Ethereum is gradually moving towards the rollup-centric roadmap. One of the EIPs, which will help in scaling Ethereum is EIP-4844, popularly known as “Proto-Danksharding.” In this blog, we will dive into one pre-requisite of this EIP, the KZG Ceremony.
The Ethereum network, like most blockchain networks, currently faces limitations in terms of scalability. As more and more users join the network and the amount of data on the blockchain grows, the network's ability to process and validate transactions in a timely manner becomes increasingly constrained. This can lead to delays in confirmation times, high transaction fees, and a lack of overall network efficiency. To address these scalability concerns, the concept of sharding came around.
Sharding is a method to split data so that it is easier to handle that data. With time, the overall size of the blockchain increases because blocks keep getting added up to the existing chains. So, in Ethereum, the idea is to split up the amount of processed data into multiple concurrent chains. So as to increase the total throughput of the blockchain.
Initially, these shards would not just hold data but were also going to perform computation on that data set. Still, the approach introduced some other complexities, such as how cross-shard communication will work in the ecosystem. As the data could have been siloed so, how will the consensus work? So the idea of how to scale Ethereum was altered and now we have Proto-Danksharding, in which instead of having multiple chains, we have one chain, and the node operator is not responsible for the whole chain; he is responsible for part of the chain.
Furthermore, the computation won’t be taking place on these shards. Instead, rollups will take care of that, as per the rollup-centric roadmap.
Danksharding is the initial proposal that is too complex to discuss in this blog. So, let’s have a look at the main innovation that came with Danksharding, i.e., the merged fee market. According to this, “one” proposer node is responsible for choosing all transitions and the data to be added in the shards. This will increase the hardware requirements for the node operator. Hence, another concept of propose/builder separation was introduced.
This requires more time to implement as it has a lot more technical complexities, so now we have a more simplified version, Proto-Danksharding that will be upgraded to danksharding in the future. However, in the short term, this solution will still drastically help with the data constraints we currently have.
Proto-Danksharding is a forward-compatible implementation for smoothening the implementation of Danksharding. The use of rollups and the merged fee market can improve scalability by offloading computation and data storage to other entities.
With Proto-Danksharding, we will have a new type of transaction, i.e., “Shard Blob Transaction”, which is like a normal translation with the exception that it will have space for blobs. EVM cannot access the blob data, it can only access commitment to the blob. A blob is a collection of 4096 units of information, each consisting of 32 bytes. With Proto-Danksharding, a maximum of 16 blobs can be stored in each block. With Danksharding, this number increases to 256 blobs, which limits the total number of data transactions that can be processed in a block. This allows for a target block size of approximately 1 MB and a maximum of 2 MB.
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Currently, In Ethereum, users pay a one-time fee for some data to be stored, and then the blockchain keeps the data on it forever. One of the ideas behind Danksharding is to give this responsibility to someone else so that the validator nodes don’t have to store this huge amount of data in perpetuity. So, what will happen is the validator will be assigned data that it must download and make it available for everyone. L2 solutions can access this data and download all the relevant portions that they need, and after a certain period, validators will discard this data.
Coming back to the validators, the important thing here is that individual validators won’t be worrying about this anymore. And as more scalability is added to the blockchain, the data that validators need to store will only increase. So, now entities who need the data are going to be responsible. But this is something rollups and protocols can take care of.
What about normal users? Normal users obviously have the option to trust the sequencers if they have their transactions on L2s. But in the case where they don’t trust the sequencer, they can store data locally. There are more options we can explore about this. On a side note, we will probably see different solutions coming forward to download and keep this data in their own archives nodes, and users will then be able to query data from those archive nodes.
KZG ceremony is a prerequisite for Proto-Danksharding. It will provide the cryptographic foundation via the trusted setup. The KZG ceremony is taking place to create a structured reference string for the Proto-Danksharding. The ceremony is to be held by the Ethereum community and will provide the necessary security for the network.
It uses multiparty computation, as different individuals first set their secret values, each mixed with some randomness. Then each contributor runs a computation to mix it with previous contributions. The output is made public and passed to the next contributor. The ceremony will be live for two months. Anyone can contribute in that time frame.
Why do we need commitment in Proto-Danksharding? So, we already know by now that the blob transaction types will have the data blob in it, which is kind of like a sidecar to the actual data block. To refer to this “sidecar,” Proto-Danksharding uses KZG commitments.
KZG commitment also enables erasure coding, which is useful in case a percentage of the data is lost.
The KZG ceremony is live for a duration of 2 months. In the KZG ceremony, we have an entity called the sequencer and as the name suggests, is literally to sequence who's next. So, if we have many people trying to contribute, how do we decide the sequence?
Since the computation is sequential and cannot be parallelized, so the sequencer sees if there is a free slot. Then the sequencer gives you the file, and then you add your secret value to the sequence. It combines your Randomness with the randomness of the people that came
before you, and then you send your file back to the sequencer, and then the sequencer checks that you didn't try to lead someone else's secret or do other inaccurate things. Then the file is sent to the next person.
The sequencer can basically see what the ceremony looked like after each contribution, but that is what everyone sees, so it's not like the sequencer has more access to data that could be used to break it. All sequencer has is more control over who goes next.
Sequencers can prevent someone from participating. But even that can be countered, as users can do their computation and send it back to the sequencer. But, again, the sequencer can reject the file by claiming that the file is not correctly computed. The sequencer has to send you the file back with their signature on it. Now, users can take the file to other sequencers and prove that the sequencer is censoring the user.
To avoid this, the Ethereum foundation put the sequencer through some audits.
The Ethereum community has several ways to participate in the creation of the Common Reference String (CRS) that is used to create zk-SNARKs for private transactions on the Ethereum blockchain, as proposed in EIP-4844. The methods for participation range in technical difficulty, from simple browser interfaces to writing your own implementation.
One of the easiest ways to participate is through a browser interface, such as ceremony.ethereum.org. To prevent spam contributions, participants will need to provide an Ethereum address (which has sent at least 4 transactions as of 2023/01/13) or GitHub account.
If you're comfortable using a command line, you can check out some of the CLI implementations to contribute from your local machine.
You can generate some randomness using a unique and creative method and use one of the above methods to add it to the ceremony.
For those who want to convince themselves that the secret hasn't been leaked, writing your own implementation using BLS12-381 for the ceremony is possible. There are resources available to make this process as simple as possible.
Note that the sequencer will reject wrong calculations.
If you participate through the browser method. There is no queue. There is a general lobby, and accounts are picked at random from the lobby. This makes it nicer that you just show up to participate. But, the trade-off is that you don't know exactly when you're going to get included. So, the lobby could have thousands of participants and you may have to wait for a while.
By being in the lobby what essentially happens is time to time, your computer asks a sequencer for the file, then the request is denied or accepted based on the file’s availability status. The file being unavailable just means that someone else is contributing.
The participation process is quite easy. The trust assumption of the ceremony is based on the concept of "1-of-N," where the security of the entire ceremony relies on the fact that only one participant is honest and hasn’t given out the secret. To compromise the ceremony, each and every participant would have to work together to extract and combine their secrets, or there would have to be a flaw in every single implementation.
In summary, Proto-Danksharding, as outlined in EIP-4844, is a promising solution for addressing scalability limitations on the Ethereum network. Its implementation will greatly improve the scalability and efficiency of the network by splitting data into multiple concurrent chains and utilizing rollups. You can participate in the KZG ceremony for the next 2 months since 13th January 2023.
One who is familiar with digital terms will not be new to the term "Metaverse". Metaverse create physical realities in a virtual world.
Just as there are entertainment Metaverses, there are art, social and medical Metaverses as well.
In fact, several games are built on the concept of Metaverses. Some of these games include Fortnite, Animal Crossing, and Roblox. These games and many more present a concept of virtual reality in an augmented superset.
Over the years, several industries are beginning to see reasons to build their applications on the concept of the Metaverse. The government is seeking to hold virtual-physical meetings with leaders from around the world and artists are seeing potential in using the Metaverse to hold concerts too.
What then is the importance of the Metaverse that the crypto world is seeking to adopt?
This article will extensively discuss all you need to know about Metaverse. We will also discuss it's importance with respect to blockchains and the digital world at large.
But first, what exactly is a Metaverse?
Simply put, a Metaverse is a concept of creating virtual spaces using a 3D augmented spectrum.
For instance, games that allow one to own lands, build cities, go outside space all operate on the concept of Metaverses. Any concept that presents a realistic virtual world is a Metaverse. This can be seen in plenty of Sci-Fi movies and even in novels.
The word Metaverse was first used in a fiction novel in 1992. The novel – Snow Crash by Neal Stephenson described it as a world outside our world.
Other examples are seen in virtual reality games like the Minecraft. Minecraft presents a unique medium for social interaction and relationships.
Students of the UC Berkeley were able to create a virtual campus on the Minecraft game. The students even conducted a virtual ceremony where each person joined with Minecraft characters.
Another application is the Roblox game. The Roblox game allows developers to create games and receive tokens as incentives. Afterwards, the developers withdraw their tokens outside of the game’s platform.
Furthermore, there is a wide application of Metaverse in the crypto world. There, Metaverses will allow users to own tokens, lands, and assets which can easily be traded while virtual money is converted to real money simultaneously.
Aside from this, there are other applications of a Metaverse in the crypto world. We’ll discuss these shortly. Before we do, here is what to know about Metaverse basic foundation.
The basic Metaverse foundation explains the components put together to build a blockchain Metaverse. These components are open standards, the internet, hardware, open programming language, and a decentralized ledger and smart contract.
The internet is essential in creating a connection for digital assets. But the internet connection for blockchain Metaverse is highly secured.
Connections between computers on a decentralized network restrict authorized individuals or bodies like the government from gaining access. It only allows users of that network to gain total authority over their decentralized network.
Metaverses use programming languages like web XR, javascript, WebAssembly, and HTML. Open standards of the media like 3D audio, images, and texts. It also uses 3D sequences and geometric figures and vectors.
Metaverses are incorporated in blockchains, so they exhibit features of blockchain technology. They offer secure and plain transactions as well as public availability and support to the blockchain ecosystem.
Many refer to the Metaverse as a replacement for the internet, whereas, it’s in actual sense the successor of the internet. Perhaps, it can be the next trillion-dollar project.
In the crypto world, Metaverses offer new experiences to gamers and creators of NFTs. Even in the decentralized platform, it offers permissionless and transparent transactions at high speed.
NFTs serve a foundational role in a Metaverse as they offer users the complete ownership of their lands. Afterward, one can sell off their virtual properties and exchange their money for real money.
A 259 parcel of virtual land in Sandbox was sold for over $900000 and it’s still the largest to date.
Arthur Madrid says people are easily blown away by the number of money players spend on digital assets. He thinks that making NFTs assets can add a layer to the already existing digital economy.
Mark Zuckerberg even said and I quote,
"We want to get as many people as possible to be able to experience virtual reality and be able to jump into the Metaverse and to have these social experiences…",
This he said while referring to Horizon - the company’s experimental virtual reality project. Mark Zuckerberg is hoping to explore this using Facebook's oculus headsets.
Here are the main advantages of a Metaverse
Metaverses will allow fans to attend concerts virtually with characters that represent them. In April, Travis Scott helped a convert which had about 1 Million concurrent views. The concert which he held at on a Fortnite with half the attendee using the creative modes.
While we cannot predict the future of Metaverses in the crypto world, we are certain that they will cause exponential growth in blockchains.
Up till now, the application of Metaverse is not popular among people and only a few projects use them.
Just like decentralized blockchains, Metaverses aren't owned by a single individual. The project is for everyone, and is owned by everyone. So, be sure of secured transactions on the Metaverse.
To own a part of the Metaverse, one has to invest in its architecture, services, and development.
Since the project is still in its early phase, here is how it works and why it's the perfect successor of the internet.
Metaverse creators have been able to create certain items. These items are virtual assets and can be sold and exchanged for real money.
Likewise, you can transfer these items from one application to another without interference. Hence, the contents of the Metaverse is not "siloed"
Currently, there are over a thousand nodes that host the Ethereum network. Hence, the ethereum network is not held by an individual. So, one will not need any permission before carrying out any transaction.
The Ethereum network can do this due to its Metaverse projects as it will allow for permissionless transactions; transparent and quick.
And as you'll expect, the decentralized nodes are of great importance to the blockchain Metaverse. It also offers high-level security through its consensus mechanism.
Blockchain Metaverse is changing the way we interact in the digital world. It's changing the way we carry out virtual activities by providing more acceptable and realistic features to games and apps.
One common app that is looking to adopt this concept is Facebook. And other apps are looking to work with the project as governments are looking to enhance their modes of operation. Government officials are seeking to meet via virtual-physical platforms provided by Metaverse.
The importance of Metaverse on blockchains cannot be undermined. It allows users to transact easily and is permissionless. It also enables users to accrue virtual assets for themselves and exchange them for real money. To top it all, they can transfer assets from one app to another without any interference.
In a nutshell, the essentiality of the Metaverse cannot be undermined.
Also read Loot: The First On-Chain Community-Driven NFT Platform
As the next-generation exchange system, Serum is making waves in proving its credibility in crypto-trading and decentralized finance transactions. It provides faster and frictionless orders with its automated order book system.
