Skycoin has been flying relatively under the radar over the past 2 years.
While there have been projects that have been raising millions of dollars in questionable ICOs, the Skycoin team has been actively working on developing their latest blockchain application platform: Skywire.
Skywire wants to provide users with a cheaper, faster and more customisable internet that will allow them to earn returns by lending this bandwidth to others. The native currency of these ecosystem will be the Skycoins which will facilitate payments in this “Web 3.0” ecosystem.
Moreover, Skycoin is being worked on by some of the earliest contributors to the Bitcoin and Ethereum projects. This has led many to believe that Skycoin could be one of the most interesting cryptocurrencies to focus on this coming year especially with the coming launch of the Skywire testnet.
Let’s take a deeper look at this project to see whether it is worth your while.
What is Skycoin?
Image via Medium
Skycoin is the native currency that will be used within the decentralised ecosystem that makes up the broader Skycoin project. This cryptocurrency has been worked on for a number of years and, according to the team, is one of the oldest cryptocurrencies in existence.
It seems as if the developers on Skycoin have taken a hard look at the problems that are currently facing the likes of Bitcoin and Ethereum. They have made a number of changes that they think will make Skycoin the most attractive alternative.
These unique features of the protocol will have the following benefits for Skycoin
- Transaction Times under 2 seconds
- Transactions will hold 0 fees
- Coded in the GO Programming language, Skycoin is one of the most secure cryptocurrencies
- Using the CoinJoin protocol, Skycoin is able to mix transactions from multiple wallets such that one cannot identify the parties to said transaction
- Given that there is no PoW mining required, Skycoin transaction verifications are that much more sustainable
- The Skycoin token has a use case and is utility backed. It is currency in the mesh network and it is backed by bandwidth as an asset
There will be 100 million Skycoins that will ever be in circulation. These are pre-mined and no more can be created or destroyed. The capped supply of coins will slowly be released to the public. Initially, there will be 25% of all coins that will be distributed.
What is interesting is the manner in which Skycoin is trying to distribute their coins. They will be releasing them slowly at 5% blocks each year after the initial 25%. This is done in order to focus on growth of the network.
People Behind Skycoin
The Skycoin founders and developers seem to have quite an impressive background. For example, the founder Synth was one of the earliest developers behind Bitcoin and sits on the advisory board of several cryptocurrency projects.
You also have Houwu Chen who was one of the creators of Ethereum and actually drew up the Obelisk whitepaper. He also holds a doctorate degree. Another founder, Steve Leonard wrote most of the original software for Skycoin and has developed for eCommerce backend systems in the past.
There is also an extensive list of some really impressive individuals who are advising the project. They have experience ranging from digital media to engineering.
Image source: Skycoin.net
In terms of investors in the project, the most notable example is Patrick Dai. Patrick is the founder and CEO of QTUM project. This project also wants to take on the likes of Ethereum with their programmable blockchain ecosystem.
The Consensus Conundrum
PoW and PoS have been the dominant consensus algorithms in cryptocurrencies for the past few years. While they are no doubt genius in their own right, they both suffer from unique problems which either threaten the environment or security.
In the case of PoW, miners are crunching heavy mathematical problems that require a great deal of processing power. In fact, the amount of power that is required in order to mine Bitcoin is so extensive it could be used to power of number of countries.
What is more worrying of course is the nature of “difficulty” adjustments. This means that mining Bitcoin becomes exponentially harder as more “hash power” and hence energy is required to mine a given amount of Bitcoin.
What about PoS you say? Ethereum is, after all, moving to this consensus method.
While PoS does require way less energy than PoW algorithms, there are a number of concerns around centralisation. In order to verify transactions a particular node has to have a certain amount of coins. This means that a node that is able to hoard coins could have more power on the network.
Centralisation of consensus in cryptocurrencies is quite dangerous and leads to a number of risks for network security including the danger of a 51% attack.
These concerns is the reason that the Skycoin developers have turned to a more distributed consensus algorithm.
Obelisk is unique in that it is a consensus algorithm that does not involve any mining. It operates on a “web of trust” where nodes (called skyminers) will subscribe to a list of other trusted nodes.
Quite simply, the Obelisk protocol requires each node to store its own personal blockchain. These personal blockchains will communicate with the broader network in the consensus stage transaction verifications.
In order to make sure that the nodes are indeed honest, they can also be audited by other network nodes to weed out any “cheating” nodes. These audits can also be done in a way that does not compromise the individual node’s security.
There are a few benefits that the Obelisk consensus algorithm has:
- Highly Scalable as the equipment needed in order to run a node is not terribly expensive
- No risk from co-ordinated attacks on the network such as DDoS etc.
- Given that the web of trust prevents from any sort of centralisation, there is way less risk of a 51% attack
- Increase privacy as IP addresses of the nodes are hidden.
- Constant fraud detection and authorship verification is conducted. This is because suspicious activities are spotted with the public keys of the nodes banned
For those who are interested in reading more about the underlying obelisk algorithm, they can read the Skycoin whitepaper in a bit more detail.
You may of course be asking, if there is no mining and transactions are free, how does the network prevent spam transactions?
This is done through something that is called “Coin Hours”. These are earned on an ongoing basis by those users who merely hold Skycoin. This is analogous to Gas in the NEO ecosystem and performs a relatively similar function.
