible by implementing interphases which are familiar to the average person.

In a 2018 interview Ivanov stated that the core Waves team consisted of 15 people, 10 of which focused exclusively on front-end development for the Waves ecosystem. These developers focus on imitating the layouts and designs found on the websites of entities such as banks.

To appeal to businesses, Waves has been actively negotiating and gathering feedback from private enterprises about creating the ideal blockchain solution. Ivanov has even gone as far as to create separate blockchain projects such as Vlostok and Waves Enterprise to satisfy the specific demands of businesses.

This dedication has created a favorable reputation for the team behind Waves in Eastern Europe, and even in Russia where cryptocurrency and blockchain regulations remain strict. Case and point: in 2017, Waves partnered with Burger King to create a “Whoppercoin” token which was redeemable at participating restaurants in Russia.

The Waves ICO

Waves raised over 16.4 million USD in Bitcoin during its ICO which lasted from April 2016 to May 2016. At the time, this was equivalent to about 30 000 Bitcoin and each Waves token was sold to investors at a value of 38 thousand Satoshis, which was around 19 cents USD.

In contrast to many other ICOs, the Waves token was created on its own native blockchain and was deposited into the wallets of investors on the Waves Blockchain Platform when the Waves main net went live a few months later.

The Waves Blockchain

The Waves blockchain has undergone many changes since it was first introduced in 2016. Despite these changes, its structure has remained the same. The Waves blockchain was initially coded in Scala (a modified version of Javascript) and built using the Scorex platform which is described in Waves’ whitepaper as “an approach [which uses] current network state as an alternative to full transaction history” as reference for consensus. This allows Waves to avoid the ‘blockchain bloat’ experienced by some other cryptocurrencies.

The Waves blockchain was initially designed with two layers. The first is the “core” layer and it is centralized, consisting of ‘full nodes’ which have a complete record of all transactions on the blockchain and provide the computational power to maintain the network.

The second layer is the “external” layer and it is decentralized, consisting of more numerous ‘lightweight nodes’ which only hold a record of the most recent transactions and pass them on to full nodes to register them on the Waves blockchain.

If there is a discrepancy between transaction histories, the blockchain temporarily forks until the correct version is identified based on which fork lasts the longest. Lightweight nodes can also create custom program extensions to the blockchain using Javascript. These plug-ins do not actually modify the core blockchain and are instead likened to apps on the Apple App store or Google Play Store.

How is Waves Mined?

Consensus on the Waves blockchain is achieved through a novel mechanism dubbed Leased Proof of Stake (LPoS). Like Proof of Stake (PoS), each full node on the Waves blockchain that holds a balance of Waves has a chance proportional to its balance to produce a block.

The L in LPoS comes from the fact that lightweight nodes can “lease” their stake to any full node they want. This increases the chances that the full node will produce a block and receive a reward, which is then shared with the lightweight nodes who leased their stakes.

Although mining rewards are paid out in Waves, full node operators have the option of paying out rewards to lightweight nodes in other tokenized assets on the Waves blockchain. Initially, full nodes needed to have a handsome 10 000 Waves to contribute to the core blockchain.

In 2018, this was reduced to 1000 Waves after a community vote. The Waves community can vote to change the stake every 100 thousand blocks (roughly every 70 days) to account for the changing market price of the Waves token. This ensures that the barriers to mining are not excessively high and that miners are adequately rewarded.

What The Waves Blockchain Does

The Waves blockchain was initially designed to facilitate the transfer of fiat currency and cryptocurrency and to optimize asset tokenization. Using the Waves Platform, users could deposit numerous cryptocurrencies and fiat currencies through external “gateway” service providers.

These assets could then be sent through the Waves platform as tokens and then withdrawn back into their original fiat or crypto form through a gateway. All of this could be accessed by downloading the Waves extension on your browser!

This can be a bit tricky to wrap your head around so here is an easy example.

Imagine you wanted to send 100 US dollars using the Waves Platform. You would either pay with a credit card or send a bank transfer to a gateway service provider such as Simplex. After Waves received payment, they would deposit 100 USD tokens to your Waves wallet.

You would then send the tokenized USD to your friend or family member who would then convert the 100 USD tokens back into 100 USD for a fee. They would then the same or similar gateway provider to send the money to their bank. This system was quite brilliant, because it shifted the burden of any Know Your Customer (KYC) and Anti Money Laundering (AML) regulations from the Waves Platform to the gateway service providers.

Regarding tokenization, any user could create a custom token in seconds on the Waves Platform for a fee of only 1 Wave. Most importantly, these tokens could be easily traded with other tokenized assets using the Waves Platform.