Serum provides incentives to its users which in turn favors so many developers. Some of these incentives are Serum Token (SRM) and MegaSerum Tokens(MSRM). With these tokens, one can achieve passive crypto income by staking their tokens on Serum.
Serum allows every member to stake their tokens. It doesn't only allow members with the highest token to stake, it also allows members with small tokens to stake too.
Seeing that Serum DEX has so much to offer, there's a need to know so much about it. In this article, we'll extensively discuss Serum DEX and its features. Also, we'll discuss the values and how it relates to other blockchains. Enjoy!
The Serum is a decentralized exchange system built on the Solana ecosystem to provide unmatched low costs and speedy DeFi transactions. It charges as low as 0.0001 cents for transactions.
The system aims to offer users faster settlement times and zero centralization.
In offering a non-centralized side of its architecture, it centralizes price fees even without using Oracles services. Hence, we say the Serum system functions without Oracles. Oracle is a centralized service used by Defi protocols to verify, authenticate and query external data then send them to an already closed system.
Because Serum is based on the Solana blockchain, it offers fully decentralized services that are easy, fast, and affordable to use.
In Serum DEX, users can easily transfer assets amongst different blockchains and even trade stable coins and wrapped coins or even convert coins from one coin to another. For instance, converting Ethereum to FxT. Some of the projects build on Serum DEX are:
Furthermore, users can create customized financial products as they deem fit.
The Serum uses native Serum tokens(SRM) as its main governing assets and incentive for its ecosystem. With SRM, users can stake, trade, or participate in burn and buy fee incentives for reduced trading costs.
Also, with the SRM, users enjoy a further reduction in Serum-based transactions.
Aside from all of these, Serum aims to enhance frictionless cross-chain contracts in DeFi while traders trade synthetic assets. It provides many synergies with the Solana blockchain serving as its host application.
As the fast-growing blockchain system, Solana has secured a spot in the top 10 cryptocurrency projects according to the market cap. Being able to carry out fifty thousand transactions in a second(TPS), Solana blockchain has demonstrated to be the quickest blockchain anywhere on the globe. So, Serum building their project on the Solana network will allow for quick fast transactions on the Serum network.
Solana, with all of its functions, is a layer-1 blockchain. So, to function effectively, Serum functions solely on a layer-1 solution system without layer-2 solutions. It operates solely on a decentralized clock that monitors time-stamps transactions together with an advanced Proof-of-Stake(POS) mechanism.
In recent times, blockchain developers have been designing decentralized applications using the Solana blockchain. This widely accepted choice from blockchain developers is due to Solana's reputation in providing fast and scalable smart-contract-enabled blockchain. It's this advanced blockchain system that the Serum network is built on. Clearly, Serum is just a project on the Solana ecosystem.
That said, Serum DEX mirrors the cost and speed of the Solana network. With this, it offers a fully decentralized trading arena with easy trading on centralized exchange systems. It also offers inter-operable features that allow users to exchange assets such as Ethereum (ETH), Bitcoins (BTC), SPL-based tokens, and ERC-based Tokens.
A unique thing about the Serum token (SRM) is its means of collecting values. It accrues values via hyperinflation.
SRM accrues values through adoption and utility. Some are:
That said, most SRM have extensive unlocking terms with all sales fees inclusive. Serum achieves this by locking the tokens. SRM are locked cryptographically in a smart contract. It takes about a year or less to unlock a locked token.
The period where you cannot unlock a locked token is its unlocking period. Most SRM have an unlocking period of one year.
In some cases, some SRM take up to 6 years to unlock. This type equates to 1/2190 SRM in a day.
SRM amount to a maximum of 10 Million tokens, creating about 175 million tokens in its circulation. Because of this high number of tokens in circulation, Serum has been able to provide liquidity to their project. However, several token stakeholders have decided to hold on to a large number of their tokens thereby reducing the number of tokens in circulation.
Moving on, several traders stake SRM to achieve passive crypto income. They also do this by rescuing fees and staking rewards when trading on Serum DEX.
Howbeit, traders with SRM can still partake in on-chain governance. Traders who do this will vote on updates to specific markets on the project.
A MegaSerum(MSRM) is equivalent to one million SRM. It means you have to have a million SRM as they'll amount to one MSRM.
MegaSerums are rare and there are only 10%. This is so as there are just fewer users that show belief and commitment to the Serum network. It's just those 10% that can lock their SRM with MSRM.
The project Serum, built on the Solana ecosystem, provides usable services to developers and other users from the start of their project to its deployment. On a large scale, this ecosystem provides a suitable platform for non-technical users planning on delving into Decentralized Finance(Defi). This they can do on Serum's user-friendly App(dApp).
That said, in the Serum ecosystem, developers are automatically eligible for grants once they build on this network. With this, projects receive the support and funding to enhance their user adoption and brand awareness.
A good example of a project like this is the Phantom project. The Phantom project is a Defi(Decentralized finance) and NFT crypto wallet. Another example is Coin98 that offers users smooth running payment gateway services.
Also, Project Serum provides developers contact points and resources. With that, you can view on-chain codes, clients codes, and repositories. The project also offers tutorials for developers which can be found on the "Developer Resources" on its website.
Finally, the Project Serum allows users to comprehensively overview all Serum's tokens and integration within its ecosystem. And to top it all, the project provides a link to its whitepaper.
Before one becomes a Serum node, one must take at least 10million SRM including a minimum of 1 MSRM. However, at 100 million SRM or 100 MSRM tokens, nodes stop staking tokens.
Nodes collect several rewards based on their network participation, the aggregate of activity, and performance within the Serum ecosystem. Generally, nodes are in charge of some blockchain operations like cross-chain settlement validation.
Oftentimes, traders can't continue the Serum project and earn passive income via Defi because they can't stake 10 million Serum tokens. This shouldn't be a challenge as there are alternatives to this.
Serum token holders can now stake tokens as regards a node. A node is formed by a leader and consists of members of that network. The node leader doesn't necessarily have the highest tokens. But the leader can be the founder of the node and will receive small fractions of node staking fees.
In a node, anyone or the leader can stake a node on behalf of another member. Still, Serum nodes will offer trading fees and governance rights within its ecosystem.
However, there're mechanisms to provide an overload of tokens in the ecosystem. As many readers stake their SRM tokens, the system cools down following unstacking tokens. This period, known for just a week.
In a node, rewards are distributed through native SRM. However, the nodal leaders receive more proportion of the node than other members. Commonly, the leader receives 15% of the rewards while the 85% is distributed among other members.
Annually, nodes receive a 2% percentage yield (APY) based on their staked funds. However, this percentage can increase to around 13%. This can only be possible if members of a node increase their performance duties and challenges. Also, nodes get special rewards for special challenges. One of these challenges includes providing collateral for SRM tokens. The aim of this is to prevent funds from burning.
Serum exchange doesn't require that users own an account before a transaction. All you need to transact on Serum DEX is an internet connection, a wallet, and some cryptocurrencies.
First, if you're carrying out a transaction on Serum, you’ll be needing a Solana wallet. Asides from the Solana wallet, there are other wallets that Serum interacts with.
Some are:
To switch between the wallet, click on the change wallet at the top right corner of the interface. Then pick your desired wallet.
Here is a breakdown of how to use the Serum before we delve into each process extensively.
Create a Solana wallet
Seeing that your cryptocurrency has arrived in your Solana wallet, you can add tokens by clicking on the add token feature on the interface. One may choose to add Serum unwrapped Bitcoin to the Sol.
The next thing to do is to find a Serum-based DEX to connect to this wallet.
Connecting your wallet to Serum DEX shouldn’t be challenging provided you follow these easy steps. Below are simple steps on wallet connection.
As of the time of writing this article, Serum values was the 11th most trending cryptocurrency. On the other hand, it was 141st on the coin market cap on that same day.
On the coin market, Serum was $8.10, a market price of $404.8 million, and a 24-hour value of $117.71 million.
Serum DEX offers a platform for developers and other users to trade speedily and conveniently. For developers, it provides contact points and resources. Such that, they can view on-chain codes and attend tutorials. All that Serum offers is because of its conjunction with the Solana network.
Also Read Solana: Exploring the Blockchain
The Casper Network is a layer 1 Proof-of-Stake blockchain that improves how businesses upgrade new services and products on the blockchain. Unlike other networks, it has peculiar features that make it unique. It's for these features that the Casper Network is becoming the best choice for programming and blockchain transmission.
One of these unique features includes its Highway protocol consensus. It's with this Highway protocol consensus that Casper blockchains can finalize the addition of new blocks to the chain. Aside from this, there are other unique features of the Casper Network.
In this article, we extensively discuss the unique features of the Casper Network and how they aid blockchain transmission. Enjoy!
The Casper Network is a permissionless blockchain network supported by the PoS consensus algorithm and WebAssembly (WASM). It was created to solve global blockchain challenges by effectively solving a trilemma:
Before we fully delve into the benefits, here is a brief on how the Casper Network came into existence and its operations.
In 2018, two people founded the Casper Network - Mrinal Manohar and Medha Parlikar. In its creation, the creators aimed to create a network that promotes DApps, blockchain technology, and smart contracts globally. Hence, based on the Casper CBC specification, they created the first real-time Proof-of-stake (PoS) blockchain.
Casper as a platform aims to continuously adapt to the needs of its users and developers from different spheres. Because of this, it is regarded as the gateway to a developed era for Web3 to match the increasing demand for connected services globally.
The Highway protocol is a consensus protocol created with the Casper Network to attain a very high threshold required for finalizing blocks to be added to a blockchain. In essence, it enables quick agreement among validates for block addition on the Casper Network.
The Highway protocol is peculiar to the Casper Network giving it an edge over other networks. Asides from enabling quick agreement among validators, the Highway protocol allows for flexibility during the finalization of blocks.
After completing on-chain transactions on Casper Network through Casper PoS consensus, network validators are rewarded with native cryptocurrencies. This reward is peculiar to the Casper Network system and is known as the CSPR token.
It was first introduced through the Coin list in a public sale. In the first supply, about 800million tokens were supplied but this was followed by a slight decrease in demand afterward. Although CSPR tokens were first sold on the Coin list, they're currently available on several crypto exchange platforms.
According to research by the University of Cambridge, the bitcoin global consumption index is 0.6%. This is very high relative to other systems. In fact, Elon Musk announced a few months ago that it'll no longer accept bitcoin as a payment option.
The reason for this high energy to power blockchains is due to the validation, computing, and securing activities of the blockchain network system. To solve this, the Casper blockchain has already incorporated a PoS, and a Highway protocol.
Unlike other platforms, the Casper blockchain network provides an environmentally-friendly blockchain network. Clearly, Casper produces clean energy blockchains.
Having known much about Casper Network, you must understand the benefits of this system. Below, we extensively discuss the benefits of the Casper Network.
As a Layer 1 Proof-of-Stake blockchain system, Casper Network makes it easy to add new blocks. This especially is a major difficulty that other systems haven't been able to solve. Asides from this, there are other advantages of the Casper Network.
Commonly, developers use block-chain programming languages for their services. A typical example of a blockchain programming language is Solidity. Solidity makes it easier for developers to code for different locks.
Unlike Solidity, the Casper Network has an advanced programming language known as WebAssemly(WASM) and Rust. Both of these programming languages make coding easy for developers. With the Rust and WebAssemly(WASM), businesses can efficiently future-proof their organizations.
Now, here is some good news, Casper has a transpiler that converts solidity codes into Rust. This tool, known as Caspiler, helps developers convert decentralized applications such as Ethereum onto the Casper Network.
The Casper Network has a very distinct characteristic that supports the upgrade of smart contacts already on the on-chain. In fact, the smart contract rate on Casper is less costly and less complex than with other platforms.
Besides this, during upgrades, the Casper system checks for vulnerabilities too. With this, smart contracts cannot be edited by anyone, not even by the original developers once deployed. With upgradeability, businesses can now offer resilient and adaptable block-chain products and services.
Another very intriguing benefit of the Casper Network is its capacity to moderate gas costs. During large volume transactions, gas volumes can get high and customers can get services at ridiculously high prices. But with the Casper Network, we reduce network congestion when competing with other Layer 1 blockchain projects.
Caper even has a future gas costs plan to help businesses prepare for the future. They hope to develop a predictive gas future to allow businesses to save gas ahead of time. With this, businesses better plan for the future.
Often, blockchains come with binary(on and off) smart contracts which is a disadvantage for large teams. Large teams manage complex systems and applications which the binary smart contract cannot accommodate. This becomes a challenge for large teams as they cannot effectively work together and manage these complex systems.
To properly manage complex systems, the Casper Network has weighted keys that allow for multi-level system access permission. These weighted keys organize the security and quantity of businesses' assets. All of these above are the advantages of the Casper Network.
Seeing the rapid changes that are occurring to the digital world and the cryptocurrency world, it's critical that their systems adapt to these changes too. One of these facets is the Defi system. Meanwhile, Casper is leading in the Defi revolution quite well.
Unlike other blockchains, the Casper Network doesn't contain high security, energy, and decentralization costs. From this, it's clear the Casper Network is leading in the Defi revolution.