Those nodes that hold the Skycoins will receive a Coin hour per Skycoin per hour. These coin hours will also be able to be traded and they will have a maximum coin hours of 100 million produced every hour. This is based on the maximum amount of Skycoin that can ever be in circulation.
While the Skycoin cryptocurrency is no doubt impressive, it is the broader project and its drive to decentralise the internet that is of real interest.
Looking at Skywire
Image via Medium
Skywire is the Skycoin project that wants to decentralise the web and make it accessible to all. They want to take on the power of Internet Service Providers and lower the barriers to entry for the participating nodes.
This is all achieved through the use of a “mesh network”. The team at Skywire have spent the better part of 4 years working on making Skywire one of the most efficient mesh networks around. The Mesh that they have developed have the following:
- Advanced Communication Protocol: Discarding the dated TCP/IP internet standard, Skywire will make use of Multi-protocol Label Switching (MPLS) techniques in order to achieve the scaling that is needed on the network. This is because of the unique way in which traffic is routed with MPLS. Moreover, the communication protocol provides more privacy for the user. One can even think of it as comparable to a more secure TOR node.
- Payment Protocol: The major barrier that internet alternatives currently face is that they rely on unpaid volunteers. This leads to a lack of incentives on the part of the network operator. Skywire is able to solve this with a payment protocol that will remunerate each node for the traffic that they handle. These payments are processed in an anonymous fashion across through the network. Smaller transactions are also settled off-chain which reduces congestion.
- Decentralized Applications: Much like other development blockchains, Skywire will provide a platform for others to build dApps in the ecosystem. This is called Fiber and it will help drive greater adoption and demand on the Skywire network. It has the added benefit of being faster, cheaper and more energy efficient than other dApp based ecosystems. Moreover, given that each company or node will have its own blockchain, Fiber is unlikely to suffer from network congestion such as on Ethereum recently.
What is really interesting about Fiber on Skywire is that there are already some companies that are making use of the technology. For example, Spaco and MyDailyLife Talent Hub have used Fiber as the foundation of the blockchain products.
Hence, unlike many other blockchain based projects and cryptocurrencies, the product is already in use and is not a mere concept on a whitepaper.
What is with The SkyMiner?
Image via Skycoin
This was indeed quite confusing concept at first given that we know that Skycoin is not mined per se. However, according to a medium post by Skycoin, this should not confuse you. This is because the miner does not conform to the typical understanding of what a miner is.
Given the protocol, it is important to understand that the miner does not mine. However, the miner does reward those participants who participate in verifying the transactions. These miners have being compared to a “be your own ISP” unit that will give the user all the benefit that the network touts.
The skyminer is a piece of hardware that was developed specifically for the Skywire infrastructure. It has been labelled as the “hardware backbone” of the entire network. This miner will be linked up to the Skywire protocols and allow you to get paid for providing bandwidth or storage to the broader network.
According to the whitepaper, the team has already begun production on the units. Once they have launched their MainNet they have said that they would like to have one factory that will produce 1,000 units per week. This could eventually scale to two factories at 10,000 units per week.
For those users who did not want to buy the Skyminer, they are also releasing a list of all the parts required as well as instructions to build your own version. The project is open source and the developers want you to still be able to participate.
The testnet for Skywire has already being underway since the end of 2017. They have already sent out some of the skyminer units and they will begin the hardware testing in late Q1 of 2018.
The far more exciting stage will be the launch of the mainnet. This is where the real benefit of the mesh network will present itself. All of the skywire nodes will be connecting to the mesh through wifi and will begin sharing their bandwidth.
They have also realised that in the mainnet launch they will have to subsidise some of the nodes in order to provide capacity for the network. This subsidy will naturally decline as more node begin to connect to the network.
The final stage of the roadmap will be what Skycoin refers to as “Backhaul”. This will be when the wireless meshnet will link up to the Fiber connection point. This will require a lot more upfront investment as well and be a great deal more involved. However once this has being implemented, the meshnet will no longer depend on the ISPs such as Comcast.
Skycoin Tokens (SKY)
These are the native tokens that will power the whole decentralised ecosystem. They have had a slight rally over the past two weeks as the project has garnered more interest in the crypto-sphere. Of course, like most of the cryptocurrency markets, they are quite far from their December highs.
Image source: Skycoin.net
The tokens are currently available for purchase on exchanges such as Cryptopia. You can also buy your Skycoins directly on the Skycoin website. Once you have purchased the tokens, you can store them in the Skycoin proprietary wallet.
Alternatively, if you were interested in earning Skytokens through the sharing of bandwidth, then you could always buy one of the skyminers and start experimenting with the hardware when the mainnet is launched in a few weeks.
In the end, the Skycoin project is definitely one of the most interesting to come to the fore recently. They are trying to solve a problem that has not being taken on yet in the cryptocurrency and blockchain space. That is to take on the ISPs and their anti-competitive behaviour.
This becomes even more pressing in the face of the repeal of net neutrality. This will mean that the internet service providers can actively adjust bandwidth speeds based on the websites that you choose to visit. When the internet is decentralised through the mesh though, this is less likely.
There is still some time to go before the fiber network can be connected to the meshnet in the final phase. Yet, one can get a sense of the direction of the project when the mainnet is rolled out over the coming weeks.
So should you invest in Skycoin tokens?
We would suggest that you do your own research but based on the team, technology and verifiable use case, Skycoin tokens could no doubt form part of a well-diversified portfolio. We will keep an eager eye on the project going forward.
Featured Image via Fotolia