Economic Analysisof the ZUZWhat will the value of the ZUZ be in 6 months? In 2 years?
Anyone claiming to know(!) is probably not to be trusted. Nevertheless, we doknow some things:
1. Value Proactively – Develop utilities and market functionalities and value
Supply and Demand. ZUZ supply is scarce by design and Coalichain has invested
and will invest resources in developing the broad and universal demand potential.
Underlying Assets Value / Value Creation (Utility). Utility is the long-term sourceof the ZUZ value. As long as the Coalichain platform and its users create new value
by using the platform and the ZUZ, developing and using new features andgovernance applications and growing the ecosystem, that value will be reflected in
the ZUZ, much the same way any other currency apricates with economic growth.

2. Diversified investor base and positive WoM
Analysis – The ZUZ behaves like an innovation diffusing in a market.
• Spike-Drop-Valley. Looking at the ZUZ through the prism of Diffusion of
Innovation models, we suggest that it exhibits rapid value explosion (Spike),
followed by a rapid decline (Drop), and a stable, slowly rising incline(Shallow Valley), driven by real value created by the platform andcommunity.
• Marketing First, WoM After. The two key forces driving these diffusion
models are marketing efforts (dominant at the early stages), and Word of
Mouth (dominant later on).
• The Speculators, The Savvy and The Fans. We identify 3 investor types:o Type A. Short-term Speculators, active during the early stages.
o Type B. Savvy investors, also active during the first stages, as well as
after the Drop.
o Type C. The fan users, investing small amounts, active throughout,typically the last to sell. They are the key for appreciation due to utility.
Risk – Too many type A investors may dump and cause a deadly drop.
Mitigation – Diversify Investors and Drive real economic growth• Investor diversification – Apply different recruiting strategies:
o Type A. Marketing, buzz-creating activities and lots of leg-work.
o Type B. This paper and lots of leg-work.
o Type C. Build a community, drive utility innovation (and lots of leg-work).
• Bounty/bonus vesting – mitigate “dump during the spike, make a quickbuck” strategy.

Contents
1.

Fundamentals. .................................................................................................................................................................................................................................. 3
1.1.

Supply, Demand and Underlying Assets................................................................................................................................................... 3

2.

3.

4.

Diffusion of Innovation ............................................................................................................................................................................................................ 4
2.1.

From the S-Curve to the Shark-Fin.................................................................................................................................................................. 4

2.2.

ICOs are innovations and exhibit Shark-Fin patterns .................................................................................................................. 4

2.3.

Understanding ICOs in light of the diffusion models .................................................................................................................... 5

The ZUZ – Designed to Grow ............................................................................................................................................................................................ 7
3.1.

Investors ....................................................................................................................................................................................................................................... 7

3.2.

Building a Community................................................................................................................................................................................................... 7

3.3.

Vision and Technology Roadmap ................................................................................................................................................................... 8

3.4.

Innovation Roadmap...................................................................................................................................................................................................... 8

The ZUZ ICO - Data .................................................................................................................................................................................................................... 11
4.1.

The ZUZ Supply .................................................................................................................................................................................................................. 11

4.2.

ZUZ Allocation ...................................................................................................................................................................................................................... 11

Disclaimer
To be clear – the following analysis is a general analysis of the behavior and price performance of
cryptocurrencies. It is offered as a service to the community.
It does not imply or suggest that Coalichain intends to, or is at all capable of taking actions that willaffect or influence the price of the ZUZ. Nor does it imply in any way that Coalichain is suggesting or
promising future appreciation of the ZUZ.
All ZUZ buyers and owners should understand that buying the ZUZ is not, in any way a returnbearing funding investment in a venture.
The ZUZ is designed and purposed to serve as a replacement currency to facilitate transaction in
the platform and measure and drive its growth through activities and transactions.

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1.0 Fundamentals
What will the value of the ZUZ be in 6 months? In 2 years?
Anyone giving you an answer followed by an exclamation point is too arrogant to betrusted. Still, there are some things we do know and some principles we can follow.

1.1.

Supply, demand and underlying assets
The simplest and probably oldest one is Supply and Demand. It states that as long as
the supply is lower than the demand the price will continue to rise. In most cases, one
has direct control over the supply and indirect control over uncovering the demand(the job of marketing). In the case of cryptocurrencies, there is another factor we must
consider – the value of its underlying assets or value creating functions. Let’s tackle
them one by one. First the supply and demand.