Casper Network incorporates a new consensus protocol known as the Highway protocol. The highway protocol allows the easy finalization of additional blocks to be added to the blockchain. To do this, the highway protocol presents varying thresholds for finalization.
Unlike other blockchains that depend heavily on miners to achieve a consensus, the Casper Network introduces validators to achieve consensus. And Casper can only achieve this through its advanced PoS protocol.
A major pitfall in Defi is its probabilistic network fees. Several people say the EIP 1559 makes the ethereum fee deterministic but not both. However, the Casper Network provides both a probabilistic and deterministic network pricing model.
With the Casper protocol, Developers can choose either a private or public and set their permission levels and privacy. In a way, this is paving the way for mass adoption for developers.
The Casper Network features a WebAssembly for developers to create a user-friendly platform. Also, it features an SDK that offers developers the flexibility of deployment without learning new languages.
The Casper Network can upgrade smart contracts on-chain directly without technical difficulties. This is due to its advanced protocol design and governance procedures.
Commonly, users opt-in for Layer 2 solutions to base blockchains for scalability sales. However, this comprises security and decentralization. To solve this, Casper has Sharded Layer 1 configuration.
Casper functions basically by validating transactions with group validators then continuing with the network. This is quite different from other validation mechanisms like the Proof-of-Work network. For economical reasons, the Proof-of-Work networks centralized validators. However, Casper presents better options like decentralized dependence on validators.
Also, Casper presents stacked tokens that enhance the verification of transactions with validators. In the same way, they're able to receive CSPR rewards because of their PoS consensus protocol. Finally, just like other networks, the Casper Network has tokens for their transactions too.
There exist networks of nodes that make it easier for peers to reach a consensus on a blockchain. But these nodes are not physical machines. Just like every digital machine, nodes some to network traffic, by presenting ID and addresses.
Since Casper ensures the effective security of data it must have high-quality security measures. To do this, Casper registered the fingerprint of members of a blockchain which serves as their identity.
It's worthy of mention that each node has distinct identity features. Each of these features is generated once a new node is activated.
A typical node has an IP and a pair of ports that successfully access the nodes. Also, importantly, a node has an address.
Internodal connections refer to the connections that exist between nodes. Before a node successfully creates a connection between nodes it opens a TLS connection that ends on the receiving node.
The node that generates the TLS connection is often referred to as the Client node. On the other hand, the node that receives the TLS connection is the server node. This is important during connection creation as the client node must verify with the client node before generating any signal.
To further explain, TLS connections must contain the same digest and password to prevent connection attacks. The activity of the connection created is dependent on the route of the connection. Connections can be one way or two ways. If one way, connects reconnects with the server but if two ways, the entire connection is discarded. Two ways connections are used to send one-way messages.
It takes at least two nodes to establish a network. Before connecting to a node, the client node will attempt connecting with another node to form a full connection network. The essence of forming a connection is for efficient data transmission.
There are two types of data transmission:
Broadcast
A broadcast allows you to transmit messages once without any accuracy that every node connected will receive the message.
Gossip
Just as you'll expect, gossip is just the distribution of value through a network without directly sending it to each node. It means that only some part nodes connect to the server before the distribution occurs. Some examples of values being gossiped about are endpoints, implementations, and blocks.
It's very critical to note that only consensus messages sent by validators are broadcast. Anything outside of this is gossip.
When nodes constantly talk about their addresses, it can lead to node discovery. After gossip, each node ensures to establish a connection and records the endpoint. Failure to achieve this is node discovery.
The Casper Network has so much to offer to the digital world. Most especially, in the world of blockchains and developers. With Casper, developers can easily code using Rust or WebAssemly(WASM) programming languages present on Casper.
The Casper Network does not only advance the world of developers, it advances other worlds too. In this article, we discuss the benefits and advancements that the Casper Network presents to the present and the future.
Also read Iron Fish: The Private Cryptocurrency
Several blockchains have tried to address several issues that face decentralized transactions but none of them have completely addressed the issue. Only one of these blockchains is close to solving this once and for all. This blockchain is the Iron Fish blockchain.
The Iron Fish blockchain is a layer 1 decentralized blockchain platform that offers top-notch privacy security to users. It helps in overcoming the challenges of creating P2P connections in a node by eliminating any barriers that may be present. Also, it has been able to create connections in any browser and any CLI environment.
Surprisingly, the Iron Fish project has so many other benefits it offers its users. In this article, we'll be discussing the benefits, networking mechanism as well as unique features of the Iron Fish blockchain.
The Iron Fish project is a layer 1 privacy blockchain that offers users strong privacy transactions and wide expansion to the use of cryptocurrency. As a decentralized Proof-of-Work(POW) blockchain, Iron Fish offers users full-private transactions and supports WebRTC. By supporting WebRTC with WebSockets, it reduces the challenge of creating P2P connections.
The Iron Fish aims to run a full node directly without future iterations in browsers or CLI environments. By doing this, it makes it easy for any person to create a node and join a node. It does so by lowering barriers to entry.
Like other blockchains, Iron Fish has six ingredients:
The Networking component of the Iron Fish gives a run of basic networking startups, stacks, messages types, and sequences. Networking provides information about Iron Fish gossip protocol implementation.
Iron Fish Blockchain has a networking system that enables it to perform its unique functions as a blockchain.
These functions enable it to carry out functions like node interaction, layers transportation, and nodal gossiping.
In building a decentralized blockchain system, creators have not successfully addressed the network address translation {NAT}. It is with the NAT that users can effectively communicate without firewalls and routers. However, by creating sharp accessibility with a combination of Web Sockets and WebRTC, the Iron Fish blockchain has completely addressed the NAT issue.
Asides from the combined action of the Web Sockets and WebRTC, Iron Fish uses an array of techniques to ensure that users connect freely irrespective of their browser and CLI environment. In other words, Iron Fish solves the problem of connection interjection due to technical faults.
That said, once a node is created, there has to be another node ready to connect to the former node. The latter node is known as Bootstrap which, once connected, connects the former node to another peer to form a network. Below, we discuss how nodes form a network in the Iron Fish blockchain.
Before a network is set up, there has to be a node that initiates a connection or startup. Once the node initiates the startup, the following happens:
During a connection, a node maintains a complete knowledge of its peers and other peers connected to it. They do this by occasionally checking for changes in the nodal connections. With that already said, let’s discuss the modality of nodal communication.
A nodal message is a unique format member of a group sends messages in a node connection. These messages are usually agreed upon and only peers in a network understand them.
There are different types of messaging with different styles of messaging.
Gossip
Gossips occur within networks, sending messages from one node to another. Once a node receives gossip, it forwards it to the nearest connected node. The essence of gossip is to propagate changes that occur in a nodal connection.
Direct RPC
This style of messaging helps to send messages to a specifically connected peer and awaits a response. It does this by its Remote Procedure Call {RPC} stream that comprises a request stream and a response stream.
Fire and Forget
The fire and forget style allows users to send messages to connected peers without any confirmation of receipt. This style of messaging is often useful if users need not worry about the recipient receiving the message.
Global RPC
Messages sent here are sent to specific users and other users in the same network. Global RPC resends the message if there are any errors in the message or if the sender doesn’t get a response. However, this style of message favors known peers over unknown peers.
The mining section in the Iron Fish blockchain describes how the blockchains construct new blocks for their users. In constructing new blocks, they do this randomly for the sake of proof of work and the miners' reward calculation.
Mining in the Iron Fish blockchain is defined by rules that guide the creation of blocks and verification of peers in an incoming block. While on the other hand, miners are nodes that add new blocks to the blockchain. We say a new block is added if a miner finds a hash of a blocker header below a target.
To prevent block accumulation, the Iron Fish block adjusts the difficulty of mining by 15 seconds. This is done if observed blocks are coming in faster or slower.
To mine on the Iron Fish blockchain, your node must know global data structures and must be familiar with the two most recent blocks.
The storage section helps users understand the basic structures and models of the Iron Fish. Also, it helps users how this layer is accessible in both browser full nodes and CLI.
In discussing an Iron Fish storage system, we’ll be looking at what the system stores and how the system stores.
What does the system store?
A note is a spendable representation of the payment form. It is quite similar to the UTXO of bitcoin. Nodes are referenced privately and are only referenced publicly on two occasions. The first occasion is when the note is severe as an output for a transaction. The second is when the note is in a hashed form. More importantly, notes are always private.
A nullifier is different from a note and it is unlinkable to a note. A nullifier is a distinct identifier to a note and can only be spent if exposed as part of a transaction.
Once exposed, the nullifier is saved on Iron Fish data structures. These data structures help to keep track of all nodes on the Iron Fish blockchain. And there are two of these data structures
The Merkel tree note as an accumulator data structure presents several elements with a tiny identifier. A Merkel note consists of the following
The Merkel tree of nullifiers functions like the Merkel tree of notes in that it accumulates too but it accumulates are nullifiers. Although, unlike the Merkel note, it accumulates notes in a series of nullifiers.
Also, the Merkel nullifier is used to track all Merkel notes spent and accompanying notes.
How then does the iron fish store data?
In storing data Iron Fish uses a storage layer that works as a Command Line Interface(CLI) tool and a browser.
Just like other blockchain accounts, users can create an account on the iron fish blockchain using a Sapling protocol. To better understand how this and other components are necessary for account creation, going through the account creation layer will do.
All transactions on the Iron Fish blockchain are influenced by the Sapling protocol. This section explains the key components of an account.
The secret key is necessary for constructing one's wallet and it's a 32-byte random number.
The spending is a direct derivation of the secret key. The spending key is used by users to spend notes associated with accounts. The spending key comes in pairs:
Spending authorization key(ask): This private key in this pair is derived by using the modifier Blake2b and placing hands on a secret key. After this, the key is converted into a scalar for the jubjub curve.
Authorization key(ak): The authorization key is a derivation of the public key by the multiplication of the spending authorization key.
The nullifier keys are derived from the secret keys and are necessary for creating nullifiers and spending a note. The nullifiers' keys are into pairs:
The proof authorization key(NSK): The proof of authorization key is the private component on the pair and it's derived by using the modifier Blake2b and placing hands on a secret key. After this, the key is converted into a scalar for the jubjub curve.
The nullifier deriving key: This key is a derivation of the public key by the multiplication of the spending authorization key.
The view key pair comes in two and are:
Outgoing view key(ovk): This key is responsible for the decryption of outgoing transactions.
Incoming view keys (ivk): The incoming view key allows your decryption of incoming transactions.
This layer gives a run-through on the applications of zero-knowledge in the Iron Fish blockchain alongside its transaction in conjunction with the Sapling method. Also, it gives a run-through on how to validate and balance existing transactions.
This final section simplifies the rules on accepting new block transactions. Oftentimes, this is the layer several users visit the most.
Before now, we discussed how nodes are created but didn't discuss why they're created that way. Nodes are created following the blockchain consensus rules.
The blockchain consensus is a verification layer that sets rules on how nodes accept blocks. This consensus layer is what the Iron Fish blockchain operates on.
Moving on, the Iron Fish block will be accepted if it has a valid header and body. At high levels, verifying headers will confirm the amount of work behind a header. To confirm the amount of work behind a header, the system checks for a hash numerically lower than the target.
Moving on, the Iron Fish block will be accepted if it has a valid header and body. At high levels, verifying headers will confirm the amount of work behind a header. To confirm the amount of work behind a header, the system checks for a hash numerically lower than the target.
Validating a block header
To validate a block header, a receiving block header checks all of the following correctly.
Validating a block body
To validate a block body, the system validates all transactions in the block. This is done by checking the validity of each transaction.
The Iron Fish gossip protocol broadcasts new transactions and blocks to every peer in a network. To do this, nodes in a network verify incoming transactions, then send them to other peers. After broadcasting the transactions, the nodes validate the incoming blocks before signaling the node’s transaction ledger. The essence of a peer broadcast is that every peer receives messages quickly.
A Zero-Knowledge proof refers to cryptographic techniques that verify and proof statements without exposing their underlying data. For the Iron Fish blockchain, it can do this by using zk-SNARKs. Essentially, zk-SNARKs shields Iron Fish users’ identities and balances. Because of this, you successfully hide your identity and transaction details.
Unlike bitcoins and ethereum, Iron Fish blockchain transactions are not in the permanent ledger. Instead of this, Iron Fish users can transact without it revealing their balance or their identity. Experts even say the Iron Fish blockchain creates platforms for developers to carry out their work. Most especially, this platform will favor developers who have no foreknowledge of cryptocurrency.
The Iron Fish network uses the sapling protocol created by Zcash to verify transactions on its blockchain. In verifying transactions, they protect their clients and offer better services.
Not only are they important to developers, but they're also important to cryptographers and enthusiasts in the field. For cryptographers, they can create Rust Coding coinage for their work and other systems.
The Iron Fish blockchain offers several benefits to its users. One of these is the ease of accessibility into networks for node creation. Another one is the advanced level of its decentralized privacy transactions.
So, don't be caught in the traps of archaic systems that disallow you from using effective software. It's with effective software that developers develop interesting and mind-blowing software for blockchains as well as platforms related to blockchains. Ensure to update yourself on all of these and enjoy advanced technological solutions.
