After the launch of the mainnet, Aleo failed to gain recognition from the community and instead faced a lot of questioning, especially from miners, on social media. Many users expressed on social media that this is another case of a failed project.
Aleo, founded in 2019, aimed to build a privacy-focused, permissionless, and programmable platform. Its main technologies include succinct proofs of work (PoSW), Leo language, AleoBFT, Varuna, and others.
These technologies mainly construct an L1 blockchain network with privacy protection as the core, combining zero-knowledge proof technology with the consensus mechanisms of POW, POS, and AleoBFT. In terms of technical characteristics, Aleo is more like an L1 blockchain network that combines the consensus mechanisms of Ethereum and Solana, with the addition of zero-knowledge technology.
The background of the Aleo founding team members is also from prestigious universities, with main members coming from the University of California, Berkeley, and having worked for well-known Silicon Valley companies such as a16z, Coinbase, and Amazon. With a star-studded team and innovative concepts, Aleo smoothly raised funding, receiving a Series A funding of $28 million in 2021 and completing a Series B funding of $200 million in 2022, with a valuation of $1.45 billion. Investors include well-known institutions such as a16z, SoftBank, Kora, and Coinbase.
However, the development progress of Aleo seemed to be dragging. The final version of the testnet was not launched until May 2024, even though the mainnet was initially announced for 2023 and later planned for release in January 2024 but postponed to September. During this process, Aleo missed the early rise of the current bull market and caused early participants who were waiting for rewards to suffer.
It can be said that Aleo has all the ingredients for success, whether it is the team background, technical concepts, or investor lineup. If it weren’t for the slow launch speed, it might have already joined the ranks of top-tier new public chains.
Due to the lack of specific wallet address numbers and daily transaction data on the Aleo official data platform, the specific ecosystem activity of Aleo cannot be directly verified through data. It can only be inferred based on some other data related to the development of the Aleo ecosystem.
Puzzle Wallet is the most frequently called program on Aleo, with more than 10,000 calls on September 19, experiencing explosive growth. Prior to this, the program on Aleo was called less than 100 times per day. According to official promotions, the wallet currently has over 30,000 users.
Aleo founder Alex Pruden mentioned in a social media post celebrating the launch of the mainnet, “This achievement would not have been possible without the efforts of dozens of employees, hundreds of ambassadors, and thousands of community members.” Based on this information, the ecosystem activity of Aleo is not considered high. However, the number of projects within the Aleo ecosystem is considerable, with over 50 projects currently.
Although the mainnet was delayed, Aleo’s funding of over $200 million was seen as a potential stock by various mining studios and mining pool groups. Well-known mining pools such as Bitmain and F2Pool also launched mining services for Aleo test tokens early on. Therefore, many miners also invested their computing power for pre-mining.
According to the Aleo official browser, the Aleo mainnet was already online on September 5, although the official did not announce this information. Some miners who smelled the opportunity started deploying mining operations. The initially produced tokens were traded at a price close to $9, and the official announcement of the mainnet launch was only made on September 18. This operation also sparked many suspicions within the community, with some people believing that the official was pre-mining tokens during this time or leaving pre-mining time for venture capitalists.
A miner who participated in early mining of Aleo told PANews that they did not deploy too much computing power because they could not be sure if the mined tokens would be recognized by the official. However, there were already many community members buying Aleo tokens off-market in early September, with prices around $9. Based on the price of mining 1.5 tokens per day with a 4090 machine, the daily income would be about $13.5, which would take approximately 158 days to recover the investment in graphics cards. And if the price of Aleo rises to $20, it is possible to recover the investment in graphics cards within three months. Therefore, the expected earnings of Aleo have raised expectations among many miners.
However, this situation dramatically changed after the official announcement of the token economics on September 16. According to Aleo’s introduction, the initial supply of Aleo tokens reached 1.5 billion, and it will increase to 2.6 billion over ten years of mining activities. Based on the $9 price, Aleo’s initial market value would reach $13.5 billion, which would make Aleo a top ten cryptocurrency project, surpassing well-established public chain tokens such as TRON and ADA.
For a project with only tens of thousands of user addresses in its ecosystem, this market value expectation is clearly too high. As a result, Aleo’s price has plummeted since the token economics were announced, falling to as low as $3.4. As of September 20, Aleo’s market value is approximately $5 billion, placing it in the top 20 of the cryptocurrency market.
The sudden price drop has greatly reduced miner’s earnings, and considering electricity, network, and other costs, the break-even period may be extended to 10 years.
In addition, for early miners participating in the testnet, they would receive incentives from Aleo. According to the official introduction, 34% of Aleo tokens will be used for early supporters’ rewards. However, this reward cannot be cashed in immediately. According to the official policy, rewards for both U.S. and non-U.S. users have a lock-up period of 1 year. This information once again betrayed the early miners who were eager to recover their costs.
Interestingly, Aleo, which has a vision of being the privacy-first blockchain, required all users to complete KYC and requested users applying for the airdrop to upload identification documents, address proof, and selfies. This requirement has caused strong dissatisfaction within the community.
According to the latest data from Aleo, becoming a validator on the mainnet requires at least 10 million Aleo tokens. For most ordinary users, this scale of funds and token amount (there may not be so many circulating tokens in the early market) is almost impossible to achieve. Some users also noticed that when the Aleo mainnet was launched, there were already 16 validators in operation, most of which were early investors.
Although the tokens held by investors are also locked for a year, they can directly convert the locked tokens into staking tokens for validators. At the same time, the staking rewards tokens are not subject to a lock-up period and can be freely circulated.
As of September 20, the data shows that the largest validator has received over 1.1 million Aleo tokens, while the smallest validator has received over 270,000 tokens. Among the validators, investors or organizations associated with Coinbase, unit410, and Aleo Foundation account for the majority.
Many community users believe that the project’s actions are to allow capital to recoup their investments first and then let retail investors take over. Self-funded miners have to consider the payback period of costs such as electricity and equipment.
From the change in mining earnings, before the announcement of token economics, Aleo’s mining difficulty was exponentially increasing, but after the announcement, perhaps due to many miners exiting, the mining difficulty started to decrease.
On social media, the evaluation of Aleo has shifted from recommendation to questioning. Twitter user @alexlizeros said, “From the Aleo case, we can see that sometimes a big project does not bring profits but instead brings greater losses!” After KOL @Supervellear released a tweet questioning Aleo, it was censored by Aleo founder Alex Pruden on social media. In the tweet, @alexlizeros listed the doubts about Aleo regarding the mainnet delay, airdrop lock-up, and excessive market value, and concluded, “When you don’t know where the liquidity comes from, you are the liquidity.”
As of now, the Aleo official has not responded to many community questions. However, based on the current social media sentiment and token performance, Aleo may need to provide more reasonable explanations and practical sincerity to regain market confidence.