1.1.1. Supply and demand
Since the number of ZUZs minted is set, supply is scarce bydefinition. This implies that as long as demand is there, even if
latent, the value of the ZUZ will be tied to its use andproliferation of the platform.

1.1.2. Underlying assets and value creating functions (Utility)
The factor that truly defines the value of a currency over time, any currency, crypto
included, is the value of its underlying assets (or value creation functions, aka, utility). In
simple words, if the ZUZ creates or measures the creation of new value, its own value
should rise proportionately, unless we “print” more of it – in which case, as long as we“print” at the same rate as that of economic growth, the value of the currency should
be stable. However, we will not. The underlying asset value is (or should be) the longterm application of any trustworthy cryptocurrency. It is what will keep people
engaged; it is what will support the development of new applications and features; it iswhat will drive the growth of the crypto-economy. In that respect, investors should be
looking beyond the scarcity factor of supply and into the vision and technology
roadmaps that reveal, if there is in fact, a strong enough utility vision that will enable
real economic growth (allowing for growth beyond market-share acquisition andtoward the increase of the size of the pie itself).

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2.0 Diffusion of Innovation
2.1.

From the S-Curve to the Shark-Fin
For many years economists have successfully used the S-Curve to describe Diffusionof Innovation processes (adoption of new products, service and innovation in general).
In recent years a new curve isbeing advocated to describe
the same set of phenomena –the “Shark Fin” adoption curve.
The most visible attribute ofthis new curve is its rate ofacceleration. More and moreinnovations show an exploding
growth pattern.

Diffusion of Innovation models
The Shark Fin

The Traditional
S-Curve

In both cases, the drivers of adoption have been researched and identified and they
are, Marketing Efforts and Word of Mouth (WoM). During the first stages of adoption,i.e., the innovators and early adopters, targeted marketing forces are the main driversof adoption. As we move to the right, WoM becomes the dominant force in the diffusion
process. The marker for this change in the force driving adoption, is the inflection point,where the graph stops being linear and explodes exponentially.

2.2.

ICOs are innovations and exhibit Shark-Fin patterns
We propose to view new cryptocurrencies as Innovations introduced to the market andtherefore to explore them with diffusion of innovation models. The rationale is simple:
The price of a currency is determined, first andforemost by supply and demand. A spike inadoption directly translates into a spike indemand and therefore a spike in price. Similarly,
a decrease in demand translates into adecrease in the price. There is little surprise thatwhen we explored the performance of existing
cryptocurrencies we found a Shark-Fin-likeadoption curve (with some additional
superimposed phenomena) in quite a few. On
the right is one such example.

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Understanding ICOs in light of the diffusion models
2.3.1. The Three Types of ICO Investors
Before delving into the econometrics, it is important we delineate the main types ofinvestors that affect it:
1.

Type A Investors – Short-term speculators

They buy early, spread the news about the cryptocurrency and exit fast, after
making a profit.
2. Type B Investors – Longer-term emotionally detached investors
They read the whitepaper. They did some due diligence. They believe in the project
and they see it as a long-term investment. They are not emotionally attached to it.
It is another “asset” in their portfolio with its associated risk. They don’t scare by
local fluctuations, even if they are significant.
3. Type C Investors – The devout users
They will not necessarily invest large amounts, but they will use the platform,
service and innovation. They see it as a solution for a problem they have. They will
drive the use of the platform and are committed to it. They will be last to sell. Forthem the financial profit is a secondary reason to buy or hold.

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2.3.2. Interpreting the ICO Shark-Fin Pattern
1.