Also read: Digital Identification on the Blockchain with Microsoft’s ION
This article will discuss the Golem Network and how it operates intensively.
Blockchain technology has exposed the world to a realm of beautiful creation that we would have thought to be impossible years ago. From a technology built mainly for peer-to-peer transactions in 2009 (bitcoin blockchain), the blockchain has become the technology of choice for many applications such as healthcare, gaming, real-estate, etc.
Blockchain technology not only allows for creating wealth or enforcing a contract without a third party but also for building supercomputers. The first decentralized supercomputer to be built on the Ethereum network using blockchain technology is the Golem Network.
Golem was co-founded by Piotr Janiuk, Aleksandra Skrzpczak, Julian Zawistowski and Andrzej Regulski in 2016 in Switzerland. After launch, Golem sold 82% of its supply and raised about 820,000 Eth, which amounted to about 8.6 million dollars at that time.
Golem is a decentralized application (dApp) built on the Ethereum network. It is a decentralized supercomputer that connects computers in a peer-to-peer network, thus creating a global market where application developers and users can rent resources (idle computational power) of other user's machines. Users can rent their hardware and be paid in Golem tokens. Those who need computational resources to complete a more complicated task such as CGI rendering, artificial intelligence, etc., can get it and pay for it through the Golem marketplace. The beauty of the Golem Network is that anyone can access it, and its constituents are the combined power of users' machines from personal computers to the whole data centers.
The computational resources supplied by centralized cloud service providers such as Amazon, Google, etc., have limitations such as hard-coded provisioning operations, closed networks, and proprietary payment systems. Golem provided a decentralized marketplace where users can share the computational resources that other users require to carry out their tasks to address these limitations. The users who share their resources to the Golem Network get rewarded in Golem tokens (the native token of Golem).
Golem functions as the backbone of a decentralized marketplace focused on computing power. Anyone who wants to create and deploy software to the Golem Network can publish the software to the application registry. Developers can use the application registry and transaction framework to extend and customize the payment mechanism, which gives rise to a unique way of monetizing software.
The Golem Network has various features that make it unique, but the application registry and transaction framework are essential. The application registry and transaction framework empower developers and create a secure, transparent, and efficient platform.
The application registry is simply a register of the basic information of applications and their developers. A smart contract built on the Ethereum blockchain allows developers to integrate their applications into the Golem Network. Anyone can confirm the authenticity of an application by checking the registry; the registry holds information about a trusted application and a non-trusted application. Developers can publish their integrated applications and help users locate the required tools for their needs.
The transactional framework allows developers and providers to decide the payment mechanism and set the price they want for their applications. The transaction mechanism is entered into the application registry and must use an open-source or Ethereum Virtual Machine (EVM) as a deterministic environment. The mechanism also uses GNT (the native token of the Golem Network) and receives community approval. Examples of transaction frameworks are off-chain payment channels, custom receipts, Nano payments, per-unit use of software, payout schemes, etc.
Golem provides a platform where providers, software developers, and others share computing power and network resources. The transaction initiates when a requestor (a user who accesses Golem Network to ask for resources) demands computational resources from a provider (a user who sells computing power) through the task template. For instance, instead of paying a centralized cloud-based platform such as Google Cloud for artificial intelligence, which is a computer-intensive process and slow on some occasions, the user can request computation power from a provider in the Golem's peer-to-peer network.
Steps involved in carrying out a task through the Golem Network include the following:
The Golem Network requires the task template (which has the complete computational logic) to execute the request made by the requestor. The computational logic needed to execute the request are:
As soon as a task is completed, Golem immediately grades the requestors and providers that use its marketplace through the reputation system. The network detects malicious nodes and provides an evaluation metric for scoring tasks correctly.
The reputation system monitors the task of the requestors to ensure that it does not contain errors when the provider computes it and monitors the timeline of the requestor's payments.
The reputation system grades a provider because they have computed their task correctly, and the task passed a verification check upon return.
Golem cryptocurrency (GNT) use-case is in the Golem Network. The value of GNT is attached to its use in the Golem Network because it is the coin of choice. Requestors need a GNT token to rent computational resources from a provider who computes the computations. Hence, the requestor will always have to buy GNT to access the Golem Network.
The Golem Network was created to solve the problems associated with renting computing power from centralized cloud-based providers. It achieved this by allowing users to supply and lease providers' computational resources using a peer-to-peer approach. The network rewards providers of the hardware the requestor rent with GNT. Golem prides itself as the first open-sourced decentralized supercomputer powered by the Ethereum blockchain.
Also read Augur: Your Global, No-Limit Betting Platform
Have you ever thought about the possibility of having a platform on the blockchain that predicts the future? Well, whether you have thought about it or not, the Augur platform is here to give you a chance at predicting the future and rewards you if your prediction is correct. This article has been written to introduce you to Augur v2 and its operations. However, it will start with the general features between the two versions.
Augur protocol was launched in 2014 by Forecast Foundation owned by Jack Peterson, Jeremy Gardner, and Joey Krug as one of the first generation protocols built on the Ethereum platform. Augur raised more than 2,000 BTC and 100,000 ETH on its first day of the crowd sale.
The platform has a native token known as reputation (REP). With a market capitalization of approximately $308 million, reputation ranks at number 154 and has a total supply of 11 million tokens. After years of operation, it launched a version 2 where it re-enforces the development since its launch.
Augur v1 was developed when Ehereum was barely two years old; since then, Ethereum, its parent blockchain, has evolved. Augur is a decentralized peer-to-peer software that uses the Ethereum blockchain to enable its users to predict the market. Augur verifies that an event happens and rewards those that made the correct prediction because it acts as a decentralized oracle. With Augur, anyone can predict the outcome of a future event such as the UEFA champions league winner, an election winner, the day of the next iPhone launch, etc.
The Augur concept is based on incentivizing correct predictions - users that correctly predict the future outcome of an event get Ether (ETH) as a reward while those with false predictions, experience losses. The higher the chance an event will happen, the lower the reward you get for predicting right. The lower the probability of an event, the higher the incentive you get for predicting correctly.
Augur is a market prediction protocol. This means that it is pretty different from the way exchanges work. While exchanges allow users to trade assets, the market prediction platform users depend on the events' outcomes.
Augur has four stages for its market prediction protocol. The stages are:
It is easy for anyone to create a prediction market on the Augur platform. Augur provides a template for anyone who wants to use their platform to access, and for situations where templates are not available, there is a custom setting.
A user has to get funds for a validity bond to create a market. A validity bond is an Ethereum fund paid for making a call. The fund is returned once it is established that your market is not invalid. The user also needs a no-show bond (this fund is returned if your designated reporter shows up to give their report within 24 hours after the market ends, and it is deposited in REP). If the user reports in 24 hours but the reported outcomes are not in final agreement upon the outcome, it is still forfeited. The fund is returned only when the outcome is correct and within 24 hours.
Also, the market creator sets a creator fee (a fee paid by traders to reward the market creator after the market contract has been settled(usually in Ethereum). The creator fee is set to encourage users to create a market.
This is the stage where people participate by buying shares in the outcome of the betting topic (events) and get rewards for their contribution on the Augur platform.
The more shares people buy, the higher the prices of the shares. Hence, the people who invested in the shares earlier get it at a lower price than those who got in late.
This stage allows people (reporters) to report on the market to Augur oracle, which determines the event's outcome. If the report is consistently correct, it becomes part of the consensus outcome, and reporters get their reward. But if the report is not among the consensus, the report is false, and the reporters lose their reward.
Although all reporters require reputation (the native token of Augur) to participate in reporting on the Augur protocol nevertheless, reputation is not needed to place a bet on the platform.
In this stage, the traders close out their trades and receive their payment.
Augur v2 is an entirely new deployment of the previous Augur Version because the v1 has no upgradeability, escape hatch or, method of halting trading activity on the protocol or the REP token.
Augur v2 incorporates or integrates the following;
Using 0x Mesh for off-chain order books is one of the most significant changes to Augur in version 2. It allows for no-fee 'maker' orders and enables the capacity to transfer the onus of Ethereum transaction fees on to order 'takers'. The 0x utilization serves as a boon for liquidity formation and allows Augur service providers and market makers to operate with more attractive margins.
Unlike Augur v1 that allows users to bet with ETH, the new version introduced a stablecoin DAI for betting. Introducing a stablecoin diminishes the volatility of the original betting asset, ETH, which further improves the experience for users.
Before Uniswap v2, Augur relied on a semi-centralized price feed oracle to inform the REP's market capitalization system. Upon its launch, the Augur v2 integrates Uniswap's newly incorporated pricing signal to dynamically adjust reporting fees based on the target REP valuation peg of 5x open interest.
Unlike its version 1, Augur v2 interoperates and is compatible with web3 concepts. It is designed to natively support signing up for a wallet from either Portis, Formatic, or Torus and abstract away key management and provide authentication flow easily. For instance, users can sign up with familiar login details with Portis and support login with either a phone number or email address and Google account using Fortmatic and Torus, respectively.
Augur is a platform that utilizes the Ethereum smart contracts to execute its operations and ensures that users who made the right predictions are rewarded. The recently launched v2 incorporates several user experiences, interoperable, new settlement using DAI instead of Ethereum, market-making tools, and the ability for a market to be settled as invalid.
Also read Digital Identification on the Blockchain with Microsoft’s ION
This article describes the concept of digital identification on the blockchain and the working mechanism of Microsoft's ION.
From time immemorial, identification has been an integral part of the human race signified by many things such as tribal marks, body piercings, etc. In short, all humans have an identity, but how we identify ourselves has continually changed over the years.
Humans identify themselves through identification cards, which is important to confirm our identity relating to people or organizations. For instance, anyone opening a bank account, checking into a hotel, traveling out of a country, or even applying for a driver's license needs a form of identification card that is personal to the owner.
The advent of technology has reshaped how humans can identify themselves, especially online (digital) identification. As the way to represent identity changed gradually from analog to digital (internet), many people lost the liberty to manage their identity credentials online. This has prompted the belief in some people that blockchain could be the answer to the identity problem created by the internet since it is purely decentralized.
The identification on a blockchain will limit the control of people's identity to their own hands instead of a third party. Hence, they have complete control over their data.
This article goes beyond identity on the blockchain to exploring in detail the Microsoft ION identity solution. It defines identity on the blockchain, discusses how ION works and the various architectures and system features that make it unique from other identity networks on the blockchain.
Digital identification in the blockchain uses blockchain principles to create an identity card and provide management in such a way that gives control to the owner rather than a third party. Since the first blockchain implementation in bitcoin, it has been useful in various applications, including identity, healthcare, supply chain, etc.
Thanks to Bitcoin, a decade ago, that aroused the curiosity of developers, cryptographers, and distributed systems engineers to solve the problems associated with centralized identity systems. Today, cryptographers and other distributed system players are deploying identity solutions on various blockchains, viz; Bitcoin's ION, Cardano's Atala Prism, Ethereum's Element, and so on.
The distributed system community, through groups like Internet Identity Workshop IIW, World Wide Web Consortium W3-C, Rebooting Web of Trust RWoT, are exploring the ideas and technical processes of the traditional identity system. Hence, proposing decentralized identities to achieve a fully distributed and decentralized identity. The purpose behind DID, a foundational technical component of decentralized digital identity, is to give ownership and control to individuals.
While many solutions are proffered, the common denominator is finding a scalable, user-owned unique identifier to a set of cryptographic keys and routing endpoints. So many solutions thus far are not focused on achieving a scalable and decentralized network that doesn't require utility tokens, consensus mechanisms, and trusted validator nodes.
In response to the above-stated issue, Microsoft proposed and launched Identity Overlay Network, also known as ION. Before exploring the solutions, architectures, and killer features of Microsoft's ION, it is crucial to discuss in-depth more about identity.
Digital identification on the blockchain could solve some of the problems associated with our present identification process. These problems are:
Before defining Self-Sovereign Identity, we should understand that the user-centric model cannot give autonomy, which users need. So, the SSI was introduced to provide sovereignty and put total control in the hands of users.
Self-Sovereign Identity (SSI) is a digital identity that people can store on their devices without relying on an external party. The concept of SSI is purely decentralized and gives the power to create and manage an individual's identity to the owner instead of a third party.
The digital identity in a blockchain is decentralized, and it operates based on the following components:
Blockchain identification has numerous advantages, which are elaborated on below.
The idea behind ION is to achieve a scalable, resilient, user-owned decentralized identity system where users do not need utility tokens, consensus, and trusted validated nodes. By implication, users own and operate their nodes. ION is a layer 2, public, permissionless, decentralized DID overlay network that runs atop the Bitcoin blockchain and leverages a deterministic DPKI protocol called Sidetree.
Before fully deploying ION in early March, Microsoft started exploring Sidetree between 2017 and 2018. During this period, they determined if it was worth investing in. Upon realization, the team worked in collaboration with SecureKey, Mattr, Consensys, Transmute, Gemini, Bitpay, Casa among others to codify Sidetree into a formal specification with the decentralized identity foundation.
