Fundamental Analysis - Request Network (REQ)

Last Sunday I asked you which coin you would like me to do an in-depth analysis on. There were several comments with equal votes so in the end I chose Request Network (REQ) which was proposed by @adamo26 since it had the lowest market cap out of all the mentioned crypto's. I made the assumption that due to the lower market cap, it is most likely the least covered cryptocurrency out of the options I had. If you voted for another coin, don't worry, you'll soon have an opportunity again to vote on a coin for my second in-depth analysis.

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What is Request Network?
Request Network is a decentralized network built on top of Ethereum, which allows anyone, anywhere to request a payment. The token, also called Request Network, is listed as REQ. In this post I will refer to the network, company and team as Request Network, and to the token as REQ to avoid confusion.

The team itself outlines 5 use cases for Request Network: Online payments, Invoicing, Audit & Accounting, Internet of Things (IoT), and Transparacy. Thus, it seems that the core of Request Network is to make payments (on the Ethereum network) and track the payments for accounting purposes.

The Request Network white paper lists an example of Alice making a purchase on Amazon:

Amazon creates a Request on the blockchain, Alices phone analyzes the blockchain and detects the request, sends a notification, and she agrees to pay

The benefit of using the Request network is that you can make transactions securely, without having to specify banking information, easily with just one click and cheap since there is no reliance on a third party like PayPal or a credit card company. To process a payment:

The only costs transmitted are the use of Ethereum gas and the storage of information.

However, later in the white paper it is mentioned that:

When using the network, the participants will need to pay a network fee in REQ which will be burned.

It's important to find out what is meant by 'using the network', because this information seems to be conflicting. Maybe I will get in touch with the team to get it cleared up. Another thing to note here is that the Request Network is designed to work with any currency, fiat and crypto. In other words, you don't necessarily have to make or receive a payment in REQ.

Where can you buy REQ?
REQ can be bought mainly on Binance, Huobi and Kucoin using either Bitcoin or Ethereum. These account for roughly 70%, 25% and 5% of the daily volume, respectively. Note that buying REQ using ETH is a little cheaper than buying with BTC.

What is the Road map?
Request Pyramid and Request Colossus have been finished at the time of writing and included the following:

• Release final draft of the whitepaper
• Launch the Request Network website
• Token Launch
• Request working with Ethereum on Test Net
• Release of the API to create, read and update Requests
• Deploy the website to create, visualize and interact with Requests
• Add Request management of accounting concepts

These milestones were planned for Q3 and Q4 of 2017 and were completed on time, which is a good signal that the team is able to meet the deadlines.

In the course of 2018, the team's main goals are releasing the main net version of the product, and creating and growing the ecosystem. Other highlights for 2018 include:

• Launching the "Pay with Request" project (an alternative to "Pay with PayPal" method)
• Add management of fiat-currencies to Request (USD, EUR, CNY…)
• Deploying Escrow, Tax, Down Payment and Late Fees extensions
• Deploy a governance system (Vote/Token Chat)
• Launching the "Internet of Things framework" project

Again, it's important to note that while functionalities such as a "Pay with Request" button, various extensions, and a governance system are exciting, this does not necessarily boost the value of the currency, REQ.

The Request Network team
The team consists of 6 members and 3 (external) advisors. The entire team used to work at MONEYTIS, which is a website which compares fees for sending money abroad. Think Booking.com, but instead of comparing hotel fees you're comparing payment processing fees. Since MONEYTIS itself does not process any payments but directs you to company websites, I fail to see the team's experience with processing payments.

From the LinkedIn profiles of the team members it is not clear if they've left MONEYTIS to work for Request Network, since all of them have May 2017 as an ending date of their working experience with MONEYTIS and a starting date for Request Network. Since it's unlike that the founders of MONEYTIS and all of their employees left to begin Request Network and MONEYTIS is still active, this suggests that the team are working on both projects and / or that MONEYTIS is the driver behind Request Network.

Conclusion: Even though Request Network markets the team's experience at MONEYTIS as a plus, this raises some concerns for me. How does the team decide whether to allocate time to MONEYTIS or Request Network? Also, MONEYTIS only compares rates for sending payments abroad. It does not actually process the payments itself.

How is the project funded? How does Request Network make money to sustain itself?
It's important to know the funding structure of a team developing a cryptocurrency. If the team is not funded, how are they motivated to keep developing? If transactions only require gas, how can Request Network sustain itself? The whitepaper shines a light on this: only payment requests in the 'Core layer' require purely gas. Payment requests which are more complex (think of taxes, payment terms or advance payments) take place in the 'Extension layer':

This layer is chargeable, in that each extension will take a fee that will be partially burned and partially transferred to the extension developers, with the extensions accrued on the same invoice.
[...]
This layer is completely open, whereupon anyone can create their own extensions, with the fees also being distributed in a way that will interest and encourage the developer and the community.

This is very comforting. Request Network themselves and any other developers who develop extensions will receive a small fee which encourages development of extensions on the network. According to the white paper this fee is charged in REQ.

Who are the competitors?
Request Network faces competition on three levels: payment service providers (PSP) such as Paypal and credit card companies, cryptocurrencies that focus on payments on the Ethereum blockchain and other cryptocurrencies that focus on payments on other blockchains.

When comparing Request Network to PSP competitors, we can only compare the fees / charges to conclude whether it's likely that Request Network will have mass adoption. We can't look at Paypal and say that because Paypal has a market cap of nearly 100 billion USD, Request Network must be worth at least as much. This comparison would make no sense as Paypal generates income from the fees it charges its customers. This makes it possible to use valuation models such as discounted cash flow (DCF). However, this doesn't work for Request Network since the currency itself does not generate income. The developers who develop extensions and receive charges from its users generate income. Therefore, any comparison with Paypal as a company would only be fair if you're comparing Paypal to Request Network extension developers.

Now, to move on to the fee comparison. The white paper cites a charges between 1% and 7% of the amounts sent and claims that Request Network will reduce cost. It's estimated that extension developers will charge 0.05% to 0.50%, which would make Request Network significantly cheaper. However, his is no guarantee. Developers might as well charge 1% to 7%. Therefore, the competitiveness (and thus adoption) of Request Network relies on its developers.

Due to the sheer number of tokens on the Ethereum platform and cryptocurrencies on other blockchains, a comparison is not feasible. The main things that the crypto space focuses on is transactions per second and transaction costs. I would argue that comparing transaction cost is not very useful under the assumption that transaction costs on the Request Network are very low. Although there are cryptocurrencies out there that offer feeless transactions, I don't think a negligible fee would hinder adoption. Request Network could still beat competitors that offer lower transaction fees or free transactions if they can get enough businesses to use Request Network. They might be able to do this by offering businesses extensions which enable more complex payments to be processed. This could potentially get them ahead of the competition.

The Verdict: is REQ worth buying?
Aside from the concerns regarding the commitment of the team towards Request Network and the question of whether or not some amount of REQ must always be paid as a network fee, the project seems to be solid. From an investor point of view, it's important that the currency is actually used. If no one uses a currency, you are relying on the so-called 'greater fool' to buy your holdings from you for a higher price. Since REQ is charged when using extensions, the use case for REQ as a currency is clear. In conclusion, I would say that REQ is indeed worth buying.

This analysis took me about 5 hours to complete. I hope you enjoyed! Please leave your thoughts below.

• What do you think of my analysis? Any points I missed?
• Do you think REQ is worth buying?

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