The Vertical Truncated SpikeFirst it is obvious that unlike the Shark Fin
described above, the pattern we see after the
ICO is “truncated”, i.e., it’s missing its initial incline(which should be rapid but not vertical). Thatmakes sense since the trade starts after the ICO
and during the ICO the issuing organization
controls the price. The spike in price after the ICO
stems from two overlapping phenomena:

Vertical Truncated Spike

Simulated data

Pre-trade marketing and buzz – The ICO initiator invests in getting the word out
and driving “buzz”. Since not everybody hears about it in time or are savvy
enough to invest in an ICO, a “pressure” is created that is released when the new
cryptocurrency becomes tradable1.
Short-term Speculation – Demand is mainly pushed by type A investors looking
for a low position right after the ICO.
The result is an almost vertical Shark-Fin spike that lasts 2-3 weeks.
2. The “Drop”
Vertical “Drop”
The higher the spike, the more likely it is to have adrop and the more significant it will be. Type A
investors start selling their cryptocurrency torealize their position. They flood the market (this isevident by the high trading volume). If these
Simulated data
investors carry the bulk of the cryptocurrency
sold, the platform will not recuperate. If, however, during the ICO (and/or private sale) asignificant-enough number of cryptocurrency were sold to type B and C investors, thisdrop in price will stop and the platform should survive it.
3. The Shallow Valley
During this period, type A investors decrease in“Shallow Valley”
numbers and in sophistication. They may drive a
couple of additional, smaller, “spike and drop”
patterns, before it subsides. In their wake, thedecline will slowly flatten and then start to slowly
climb. The reason for this change in trend is theType C investors. As mentioned above, value isset by demand and underlying assets. Type C investors become the dominant force
driving demand via WoM and at the same time they grow the value of the underlying
assets by using the platform itself.
1

The adoption curves of movies behave the same. A lot of buzz is created before the opening weekend, and much of the “normal” curve iscompressed into a short period of time.

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3. 0 The ZUZ – Designed to Grow
In this chapter we will discuss Coalichain’s ZUZ economy.

3.1.

Investors
3.1.1. Investor Diversification
Type A investors are like an adrenaline shot – they make you feel like superman for ashort period of time, and in some cases, they are needed, however, if there are too
many of them, you’re gonna get a heart attack. The best way to mitigate the risk of adeadly Spike and Drop scenario, is to diversify the investor cohort and bring to thetable both savvy, investors with a backbone (type B – for which this paper was writtenfor), as well as committed users (type C).

3.1.2. Attracting Type C Investors
Below, in “Vision and Technology Roadmap”, we delineate the skeleton of a shared
governance program that will combine “Proof of Stake” and “Proof of Work” type ofconcepts to allow users that both have a certain amount of ZUZ and havedemonstrated a certain level of activity to enjoy a higher level of influence on the
Coalichain development strategy. This should act as a filtering incentive attracting theones that are willing to both out in the time and also put in some money.

3.1.3. General Buzz Creating Activities
Coalichain has been and will continue to invest in promoting the ZUZ and its vision in
multiple media channels and through its vast network. Many, strong and successful
ICOs were driven by only several thousand on investors.

3.2.

Building a Community
Coalichain sees the ZUZ as a community-building currency, that creates a sharedsense of purpose (and sometimes frustration). Building a community, at this stage ismany times based on bounties and “airdrops”. Nevertheless, those alone do not explain
the buzz around Coalichain, our 10,000 strong and active Telegram group and ourstrong advisory board. These are the people that will drive innovation in the platform,
type C investments and long-term commitment.
Moreover, in order to mitigate the risk that discounted ZUZ acquired through bounty
and bonus programs, will be dumped right after the ICO to make a quick buck, we
initiated a vesting period of 3 months for those ZUZs.

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3.3.

Vision and Technology Roadmap
3.3.1. The Purpose of the ZUZThe ZUZ is cryptographic currency dedicated to the Coalichain ecosystem. Over andabove its function as a frictionless, inexpensive, fast and secure, replacement-currency,
the ZUZ is a community building tool. In being the sole currency for all on-platform
transactions it will:
Build a shared sense of trust, purpose and community.
Make tracking and financial management easier and more directly related tothe platform’s performance

3.3.2. The Utility of the ZUZ
In-platform Transactions – voting, fundraising, service procurement, etc.
Support tool – the more ZUZ donated or used by a candidate or cause, thehigher its visibility (with restrictions to prevent abuse)
Transparency – since all commitments made by candidates to supporters are
public and locked into smart contracts, anyone trying to influence the election
will risk exposure and public ramifications.
Accountability – ZUZ donated to a campaign can be associated (committed) toa specific promise and conditioned by its fulfillment. In case the promise is not
fulfilled, sanctions will be activated, ranging from publication of “breaking apromise” all the way to donation retraction and fines (under certain conditions).
Vision - In the future Coalichain will expand the use of the ZUZ to measure andpromote participation in the democratic process.