Microsoft's ION comprises a collection of microservices, including a Bitcoin Core, IPFS, and MongoDB (for local data persistence). Simply put, the majority of ION's code comprises Sidetree protocol. As a Sidetree based DID network, it combines Sidetree logic module; a chain-specific read/write adapter, a content-addressable storage protocol (e.g., IPFS), MongoDB, and an existing layer one protocol.
The content-addressable storage protocol like IPFS helps replicate data between nodes. The above combine to form the Sidetree protocol that enables the creation of layer 2 DID networks that run atop existing blockchains (layer 1) at thousands, or even tens of thousands, of PKI operations per second. The Sidetree requires no additional consensus like several other layer 2 solutions. It simply relies on a decentralized chronological ordering of operations provided by the underlying blockchain. Unlike monetary units and asset tokens, IDs are not intended to be exchanged and traded. To achieve greater scalability without relying on additional layer 2 consensus schemes, trusted validator lists, or special protocol tokens. Also, the Sidetree is designed to allow all nodes of the network to arrive at the same Decentralized Public Key Infrastructure (DPKI) state. This allows an identifier based solely on applying deterministic protocol rules to chronologically ordered batches of operations anchored on the blockchain, which ION nodes replicate and store via IPFS.
ION leverages a single on-chain transaction, blockchain-agnostic Sidetree protocol to anchor tens of thousands of DID/DPKI operations on a Bitcoin chain. The ION node processes and encodes transactions with a hash used to fetch, store, and replicate the hash-associated DID operation batches via IPFS. Without requiring an additional consensus, the nodes process the hash associated DID operation batches following a DIF's set of deterministic rules, enabling them to independently arrive at the correct DPKI state for IDs in the system. The nodes are designed to fetch, process, and assemble DID states in parallel, and also, the aggregate capacity of nodes can run at tens of thousands of operations per second.
To run ION, you need to meet certain hardware and software requirements.
Hardware requirement;
Software requirement
Make sure you have running on your machine, Windows, or Linux operating system. Upon meeting the listed prerequisites, follow the below to run ION and create DIDs;
Though digital identification in the blockchain is a field that is still new, it gives an assurance of more tight and user-centered control of one's data than centralized databases. It reduces the risk of getting people's information to hackers who use it for different nefarious activities. Microsoft proffered a scalable, resilient, user-owned identity management system that doesn't require utility tokens, trusted validator nodes, and additional consensus mechanism through ION, a layer two solution to decentralized identity.
Also read DeFi Lending: A Primer
Today, lending is one of the most important financial activities in society. It fuels economic growth and facilitates commercial activities. The size of the world’s debt markets as of 2020 was estimated to be more than $281 trillion, more than three times the world’s annual output. This paper focuses on DeFi lending markets being created through the use of blockchain technology.
Credit, offered by a lender to a borrower, is one of the most common forms of lending. Credit fundamentally enables a borrower to purchase goods or services while effectively paying later. Once a loan is granted, the borrower starts to accrue interest at the borrowing rate that both parties agree on in advance.
When the loan is due, the borrower is required to repay the loan plus the accrued interests. The lender bears the risk that a borrower may fail to repay a loan on time (i.e., the borrower defaults on the debt). To mitigate such risk, a lender, for example, a bank, typically decides whether to grant a loan to a borrower based on the creditworthiness of this borrower, or mitigates this risk through taking collateral - shares, assets, or other forms of recourse to assets with tangible value. Creditworthiness is a measurement or estimate of the repaying capability of a borrower . It is generally calculated from, for example, the repayment history and earning income, if it is a personal loan.
The current mainstream lending market, led by banking institutions, is fraught with issues as highlighted below.
Individuals or entities with thin credit files face financial exclusion from present lending institutions, which have stringent lending rules and underwriting models to reduce default risk. The International Finance Corporation estimates that 65 million firms have unmet financing needs of $5.2 trillion each year.
The supply and demand side of lending is fragmented based on lending period, interest rate, credit rating etc. in the present markets. This results in sub optimal liquidity. Further, the oversupply of liquidity in one submarket cannot be promptly transferred to serve the demand of another submarket.
The financial exclusion in current systems has given rise to alternative lending entities, including peer-to-peer lending markets. These lending entities typically charge borrowers a premium for securing funding, understanding that the borrowers are left with no other options to source funds. Because these markets are non-regulated, fraudulent activities and high default rates permeate these less strict lending markets.
During 2007 financial crises, institutions were left holding trillions of dollars worth of near-worthless investments in subprime mortgages.
The dated information technology infrastructure used by mainstream lending entities is a crucial impediment to efficiency and speed. There is limited data exchange between financial institutions. Credit history and other related information is fragmented and opaque.
Despite their respective distinctions, most DeFi lending protocols share two features; they have replaced centralised credit assessment to codified collateral evaluation, and they employ smart contracts to manage the system functionalities. Some key concepts being used by most DeFi protocols are highlighted below.
Value locked represents the total users’ deposits in a protocol’s smart contracts. The locked value serves as a collateral or reserve to back the system.
Lending protocols issue users IOU (I Owe You) tokens against their collateral deposits. These IOU tokens redeem deposits at a later stage, and they are also transferable and usually tradeable in exchanges.
A loan’s collateral represents the entirety or part of the borrower’s deposit against the loan. The collateral ratio determines how much loan a user is allowed to borrow.
The liquidation of a loan is triggered automatically by a smart contract. When a loan’s collateral ratio drops below a critical threshold due to interest accrued or market movements, any network participant can trigger the function to liquidate the collateral.
Borrowing and lending interest rates are computed and adjusted by smart contracts according to the supply-borrow dynamics, based on protocol-specific interest rate models.
The total amount of profit or income produced from a business or investment is referred to as yield. In DeFi, it is often measured in terms of Annual Percentage Yield (APY). Yield is relevant to the suppliers of loans, and is largely dependent on borrowing demand.
The market price information of locked and borrowed assets are supplied to smart contracts through external data feeds providers called “price oracles”. An oracle imports off-chain data into the blockchain so that it is readable by smart contracts. There are different kinds of oracles that the lending borrowing protocols use. Such as, chainlink or any custom made DEX oracles such as uniswap’s TWAP.
Liquidity pools are markets of loans for crypto-assets. Users called liquidity providers (LP), act as lenders and supply an asset to the protocol. In return, they receive a claim to the supplied asset represented as minted tokens (IOU). In return for liquidity provision or supplying assets, lenders are given incentive in the form of interest. At any time, lenders can redeem their IOUs by transferring minted IOU tokens to the protocol, which then pays back the original tokens (with accrued interest) to the redeemer, simultaneously burning the minted tokens (IOUs). This can be seen by a simple representation of providing liquidity on Compound protocol shown below. A user supplies ETH as an asset and gets cETH as an IOU token, which can be redeemed back for the underlying ETH plus interest paid in the units of supplied asset, in this case ETH.
Borrowers can initiate a loan by borrowing tokens deposited in a pool. This can be seen by a simple representation of borrowing on Compound protocol shown below in which a user deposits ETH as collateral and gets cETH as an IOU token representing the collateral plus the borrowed DAI. The collateral can be redeemed by paying back the borrowed amount plus the interest. The interest rates paid and received by borrowers and lenders are determined by the supply and demand of each crypto asset. Interest rates are generated with every block mined.
To ensure that borrowers eventually repay the loan, they are required to provide a collateral (usually in the form of ETH). An unpaid loan of person A can be liquidated by person B, who pays (part of) A’s loan in return for a discounted amount of A’s collateral. For this to be possible, the value of the collateral must be greater than that of the loan. To illustrate this, let's say a borrower has taken out a loan of 100 DAI by depositing $150 worth of ETH as collateral, given that the required collateralization ratio is 150%. If ETH falls in value and if the borrower’s collateral is now worth less than $150, then anyone can pay for the loan by paying 100 DAI for the loan, and in return can get the ETH deposited by the borrower as collateral at a discounted rate set by the protocol.
In DeFi, tokens can represent a user’s share in a liquidity pool or serve the purpose of keeping the markets in equilibrium and to ensure that all actors behave honestly. Protocols also distribute governance tokens that allow holders to propose and vote on protocol changes, such as modification of interest rate models. Governance tokens are often given as a reward to incentivise participation, from both borrowing and lending sides, in a protocol. One more usage of governance tokens from the perspective of a protocol is to pay debt in the scenario of a black swan event.
They are the main users of the protocol. Lenders supply assets for loans in order to earn yield or interest income from their holdings. Borrowers on the other hand, take loans to get liquidity by providing collateral. They do this because they expect appreciation in the price of their collateral and don’t want to sell it to access liquidity. The loan can be used for consumption, allowing the person to overcome a temporary liquidity squeeze or to acquire additional crypto assets for leverage exposure.
Protocols may require that the on-chain state is continually updated to maintain certain standards such as collateral ratio. To trigger state updates, certain protocols rely on external entities called Keepers. Keepers are generally financially incentivized to trigger such state updates. For instance, if a protocol requires a user’s collateral to be automatically liquidated under certain conditions, the protocol will incentivize Keepers to call transactions to trigger such liquidation and in return the Keeper will receive the liquidated collateral at a discounted price. The network of Keepers can be based on pure P2P execution or a consortium based on some consensus protocol such as PoA, or PoS.
Governance, in DeFi, is the process through which a protocol is able to make changes to the parameters which establish the terms of interaction among participants. Such changes can be performed either algorithmically or by agents. Presently, a common approach to governance is for a protocol to be initiated with a foundation. The foundation has control over governance parameters, with a promise to eventually decentralize its governance process in future. Such decentralization of the governance process is instantiated through the issuance of a governance token, an ERC-20 token which entitles token holders to participate in protocol relative to their share of total supply. Governance can be both full on-chain, off-chain or a hybrid combination of both.
Basic coin voting can empower large whales to vote on the system and virtually hijack it. But this can be mitigated through Quadratic voting. Detailed information on the topic of DeGov can be found here.
Protocols in DeFi follow different approaches for lending: Collateralized debt positions, P2P collateralized debt markets, Under collateralized borrowing and Flash loans.
Contrary to the traditional lending markets, the lack of a creditworthiness system and enforcement tools on defaults leads to the necessity of overcollateralization in most lending and borrowing protocols (e.g. Compound, Aave). Over-collateralization means that a borrower is required to provide collateral that is higher in value compared to the debt being taken out. To maintain the over-collateralization status of all the borrowing positions, lending pools need to fetch the prices of cryptocurrencies from price oracles.
Once a borrowing position has insufficient collateral to secure its debts, liquidators are allowed to secure this position through liquidations. Liquidation is the process of a liquidator repaying outstanding debts of a position and, in return, receiving the collateral of the position at a discounted price. At the time of writing, there are two dominant DeFi liquidation mechanisms. One is the fixed spread liquidation, which can be completed in one blockchain transaction, while the other one is based on auctions that require interactions within multiple transactions.
To illustrate the concept, let's take the example of Compound protocol. Users of Compound can lend and borrow ETH and other ERC-20 tokens. Users who lend their token receive IOUs in the form of cToken (e.g. cETH, cDAI) of an equivalent value in return. The IOUs can be used to redeem the supplied asset by the lender and accrue the interest. The deposits of all lenders are pooled together and they start earning interest right when they deposit their funds in the smart contract based pool. However, the interest rates are dependent on the pool’s utilization rate. When liquidity supply is high loans will be cheap as interest rates will be lower. When loans are in demand, borrowing will become more expensive with interest rates becoming higher.
Lending pools have the additional advantage that they can maintain relatively high liquidity for the individual lender in case of redemption. The role of the keepers comes into play in the CDPs liquidation process.
This approach works by matching lenders with borrowers. In other words, for someone to be able to borrow ETH, there must be another person willing to lend ETH. Loans are collateralized in this approach too in order to mitigate counterparty risk and to protect the lender, the collateral is locked in a smart contract. Under this approach, the lenders do not automatically start earning interest, but only once there is a match with a borrower. The advantage of this approach is that the lenders and borrowers can specify terms of loan such as time period and fixed interest rates.
From a technical perspective, a state channel can be opened between both parties with the signature verification done on the base chain. And the channel will be closed only if both parties agree that settlement has been done correctly.
Under-collateralized borrowing also exists in DeFi (e.g. AlphaHomora), however in a limited and restricted manner. A borrower is allowed to borrow assets exceeding the collateral in value, however, the loan remains in control of the lending pool and can only be put in restricted usages (normally through the smart contracts deployed upfront by the lending pool). For example, the lending pool can deposit the borrowed funds into a profit generating platform (e.g. Curve ) on behalf of the borrower.
An alternative to over-collateralized loans are flash loans. Flash loans take advantage of the atomicity of blockchain transactions. Atomicity means that multiple actions can be executed within a single transaction. Even if one of the actions is not executed, the whole transaction is reverted. Because flash loans are taken out only for the duration of a single transaction, they allow the borrower to take out loans and repay the full borrowed amount plus fees by the end of a single transaction. Aave is one of the first protocols that supports “flash loans”, later on followed by Uniswap.
We can see from the chart below that the Total Value Locked (TVL) in DeFi lending has meteorically increased over the last year rising from almost $4B to $39B, posting an increase of almost 10X.