This was seen by many as a gamechanger in the world of tokenization, since other tokens generally had to built up a sizeable reputation before they could be traded on any exchanges for other assets. Waves has since added a myriad of functionalities to its platform and has likewise made changes to its blockchain which are best understood by examining their roadmap.

Waves Roadmap

Like many cryptocurrency projects, the Waves roadmap is bit tricky to follow. Waves laid out their first roadmap on Medium in 2017 and it detailed what it had achieved since 2016 and what they intended to accomplish by 2018.

In January of 2019, Waves outlined another roadmap with development milestones for that year. In August 2019, Waves shared an image in a Reddit thread of what they hope to accomplish in 2020-2021.

So far they have accomplished everything on their to-do lists, which included an upgrade to their blockchain called Waves-NG which increased the transactions per second (TPS) from 1 to 100, launching the Waves decentralized exchange (DEX), introducing the Waves blockchain explorer, and even creating a simplified coding language called RIDE used to make smart contracts.

Let’s take a closer look at their recent developments and it means for Waves going forward.

Waves Roadmap 2019

2019 brought in a new tide for Waves. The RIDE language was modified to allow for the creation of decentralized applications (dApps) on the Waves blockchain. This added a “third layer” to their blockchain and also introduced two new elements into the Waves ecosystem: smart assets and smart accounts (in laymen’s terms, programmable assets and custom conditions for confirming a transaction).

Waves also shut down the Waves DEX and put the Waves Exchange in its place. As a hybrid cryptocurrency trading platform, the Waves Exchange is meant to combine the safety of decentralized exchanges with the benefits of centralized exchanges.

Waves Roadmap 2020 and Beyond

The image you see above is the final roadmap detailed by Waves. Unfortunately it doesn’t contain very many details and the Reddit thread it was posted in does provide any further clarification (note that VST is the token native to Vostok blockchain created for enterprise use by Ivanov).

Besides this image, the last public post from Waves which resembles a roadmap seems to be a Medium article from March of 2019. It details how Waves intends to be one of the pioneers of Web3.0 – a fast and more efficient internet which incorporates technologies like artificial intelligence, natural language processing, blockchain, and (hopefully) decentralization.

According to the document, Waves must go “beyond the crypto-community” to achieve mass adoption of blockchain technologies including cryptocurrency. This article concludes with the following statement:

We don’t solely do blockchain tech any longer; it is just a part of a bigger picture. We’re becoming the first company that focuses exclusively on monetizable WEB3.0 applications. We want to become one of the first Googles or Facebooks of the future Internet.

Waves Price Analysis

At a glance, the performance of Waves as an asset is quite consistent with most other cryptocurrencies. Namely, upon introduction to the market in June of 2016, the price of Waves dropped from just over 1$USD to around 20 cents USD in the first two weeks (which was close to the cost per token at the ICO stage).

Prices remained flat until the 2017-2018 bull run, when Waves become one of the largest cryptocurrencies by market cap at its all-time high of over 18$USD per coin. With a circulating supply of 100 million, this gave it an impressive market cap of over 1.8 billion dollars at its peak.

Although Waves has not come close to regaining its previous highs, it has managed to hold a level of support of around 1$USD since then. This is in contrast to many other cryptocurrencies which were laid to rest in cyberspace after what was left of the retail investors fled the market following the December 2018 crypto crash.

Furthermore, those who participated in the Waves ICO are still in the green by a healthy 500%. Waves also remains one of the top cryptocurrencies by market cap, ranked 58th at the time of writing.

Where Can You Buy Waves?

If you are looking to buy Waves, you are in luck. According to CoinMarketCap, Waves has a whopping 132 trading pairs on over 2 dozen exchanges including the Waves Exchange.

This is not too surprising when you remember how adamant Sasha Ivanov is about building partnerships both inside and outside of the crypto community. Although not all of the exchanges Waves is listed on are reputable or particularly trustworthy, the list does include Binance, Huobi, OkEx, and Kraken.

A quick scan of the market pairings on these exchanges shows a remarkably even spread of Waves’ roughly 33 million $USD daily trading volume. Although you do have to scroll a bit down the pairings until you see a household name like Binance, there is no shortage of trading volume taking place in the top 40 pairings.

This means that no matter what exchange you prefer to use, Waves is probably on there somewhere!

Waves Crypto Wallets

If you’re looking to store your Waves token, you’ve got plenty of options. We have actually covered a list of the Best Waves Wallets earlier this year.