3.4.

Innovation Roadmap
The following is a list of potential developments and innovation pipeline that will drive
Coalichain’s core purpose – to realize an effective, democratic and accountable,
electoral political system and reestablish a direct, transparent and trusting relationshipbetween voters and their representatives.

3.4.1. Access
Although the proliferation of smartphones is quite wide and is improving all the time,
there still are large parts of the world who do not have access to these devices or todata networks. Coalichain’s purpose is to be inclusive and facilitate free and equitableelections. Therefore, we have concrete plans for the development and installation ofinteractive terminals in public locations (city centers, airports, bus and train terminals,etc.) in cities all over the world, and specifically in places with limited internet access.

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3.4.2. Governance in the 2nd sector
Coalichain originated from the desire to empower voters – the public. Nevertheless,corporations are in many ways examples of human societies and there are a lot of needs
and desires and frustrations that are common to a state, a city or a company. The
application of Coalichain to the corporate setting and its adaptation to best fit the needs
will be a natural development in Coalichain’s business development roadmap. Specificapplications will include:
Organic and external open innovation pipeline development
Corporate community outreach and CSR

3.4.3. Governance in decentralized autonomous organizations
Coalichain’s automated governance properties can be used to solve a prominent issueof many Blockchain projects – centralization. The main promise of a plethora ofblockchain applications is facilitating direct transactions between interested parties,
without the involvement of central bodies and mediators (platform itself and its founders
included). Nevertheless, at least at the beginning, many of these projects themselves are
led by a central team that makes all the decisions. Moreover, many times, while theseteams are painfully aware of the deficiencies of central systems, they are totally blindto the fact that they themselves exhibit very similar architecture. Coalichain’s voting andgovernance mechanisms can be used in other DAOs to help maintain power distribution.

3.4.4. The election toolbox
Coalichain will keep developing and adding tools and features, to address moreenvironments and scenarios. Our vision is to become the go-to platform for everything
related to election and governance. Every organization, political party, municipality or
country that will want to hold an election or address a specific issue will be able to go on
Coalichain and build their engagement space, mixing and matching the different tools
according to their needs.

3.4.5. Accountability mechanism
Coalichain aims to create a genuinely accountable governance system. Elected
politicians are meant to serve the public, but today they are not incentivized to do so.
The current mechanism we are offering - financial accountability that rewards or fines
politicians according to public satisfaction, is the first step towards realizing the fullpotential of our vision. Alone, it will not be enough.
The mechanism we imagine for the future puts the power directly in the public’s hands,
with political organizations and public officials governed directly by smart contracts.
Campaign promises, requirements and actions taken while in office will all be recorded
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on smart contracts, and majority dissatisfaction will not only result in financial penalty
but may even bring to the dismissal of the politician from office.
We want to create a public-directed government - a government that is genuinely at theservice of the public.
That is the Coalichain future.

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4.0 The ZUZ ICO - Data
4.1.

The ZUZ Supply
Coalichain will issue a total of 770,000,000 ZUZs
according to the following distribution:
The rationale behind the allotment of 269.5
million ZUZs to the public, is our desire to
make the ZUZ accessible to the masses andfoster wide adoption.
The 35% allotted to Platform development willserve two missions:
Funding the geographical expansion of Coalichain to additional geographies
Development of the platform, especially in making the ZUZ a means formeasuring and promoting participation in democratic processes.

4.2.

ZUZ Allocation
Coalichain will issue a total of 770,000,000 ZUZs according to the following distribution:
Public - 35%
Platform development - 35%
Charitable causes - 10%
Team - 20% (Founders: 7% | Executive Team: 2% | Advisors: 6% | Bounties: 5%)
ZUZS allotted to the founders and executive team will be vested2 according to thefollowing schedule:
Event

2

% Release

Alpha reached 500 users

5%

Beta reached 2,000 users

10%

Coalichain reached 30,000 users

10%

Completion of 1st pilot

15%

Implementation in 5 geographies or reaching 5,000,000 users

30%

Implementation in 10 additional geographies or reaching 30,000,000 users

30%

We will use a decentralized escrow such as EscrowMyEther.com.

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