In terms of protocols with highest TVL, Aave tops the list with a current share of approx. 37.5% followed by Compound (25%) and Maker (21.8%). InstaDapp is a lending aggregator, hence we do not account for it here as this could result in double counting the TVL. The combined TVL of the 3 highlighted platforms constitutes approx. 85% of the entire DeFi lending TVL which shows their dominance.
Interest Per Year (IPY) is the speed at which interest is accruing in DeFi. IPY is calculated by multiplying the current borrow rate by the total outstanding debt. The composite IPY of the entire lending space is shown below for the last one year. In general, each asset listed on a lending protocol has its own market and terms for loans. Data from each cryptocurrency / asset listed by a protocol is combined to arrive at its composite IPY.
We can see from below that the overall IPY in the last year has increased starting from around $70M to currently standing at $885M. Around July the IPY fell considerably possibly due to the crypto market downturn, still it was able to stay above $500M. The IPY since the downturn appears to have rebounded back, though one can infer that borrowing demand is correlated to the overall crypto market cycles.
As far as individual protocol’s IPY is concerned, Aave appears to take the lead on this metric too. It generates almost 2.5 times the IPY of Compound and almost 12 times the IPY of Maker. This implies that Aave is able to attract much more borrowing demand compared to the other two. It would be worth investigating the reasons for this. One possible reason could be that Aave allows borrowers to select a stable or variable interest rate, while Compound and Maker only have variable interest rate options. This introduces uncertainty in interest payment amounts both for borrowers and lenders. Other possible reasons could be better user experience and newly added features in Aave V2 as highlighted in this article.
Users seem to be engaging with DeFi lending protocols for a variety of reasons. One of the motivations has been to receive participation rewards e.g. valuable, tradable governance tokens resulting in overall higher APY compared to traditional lending. By guaranteeing IOU tokens’ redeemability, DeFi lending protocols also ensure full transferability and exchangeability of debt holdings.
Sophisticated investors as well as institutional investors leverage DeFi lending for trading. For example, an investor bullish on ETH may borrow, say, DAI to buy some ETH. In expectation of a price increase of ETH, investor would swap borrowed DAI for ETH on an exchange, hoping that the purchased ETH can be worth more DAI in the future to such an extent that it exceeds the loan amount and leaves the investor some profit. Similar to the borrow spiral discussed above, an investor can repetitively (i) borrow DAI, (ii) swap DAI for ETH, (iii) re-deposit borrowed ETH as collateral, (iv) borrow more DAI. As such, a “leveraging spiral” is formed to maximize the investor’s long exposure to a crypto-asset that is expected to appreciate.
Flash loans have opened up a huge space for innovation in arbitrage and to unlock collateralized borrow positions on lending protocols, however they can also be used for malicious actions e.g. in case of governance voting.
It is important to highlight that competing blockchains and overcollaterization problems may stifle growth of DeFi lending. Several protocols such as Cosmos, Polkadot and Solana are rushing to kickstart DeFi ecosystems on their own platforms, this may pull some developers and liquidity away from Ethereum based DeFi systems. However healthy competition and increased interest just goes on to demonstrate the value in the potential of DeFi. But perhaps the biggest limitation of current DeFi systems is overcollateralization of crypto assets. This causes capital inefficiency. Further, it does not help the unbanked since without a crypto collateral, they cannot access capital.
Overcollaterization problem can be potentially resolved via a credible reputation/credit system in DeFi. With this approach, based on the credit history and other relevant parameters, loans can be provided to users that meet certain criteria. This would allow for financial inclusion and induce more liquidity in the market to serve user needs.
Decentralized lending has enabled borrowers and lenders to earn yield and maximise their returns on investment on their crypto holdings, without needing to go through any centralised intermediaries. Though the current DeFi lendings’ offer exceptional yields (which are partly there to fuel adoption), it is unlikely these yields will be sustainable. However, billions of dollars worth of value locked, institutional interest and the increasing network effects make it likely that the DeFi lending platforms will continue to grow and offer acceptable yields to its users.
References:
Xu, J., & Vadgama, N. (2021). Arxiv.org. Retrieved 11 September 2021, from https://arxiv.org/pdf/2104.00970.pdf
Arxiv.org. (2021). Retrieved 11 September 2021, from https://arxiv.org/pdf/2101.08778.pdf
Bloomberg, S. (2021). World's $281 trillion debt pile set to rise again in 2021, says IIF. Business-standard.com. Retrieved 11 September 2021, from https://www.business-standard.com/article/international/world-s-281-trillion-debt-pile-is-set-to-rise-again-in-2021-iif-says-121021800277_1.html#:~:text=Governments%2C%20companies%20and%20househ
Polkadot [IOU] is now available for trading on Poloniex. Medium. (2021). Retrieved 11 September 2021, from https://medium.com/poloniex/polkadot-iou-is-now-available-for-trading-on-poloniex-c18c0e13d180
What is Quadratic Voting? | Hacker Noon. Hackernoon.com. (2021). Retrieved 11 September 2021, from https://hackernoon.com/what-is-quadratic-voting-253zo3xa5
MakerDAO issues warning after a flash loan is used to pass a governance vote. The Block. (2021). Retrieved 11 September 2021, from https://www.theblockcrypto.com/post/82721/makerdao-issues-warning-after-a-flash-loan-is-used-to-pass-a-governance-vote
Ifc.org. (2021). Retrieved 11 September 2021, from https://www.ifc.org/wps/wcm/connect/03522e90-a13d-4a02-87cd-9ee9a297b311/121264-WP-PUBLIC-MSMEReportFINAL.pdf?MOD=AJPERES&CVID=m5SwAQA
Decrypt. (2021). What is Compound? A 3-minute guide to the DeFi lending project - Decrypt. Decrypt. Retrieved 11 September 2021, from https://decrypt.co/resources/compound-defi-ethereum-explained-guide-how-to
Supplying Assets to the Compound Protocol. Medium. (2021). Retrieved 11 September 2021, from https://medium.com/compound-finance/supplying-assets-to-the-compound-protocol-ec2cf5df5aa
Borrowing Assets from the Compound Protocol. Medium. (2021). Retrieved 11 September 2021, from https://medium.com/compound-finance/borrowing-assets-from-compound-quick-start-guide-f5e69af4b8f4
(2021). Retrieved 11 September 2021, from https://medium.com/aave/aave-v2-the-seamless-finance-d52075d97a7
Also Read: Bitcoin Dawn of Innovation
In this article, we will be exploring the Connext Network and its working mechanism.
Since its inception in 2015, Ethereum has become the most sought-after blockchain due to its vast benefits, ranging from developing decentralized applications (dApps) to the ease of building other projects. However, as the popularity of Ethereum increases, it led to the congestion of the network, which resulted in slower transaction time and increased gas fees to carry out a transaction on the blockchain.
Since these problems have been encountered, various solutions have been proposed to mitigate the issues. One of which is layer 2 - which enables transactions to be carried out outside the Ethereum mainnet but records the data on the Ethereum mainnet. Connext is a layer 2 solution that aims to solve the problem.
Connext is an Ethereum based interoperable platform that connects Ethereum Virtual Machine (EVM) compatible chains and layer 2 solutions. Connext achieves its function without the use of a new external validator.
Connext works through the Noncustodial Xchain Transfer Protocol (NXTP) for its cross-chain transfer without depending on any external validator.
The NXTP model consists of a locking pattern, off-chain routers, and SDK. The locking pattern prepares a transaction and fulfills it; the off-chain router passes call-data between chains, and the SDK prompts an on-chain transaction.
All transactions on the NXTP follow three stages which are:
i) Route auction: This is the route that users select for their transactions to follow. There are different routes that a transaction can follow. A user places a request on auction for the router to bid, and selects the route they prefer, the system (routers) seals the offer - which means that there is a price range and time limit for the transaction to be done.
ii) Prepare: This is the stage where the transaction is audited before being sent. The prepare stage involves both the sender-side chain and the receiver-side chain. The users send their transactions to a contract on the sender-side chain that manages transactions. The contract now has the router's sealed bid, which prompts the router to submit the same transaction to the transaction manager on the receiver-side chain, after which a specific amount is set aside and locked as liquidity. This stage ensures that there is an incentive for the router to carry out the transaction.
iii) Fulfill: This is the stage where a transaction is executed, or the transaction is returned if it doesn't complete. After the preparation stage on the receiver-side chain, the user sends a signed message to a relayer (it could be the router) which relays the signed message to the transaction manager on the receiver-side chain to complete a transaction and claim the funds locked by the router.
The router also submits the same message to the sender-side chain to complete the transaction and unlock the original amount.
Learn more about NXTP
Connext is an Ethereum based interoperability system that is highly capital efficient and truly trust-minimized. No other Ethereum based interoperable system has this advantage that Connext has.
Connext is a protocol that is easy to use on any Ethereum Virtual Machine compatible chain. It also supports non-EVM compatible chains though it requires rewriting the transaction and porting the contract.
Also read The Cosmos Network: A Comprehensive Guide
Are you a developer looking for the next best blockchain to host your project? are you a cryptocurrency trader that wants to try other Blockchains? Or are you a trader or investor in cryptocurrency but the gas fee is not friendly to you? whatever your interest is or wherever your interest lies, this article will present the Solana Blockchain, one of the most exciting Blockchain that answers most of your questions.
Solana is a decentralized Blockchain that is fast, secure, scalable. It is a platform where anyone can build a decentralized app. It is essential to know that the Solana blockchain can run around 50,000 transactions per second (TPS) and have a block time of approximately 40ms. Astonishing, isn't it?
In 2017, Anatoly Yakovenco created the Solana blockchain. He and his team created the blockchain to make transactions fully trustless and solve scalability problems.
Yakovenco did not just build Solana from the blues; he had a lot of experience while working with Dropbox as a software engineer and lastly Qualcomm before making the Solana blockchain.
Today, top organizations such as Qualcomm, Microsoft, Apple, and Google support the project from their wealth of experience.
You may be wondering about how Solana could achieve scalability with running 50,000 transactions in a second. If you have been wondering about it, wonder no more as the reason for this stunning performance is tied to the working principle of Solana.
To ensure all these work together for good, Solana developed eight important innovations by which it operates. The eight innovations are discussed below.
Solana uses a proof of stake consensus that works perfectly with proof of history to determine the transaction time in the protocol.
The proof of history is a record that verifies that an event happened within a specific time frame and keeps track of it. This approach assigns a timestamp for any transaction carried out on the blockchain. It also disallows any involvement either by bots or miners in deciding the order in which blockchain records its transactions. It is different from other blockchains in that it does not wait for other validators to confirm a transaction before it is accepted. Solana allows all validators on its platform to confirm transactions immediately without waiting for another. It can achieve this by making use of SHA-256 - it enables hashing a verifiable delay function sequentially (VDF).
Byzantine fault tolerance is an agreement that tolerates failure and defends the computing system against corrupt data and malicious attacks. As a result, all the nodes in the system get the same authentic data all the time.
The tower's practical byzantine fault tolerance ensures that all transactions in the system are verified with the lowest processing power possible. It can do this because it uses the proof of history as a clock - a record of the timestamp of past transactions - before achieving consensus. Hence, Solana becomes faster and more efficient than other blockchains.
It is a block propagation protocol that makes transmission to the blockchain node easy.
Validators on Solana can now execute transactions faster and reduce confirmation time. All thanks to the gulf stream. The transactions are always at the forefront of the system for execution.
Gulfstream is the mempool-less transaction platform. We must understand what a mempool is to grasp what the Gulfstream entails fully.
A mempool contains all transactions that are submitted on the blockchain but has not been processed. What these mean is that a mempool is a transaction awaiting confirmation on the blockchain. With this understanding now, we can safely say a Gulfstream is a platform that does not allow delay in a transaction before it's been processed. Interesting right? We will delve into how the gulf stream works and how it helps the Solana network to make faster transactions.
In Solana, there is a concept of leader which is the role of a validator when it is appending entries to the ledger. Validators can easily execute a transaction before the set time, reducing the transaction time. This is possible because all validators are aware of the order of upcoming leaders, so they send the transactions to the expected leader before the set time so the leader can process the transactions.
A block occurs on the Solana platform approximately every 800 milliseconds, and it becomes more time-consuming to unfold as they increase. In a worst-case scenario, a fully confirmed block-hashes contains about 32 blocks. A client signs a transaction that points to a recent block-hash that the network has confirmed. The signed transaction is sent to the validators which immediately forward it to the most senior leader in the network. The client knows that the network confirms a transaction and that the block-hash has an expiry time, so the client signs a transaction knowing that it can execute or fail. Immediately the network is ahead of the rollback point, the referenced block-hash expires, and the client knows that the transactions become invalid, never to be executed on the chain.
The sea level is a parallel smart contract runtime. The sea level helps Solana protocol scale across GPUs and SSDs, enabling efficient runtime. In addition, the sea level gives all Solana transactions the ability to run concurrently on the blockchain.
The pipeline mechanism is a processing unit that enables all transactions to be quickly validated, optimized and recurrent across all the nodes in the Solana network. The pipeline follows the outline below to carry out its function.
Cloudbreak allows the Solana network to achieve a high level of scalability. Before defining Cloudbreak, let's understand the Solana blockchain scalability.