Although Waves is built on the Waves blockchain, there are about a dozen digital and physical cryptocurrency wallets support its storage. Notable digital cryptocurrency wallets for Waves include Atomic Wallet, Trust Wallet, and the Waves Exchange/wallet. For the time being, the only hardware wallets which can store Waves is the Ledger Nano S and Ledger Nano X.

Whatever you do, do not be reckless and leave your Waves token on a regular exchange. Always remember the eternal mantra of cryptocurrency trading – not your keys, not your crypto!

Our Opinion of Waves

We like Waves. It is rare that a cryptocurrency project is able to make such incredible improvements in such a short period of time. Waves probably owes this to their more centralized structure.

Unlike most other cryptocurrency projects, the core blockchain is centralized in the hands of the Waves development team. Whereas the vast army of developers on other blockchains such as Ethereum must achieve some degree of consensus about a change or risk a fork, Waves is effectively immune to this problem.

Although this aspect of centralization may give Waves an advantage for the time being, it is unclear whether it will outperform similar projects in the space in the long term. Some of you may be familiar with the saying “alone you go faster, but together you go further”.

Waves’ development team is more than just Sasha Ivanov, but it does fundamentally consist of a small tribe of like-minded individuals. Conversely, genuinely open-source blockchains bring in external opinions and ideas. Even though these may take a longer time to implement, they bring the innovation necessary to provide the best solutions to issues like scalability, privacy, and decentralization.

Is Waves truly a “cryptocurrency”?

There is another peculiar issue in Waves’ approach to mass adoption as well. Ivanov has been very passionate about partnering with legacy institutions in finance, including payment providers and banks. However, almost every other cryptocurrency project is actively seeking to replace these very intuitions and may eventually succeed in doing so.

As decentralized blockchain technologies continue to erode the foundations of legacy institutions, Waves’ centralization and commitment to meshing in with the status quo may in fact push them out of the spotlight in a new world with decentralization as its ethos.

Funny enough, Waves’ marketing approach of effectively telling users not to worry about what is going on beneath the surface of their platforms certainly raises the eyebrows of your average cryptomaniac. Ivanov would probably respond by saying that the average person does not really give a Satoshi about what’s going on beneath the hood (and he probably has a point).

Waves vs. Ethereum

Although there are many competitors in this space already, most notably Ethereum, EOS, Lisk, and NEO, Waves stands out in its understanding of what it takes to achieve mass adoption of cryptocurrency and other blockchain technologies, even to the point of making the coding aspect accessible to the average person (as seen above).

Furthermore, Ethereum is often referred to as the decentralized “world computer” from which anything can be built. In contrast, Waves is a partially centralized blockchain which supports a multitude of customizable “plug-ins”, smart contracts, and dApps.

Is Waves worth investing in?

We are not investment advisors so we can’t tell you where to place your bets in the wild west of cryptocurrency but in our opinion Waves is quite an interesting specimen as an asset.

Some of you may have noticed an uncanny detail in Waves’ information on CoinMarketCap. This is of course that the entire supply is also the circulating supply. Considering that not all Waves tokens have been mined, how is it possible that all 100+ million coins are currently in circulation?

Since the Waves blockchain explorer appears to be down at the time of writing, we must put our thinking caps on to solve this dilemma. The reason the circulating supply of Waves is also the total supply is probably due to the Waves Exchange.

Since the Waves Exchange is listed on CoinMarketCap, and because it is directly linked to the Waves blockchain (as a hybrid exchange), this means that the entire supply of Waves is technically available for trading even though it hasn’t actually been mined yet. This is because the entire supply of Waves is “exposed” to trading via the exchange’s connection to the Waves blockchain.

This is quite the clever sleight of hand by the Waves development team to effectively guarantee a high ranking of the coin. CoinMarketCap calculates market cap by multiplying the circulating supply by the market price aggregated from pairings on exchanges.

As such, it is no surprise that Waves was among the top 20 cryptocurrencies in 2017 when the circulating supply of just about every other cryptocurrency was not its total supply. While this might be sneaky, it is hard to say if it is nefarious.

What is concerning though is that the current total supply of Waves exceeds its maximum supply in CoinMarketCap. This was explained by a Waves developer 3 months ago in a Reddit thread as being due to “inflation” and refers concerned Redditors to a Medium article which no longer exists.

Conclusion

Waves is a cryptocurrency project which has so far delivered everything and more.

Although there are a few questionable details in its operations, its focus around adjusting to current users and intuitions makes it stand out from other cryptocurrency projects which are often more concerned with the architecture of their blockchains than whether or not the average person will understand or realistically use them.

Whether or not this vision will cause Waves to dry up in the new world of truly decentralized open-source projects is something that only time will tell.