Scalability can be achieved without sharding, but more is needed than scaling computations alone because the memory used to monitor accounts can easily be overwhelmed, affecting the size and speed of the network. The network used to achieve scalability must take advantage of the account's concurrent read and write access. RAM and SSDs can be used to achieve scalability without sharding, but they come with a huge disadvantage. To solve the challenges posed by using RAM or SSDs for scalability purposes, Solana designed software that allows 100% utilization without involving the hardware. It does not use a traditional database to address scalability but uses different combinations to provide solutions. The mechanisms are highlighted and discussed below.
a) Memory-mapped file leverage: a file that has its byte mapped in a process's address (virtual) space. The kernel may or may not store the cached memory in the RAM. Although the RAM does not limit the amount of physical memory, the size of the disk can. The disk performance determines the reads and writes.
b) Faster sequential transactions: Sequential transactions are faster than random operations across all the virtual memory stacks.
The accounts data structure of faster sequential operations are:
i) The RAM stores all index of accounts and fork.
ii) About 4MB of memory-mapped files stores all the account.
iii) A memory map stores an account from a proposed fork.
Random distribution of maps across numerous SSDs.
iv) Semantics (copy-on-write) are used.
v) Writes are assigned randomly to a memory map for the same fork.
vi) After each writes, the index is updated.
Solana gets the privilege to write and scale concurrent transactions sequentially and horizontally across many SSDs because the account updates are copy-on-write and assigned to a random SSD. It is not only the writes that are horizontally scaled but read. Read achieves this because forks states updates occur across numerous SSDs.
c) Garbage collections: As accounts get updated, and forks are finalized after rollback, every old account is collected as garbage and freed from the memory.
d) State updates for fork: horizontally scaled sequential reads that happen across all SSDs help with computing Merkle root of the state updates for a fork.
With Cloud break, Solana achieves scalability without sharding and also scales much more than computations. You can look at it as an optimal data structure for concurrent reads and writes across the network.
As the name implies, the archiver in the Solana network is the node for storing data from validators. Therefore, many checks go on in the background to ensure that only valid data are stored on the archivers.
Solana has been attracting many projects that build its tech stack due to its fantastic advantage in the current cryptocurrency world. Today there are more than 200 projects built on the Solana protocol. Some of the projects are highlighted below.
The Solana ecosystem is growing very fast, with about two hundred and eighteen (218) projects built. The project cuts across various categories such as Defi, AMM, Stablecoins, Governance, Dex, and NFTs.
SOL is the native token that is used on the Solana protocol. The Sol token has two crucial use cases, which are:
To stake sol token, you should follow the steps below:
According to coingecko, Sol has a current circulating supply of 272 million out of its maximum store of 488 million. It had an all-time high of $149.91 in September 2021 and currently trades at a value of $142 per Sol token. The current market cap of Sol is around $41,499,887,443.
The Solana blockchain achieves the fastest cryptocurrency transaction per second compared to Ethereum which takes about 15 seconds per block, and bitcoin of 10 minutes per block. Recently, platforms such as OKEx, MXC, and the Solana foundation became partners to launch two new funds that will increase the growth of projects on the Solana ecosystem. If the ecosystem continues this way, it might just become the leading blockchain soon.
Also, read on Stable Coins.
Before the Ethereum Blockchain could reach its potential, it needed several transformations. Such transformations include migrating to Ethereum 2.0 also known as Serenity. ETH 2.0 is the much-awaited Ethereum upgrade that allows a more scalable, cheaper, decentralized, and secure network.
Ethereum has since chanted the course to migrating from the POW to POS consensus for cheaper transaction costs and better decentralization. Accompanying the upgrades are various hard forks promising various Ethereum Implementation Proposals, EIPs.
By the way, what is a fork, and what exactly is a hard fork? The fork is the process of copying and improving on an existing protocol, similar to the traditional software upgrades.
A fork can be soft, hard, accident, and intentional. It is a hard fork when it changes the rules of the blockchain protocol so that the old blockchain and the resulting blockchain are incompatible.
A hard fork is a radical upgrade that can make previous transactions and blocks either valid or invalid and requires all validators in a network to upgrade to a newer version. It’s not backward-compatible. A soft fork is an upgrade to the software that is backward-compatible and has validators in an older version of the chain that sees the new version as valid.
When two or more miners find a block at the same time, an accidental fork occurs but it is intentional when the rules of the network are being modified.
Similar to other blockchain networks with active communities, Ethereum Blockchain has undergone soft and hard forks over time. For a brief, we need to reference other non-Ethereum hard forks before explaining Ethereum hard forks in detail.
So far, Bitcoin, the first implementation of blockchain launched by Satoshi Nakamoto, a pseudo-anonymous entity, has also undergone several hard forks. The most prominent Bitcoin hard forks are; Bitcoin XT, Bitcoin Classic, Bitcoin Unlimited, Segregated Witness (SegWit), Bitcoin Cash, and many others. From records, one common thing about the various hard forks, both Ethereum and Bitcoin hard fork, is that they are geared towards protocol upgrades which are done by network consensus.
Similar to other network and software upgrades, Ethereum concerns birthed the various hard forks. It ranges from security, centralization, fees, scalability, and other Eth 1.0 limitations. For instance, despite having a good run in Q1 and Q2 2021, Ethereum had its highest fees that scare developers. A simple swap on the Uniswap for example is as high as $100 while others could be $16-20.
While we are set to discuss Ethereum Hard forks fully, it is important to note the Ethereum journey so far and link them to the hard forks accordingly. The journey as referred to here is the Ethereum developmental roadmap.
Ethereum has a four-stage development roadmap. They include; frontier, Homestead, Metropolis, and Serenity. Recall that, unlike most POW networks, Ethereum is way beyond currency and has to measure up to accommodate varying use cases and features. Hence, the need for a roadmap.
Below explains the various journey so far;
The frontier is the first developmental roadmap of the Ethereum blockchain. It went live on July 30, 2015. Although it went live as a beta, it performed better than expectations. Developers began writing smart contracts and decentralized applications to deploy on the Ethereum Blockchain. Shortly after its launch, it experienced a hard fork called Ice Age.
Ice Age, also known as “Frontier Thawing”, was the first (unplanned) fork of the Ethereum blockchain aimed at providing security and speed updates to the network.
While the Frontier phase of Ethereum laid the groundwork for experimenting in Ethereum, the Homestead steps it up to its first production release. Homestead, the second major version of the Ethereum release, comes with several protocol changes and a networking change that provides the ability to do further network upgrades.
The upgrades changes was activated at Block >= 1,150,000 on Mainnet
Block >= 494,000 on Morden
Block >= 0 on future testnets. The homestead hard forks include:
EIP-2: Main homestead hard fork changes
EIP-7: Hard fork EVM update. DELEGATECALL
EIP-8: devp2p forward compatibility.
The Ethereum Classic hard fork is a child of necessity after the homestead hard fork. It was in 2016 when hackers exploited DAO, one of the most notable Ethereum projects. As a result, developers initiated the Ethereum Classic hard fork to mitigate the DAO loss.
The DAO, also called Distributed Autonomous Organization, raised $150m in Ether in a public crowd sale.
The DAO, in principle, was to operate as a form of decentralized venture capital fund where investors would send Ether to the DAO to receive voting rights, whereafter those who had invested (and voted) would democratically decide on which projects to which the DAO should disperse those funds.
Contrary to the arrangement, the DAO was unable to complete its vision when millions of Ether vanished.
As a response, the Ethereum community moved to recover the funds by voting to change Ethereum’s baseline code to recover the lost funds and reimburse investors. As a result of the majority vote in the favor of this proposal, a hard fork and two separate blockchains were created.
EtherZero is the second intentional Ethereum hard fork that took place in 2018. The hard fork went live at 4936270 block on 29 Jan 2018. Unlike the Ethereum Classic hard Fork, it was started by a group of tech geeks looking to provide a better platform for creating decentralized applications (dApps) and smart contract deployment. Contrary to other forks, it has no specific interest to speed up transaction rates. Rather, the development team was determined to make transactions completely free.
This is the third phase of the Ethereum upgrade and one of the notable hard forks. It is the forerunner to Serenity in the sense that it lays the background for early proof of stake (POS). Metropolis upgrade includes Byzantium, Constantinople, and early serenity. Byzantium is a backward-compatible upgrade aimed at integrating zero-knowledge protocol and delay of the network difficulty bomb. On the other hand, Constantinople is a non-backward compatible upgrade.
It represents a hard fork deployed to solve a security weakness allowing hackers to access users' funds and integrates a smart contract functionality that enhances the verification process as well as the reduction of gas price. Lastly, as a forerunner to serenity, it made the first attempt of implementing POS and account abstraction.
Also known as the Ethereum 2.0, serenity is the latest Ethereum upgrade. It builds and improves on the successes of the previous upgrades and hard forks. The major improvement of the Serenity upgrade is porting from POW to POS fully.
By implication, serenity increases its transaction capacity, changing gas fees and achieving scalability while achieving more eco-friendly coin generating and validating networks.
The launch of the Beacon chain is Serenity's first step to revolutionizing the Ethereum network. From the Beacon chain, it pushes through to; Berin hard fork, London hard fork, and the upcoming Shanghai hard fork.
The Berlin hard fork is a forerunner to the London hard fork. It is named after the host city of the inaugural Ethereum Devcon convention. Berlin hard fork incorporates several EIPs which addresses gas price and introduces new transaction types.
The Berlin hard fork went live at 12,244,000 on April 15 and proposes several EIPs. The EIPs include; EIP 2565, EIP 2718, EIP 2929 and EIP 2930.
Before the Berlin hard fork went live, several delays were citing possible vulnerabilities and centralization concerns. Some believed the Berlin hard fork will be less impactful in the short term, but will further pave the way for the upcoming London hard fork.
After the Berlin Hard Fork comes London hard fork, scheduled for July before being delayed to August 4. In preparation for the ETH 2.0 launch in 2022, London hard fork makes significant changes to Ethereum’s transaction fee system, which has long been a contentious subject.
Ethereum's London hard fork introduces two new known Ethereum Improvement Proposals (EIP), namely: EIP-1559 and EIP-3238. EIP-1559 is a proposed change to the way users pay gas fees on the Ethereum network. It also proposes a new transaction pricing mechanism that will create a base fee for each block. Usually, users enter a bid to pay their gas fees, but the EIP-1559 allows miners to prioritize transactions based on the fee added and use the fee as a reward for adding it to a block. Now, each block will have a fixed, associated fee instead. The EIP design allows the blockchain to burn the fee, reducing the overall supply of Ether (ETH). Thereby creating deflationary pressure on the cryptocurrency.
Ethereum 1.0 has a difficulty in mining called the difficulty time bomb. As miners reach the difficulty time bomb, it takes longer to mine a new block, and thus reward gets lower as well as slower transaction. To motivate users and encourage them to move to Ethereum 2.0 upon launch, EIP-3238 will delay the time bomb to enable the network to incentivize validators to Ethereum 2.0’s Proof of Stake consensus model at the correct time. It is suspected that if there is no consensus to move to the awaiting Ethereum 2.0, the scenario of Ethereum Classic will happen. Delaying the time bomb will lead to a 30-second block time ice age around Q2 of 2022, therefore, enabling "The merging" of Ethereum 1.0 with Ethereum 2.0.
The upgrade didn't stop at Berlin and London hard Fork. It proceeded to the Shanghai hard fork scheduled for OCTOBER 2021. Shanghai hard fork is promised to include the following EIPs;
The new opcode BEGINDATA indicates that the remaining bytes of the contract should be regarded as data rather than contract code and cannot be executed.
Ethereum Blockchain so far has been a work in progress. It started from a four developmental roadmap Viz: frontier, homestead, metropolis, and serenity to achieve what we will call ETH 2.0 2022. Every upgrade of Ethereum accompanied an associated hard fork. The major Ethereum hard forks are Ethereum Classic, Shanghai, London, Berlin, Homestead, Constantinople, and Ice Age hard forks. It is expected that the Ethereum network will attain scalability with eco-friendly network fees and better decentralization. The ETH 2.0 is promised to provide a sustainable blockchain network that doesn't compromise any of the above features.
Over the years, cryptocurrency has grown in leaps and bounds. There has been a significant improvement from the day it was first launched, and today the cryptocurrency space has more than a trillion-dollar market cap. Despite the growth associated with cryptocurrency, its volatility has made it increasingly difficult for new investors to put their money into it. ETF provides safety against risk and volatility. Many investors can invest in cryptocurrency through the ETF.
An ETF stands for exchange-traded fund. An exchange-traded fund means buying and selling an ETF the same way you buy and sell a stock. An ETF gives you the ability to spread your investment money across many underlying assets rather than have all your investment in one underlying asset. It can be used for diversification and security of investment because you can use it to get many assets.
An ETF tracks the price of an underlying asset. For example, copper ETF tracks the price of copper.
A cryptocurrency ETF is an exchange-traded fund that tracks the price of the cryptocurrency. Investors can buy or sell a cryptocurrency ETF in the stock exchange the same way they buy and sell other stocks. An investor trades cryptocurrency ETF in the traditional market exchange and not a cryptocurrency exchange.
The cryptocurrency ETF works the same way as other ETFs. The organization in charge of funds would need to own cryptocurrencies which serve as the underlying assets. The cryptocurrency would serve as shares that investors can buy. Once the investors purchase the shares as ETFs, they already own cryptocurrencies indirectly.
Since you cannot trade a cryptocurrency ETF on the cryptocurrency market exchange, you do not need a wallet to store it. For example, if you want to invest in bitcoin, you can get the bitcoin ETF from the stock exchange, and it would have the same value as the bitcoin. If the price of bitcoin increases, then the price of bitcoin ETF increases. If the price of bitcoin reduces, the price of bitcoin ETF also reduces. In essence, the price of the bitcoin ETF is dependent on the price of bitcoin.
There are cryptocurrency ETFs, and it is not surprising that the bitcoin ETF was the first. The first country to approve a bitcoin ETF was Canada. The name of the ETF is the purpose Bitcoin ETF and goes by the ticker BTCC on the Toronto Stock Exchange. BTCC was launched in February 2021. Three more bitcoin ETFs have been launched in Canada, bringing the total number of bitcoin ETFs to four.
Presently, Canada has approved four new Ethereum ETFs: CI Galaxy Ethereum ETF, Purpose Ether ETF, Evolve ETF, and Ether ETF. Toronto Stock Exchange is the place where all ETFs are currently trading.
The year 2021 might be the year of the cryptocurrency ETF as countries like the United States of America, Brazil, Chile, and the UAE, are considering launching it. To date, the U.S. Securities and Exchange Commission (SEC) has rejected all proposals to launch a crypto ETF. The reason cited by SEC for the rejection is related to crypto being volatile and non-regulation of the crypto market.
Despite all the rejections, we await a positive announcement from the SEC later by June. There is a high probability that a crypto ETF would be launched then.
Apart from the cryptocurrency ETF, we also have the blockchains ETF trading on the stock exchange. The popular blockchain ETFs are:
Cryptocurrency ETF makes it easy to invest in cryptocurrency because you do not need a wallet. You also do not have to sign up on any cryptocurrency exchange market. The use of an ETF reduces the chances of losing your cryptocurrency. And it also reduces the risk associated with having cryptocurrency directly.
For example, if you store your cryptocurrency in a personal wallet, you could lose it once the password is lost. If a centralized exchange is compromised, you can also lose your funds if you have it there. In summary, a cryptocurrency ETF gives you leverage over the risk and volatility associated with cryptocurrency.
It is easy to diversify with an ETF. You could invest in more than one underlying asset from different companies in your ETF. For example, you could have bitcoin, Ethereum, Google stocks, Tesla stocks, Facebook stocks, Guinness stocks, Coca Cola stocks, and more in your cryptocurrency ETF. The advantage of this ETF is that it helps you to reduce your risk and diversify your portfolio.
The United States of America Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) regulate financial institutions. Cryptocurrencies are decentralized, and hence, no financial institution regulates them. Cryptocurrency ETF won't trade on decentralized platforms but regulated exchanges such as New York Stock Exchange, making it open to most tax havens and pension funds.
Investors that want to invest in cryptocurrency and make better long-term returns can use cryptocurrency ETF.
There are two ways a cryptocurrency ETF can be managed. It can either be managed actively or passively. An actively managed fund has a higher management fee than a passively managed fund. The management fee is higher for an investor with many cryptocurrency ETFs when compared with those with less.
For instance, you can trade bitcoin for Ethereum, but you cant trade bitcoin ETF for Ethereum. It is impossible to trade bitcoin ETF for Ethereum because it is an investment fund and not a cryptocurrency.
Cryptocurrencies were created not to be centrally regulated. They were created to be decentralized and not regulated by any financial institution such as the central banks. Cryptocurrency ETF won't enjoy all these benefits because they are regulated by the financial institution where they are listed.
One of the advantages of ETF is the fact that you can use it to diversify your portfolio. The diversification advantage can also be a disadvantage as ETF may not track the accurate price of a cryptocurrency because of the value of its other holdings.
For example, a drop of 5% in Ethereum may not reflect a 5% drop in the price of an ETF that tracks numerous assets.
While you can directly use your cryptocurrency, such as bitcoin, to buy things and make payments, you cannot use your ETF to do such.
For Institutional investors who could not get into the crypto market for many reasons, crypto ETFs could provide an entry point for them to invest.
Cryptocurrency ETF would open up a new era of investment all over the world if it is accepted. It would allow people who have low-risk tolerance to invest in cryptocurrency. However, if you have high-risk tolerance, there might be no need to invest in cryptocurrency ETFs since the return of cryptocurrency is higher than in ETFs.
Also, read about Opyn Protocol.
Opyn is an Ethereum based decentralized Options trading platform, which allows you to buy, sell and create Options. It is a trustless and permissionless insurance platform that protects user’s decentralized finance (DeFi) assets from risks. There are three categories of Opyn users which are:
To understand Opyn and how it works, you must understand some terms associated with DeFi and Options trading. Below is an explanation of the words.
Options are the contract that gives you the right to buy or sell an underlying asset at a set price within a particular time frame. It is not a must to purchase or sell the underlying asset at the expiration time. You can decide to honor the contract or not.
We have two types of Options which are Call Options and Put Options. Option buyers are known as holders, while Option sellers are known as writers.
A Call Option contract gives you the right to buy a specified asset at a set price within a particular time frame. You have a choice to either accept or not, as the contract does not make it compulsory for you to buy at the expiration time. A Call Option could be a Call Option buyer or a Call Option seller.
A Call Option buyer is also known as a “Call Holder”. As a call holder, you can decide to exercise the right to buy an Option contract or not. To have the right to buy, you will pay a fee to the Option seller called the Premium.
A Call Option seller is also known as a “Call Writer”. As a call writer, you must sell an Option contract to the buyer if he or she exercises the right to buy at the strike price.
A Put Option contract gives you the right to sell a specified asset at a set price within a particular time frame. You have a choice to either sell or not, as the contract does not make it compulsory for you to sell at the expiration time. A Put Option could be a Put Option buyer or a Put Option seller.
A Put Option buyer is also known as a “Put Holder”. As a put holder, you have the right to sell an Option contract but are not obligated to do it. You can decide to exercise your right to sell or not.
A Put Option Seller is also known as a “Put Writer”. As a put writer, you do not have an obligation to buy the underlying asset at the strike price.
The money an Option buyer pays to the Option seller to buy a contract is called a Premium. It is the income a seller gets for selling a contract.
The “Bid price” is when a buyer is willing to pay a specific price to own an Option contract.
The “Ask Price” is the price at which a seller accepts to sell an Option contract. The money you are willing to pay to buy an option contract is the premium.
When exercised, the price at which a seller can sell an Option contract or buy an Option contract is the strike price.
This term is different for both the Call Option and the Put Option. For the Call Option, ITM is when the current price of an underlying asset is greater than the strike price. While for the Put Option, ITM is when the current price of an asset is lower than the strike price.
For a Call Option, OTM refers to the position where the strike price is greater than the current price for an asset. While for a Put Option, OTM is when the strike price is lower than the current price for an underlying asset.
ATM is the same for both Put and Call Options. It refers to the position where the price of an underlying asset is the same as the strike price.
Rich wants to sell 1 ETH for 3,000 USDT before 10 am on May 28, 2021. Stone is willing to buy 3,000 USDT for 1 ETH at Rich’s request. Rich pays Stone 5 USDT for having the right but not the obligation to sell his ETH. After the expiry date of May 28, 2021, Stone must buy from Rich if he decides to sell. If Rich doesn’t sell, he only loses 5 USDT and keeps his 1 ETH while Stone keeps his 3,000 USDT plus the 5 USDT.
In the above example,
The reasons for using Options differ for people. People use Options basically for:
To sell Call Options and sell Put Options, you should follow the steps below:
Opyn is an Ethereum based decentralized, trustless, and permissionless Options trading platform, which allows you to buy, sell and create Options. It is flexible, secured, and easy to use for three categories of users - sellers, buyers, and market makers to ensure against financial and technical risk in a DeFi, and also help users generate income.
With Opyn, you can buy and sell a call option, or buy and sell a put option. To start trading options using Opyn, you can use the guide in the article.
Also, read about Hegic Protocol.
OpenSea is a decentralized peer-to-peer marketplace to buy, sell and trade non-fungible tokens (NFTs). OpenSea markets itself as the largest NFT marketplace. Therefore, It is worth walking to explore the world of OpenSea and discover what it offers in the trade of NFT.
This article will take you through the questions like what OpenSea is, And what is the user journey in the platform.
With the surging popularity of CryptoKitties, Devin Finzer and Alex Atallah decided to create a decentralized platform to trade NFT. Hence, in 2018, OpenSea was formed. Since then, OpenSea is witnessing significant growth in the NFT market. Artwork by Beeple for $70 million and flying Pop-Tarts rainbow cat for $600,000 is trading on OpenSea.
The Growth rate of OpenSea is astonishing. OpenSea in March 2021, recorded $82.5 million in transaction volume.
Recently Logan Paul has announced the launch of his first NFT on Twitter, with networth of over $3.5 million. These announcements from influencers are adding fuel to the burning fire.
NFTs acquire huge significance for Digital art. They are non-replicable digital assets which require a unique marketplace for its trade. Thats where OpenSea came into play. But before we take a deep dive into the OpenSea marketplace. If you still have some ambiguity regarding NFTs you may read more on this.
OpenSea is like an amazon for NFTs. It has millions of unique digital assets. Besides having digital art it has multiple categories of collectibles, games items, music and other digital representations of physical assets.
Wallet is a tool to connect with the blockchain, and to store, buy, and sell NFT. One thing to remember here is that OpenSea doesn’t provide the infrastructure to store the assets. So we need to connect with the external wallet. In this case we are using MetaMask.
Trading on OpenSea is more to rely on smart contracts than the counterparty. You don’t need to trust the buyer or the third party. This is because OpenSea uses the Wyvern protocol. This protocol enables the swap to change the state of NFT ownership as soon as the seller receives the cryptocurrency ownership.
After setting up the wallet, now it's time to connect with OpenSea and discover the world of it. To do so, click on the top right corner, then my profile, select MetaMask, sign in and follow the instructions in your wallet.
Your page is empty for now. To create one, you can click on create, fill the description and hit Add. You can now see your collections at the window.
The marketplace option is the heart of OpenSea. You can search for any NFT by typing name or can use various filter options.
To create your first NFT, click on the Add new Item. A new window will be open. You can add your metadata such as images/audio/video files with the NFT name below. You can also add external links and descriptions of the NFT.
This method can create only one NFT at a time. However, if you want to make multiple versions of the same artwork you can add the Edition numbers in the stats below.
You can also add unlockable content such as high-resolution files and private keys of Physical assets to ensure security. Once you are satisfied, you click on create and a new window of your NFT statistics will be open.
To buy NFT you first need to buy ETHs. Users also need to ensure that they accommodate gas cost by themselves.
Once you have finished purchasing ETH, bid on the NFT you intend to buy. You can also follow the auction. If you are the highest bidder in the auction you’ll get the NFT.
OpenSea claims to charge the lowest fee in the NFT space. They take 2.5% of the sales price. There are no service charges for buyers. You can learn more about their gas fee structure from here .
The NFT market is growing vigorously and it can only be limited by imagination.There is no doubt that the NFT markets such as OpenSea and Rarible are poised to prosper in future.
Recently, AIRNFTs build on Binance smart chain has also launched. Apart from that Aleph.im has also announced a partnership with the polygon to offer an unstoppable storage solution for NFTs marketplace.
Also read about blockchain architecture.
Hegic protocol is the non-custodial, decentralized, and on-chain Option trading platform built on the Ethereum blockchain. Hegic allows you to buy WBTC and ETH Options or sell ETH Options using the Hegic token. To sell, you have to provide liquidity.
An Option is a smart contract that gives you the right to buy or sell an underlying asset at a specific price within a certain time frame. There are two types of Options which are the Call and Put Option.
A Call Option is a contract that gives you the right but not the obligation to buy an asset at a certain price on or before a particular date. A buyer is known as a holder.
A Put Option is a contract that gives you the right but not the obligation to sell an asset at a specific price within a particular time frame. A seller is called a writer.
A Strike Price is the fixed price at which you can buy or sell an underlying asset if the Option is exercised (i.e., if you decide to buy or sell an asset). For example, the Strike Price is the buying price for Call Options and the selling price for a Put Option.
The price of an Option contract is called an Option Premium. There are four ways to trade Options, which are:
A Buy Call is a price above the Strike Price that you can exercise your right to buy. You may be wondering why you should buy an asset above the current price. The reason is explained with the example below. A Premium is paid to make a Buy Call. The risk involved with a Buy Call is minimal, as the maximum amount you can lose is the premium paid.
For example, if the Strike Price of Ethereum is $500, you can place a call to buy it at $600 within a week. Instead of paying $500 for the Ethereum now, you will pay $100 (Premium), and once the price gets to $700, you can exercise your right to buy and have made a net profit of $100. Your net profit is $100 because the Premium is subtracted from the total profit.
If the price is at $600 or below at expiration, the Option will expire worthless, and you will lose $100 (Premium) rather than $500 if you had bought without using an Option.
A Buy Put is the price below the Strike Price that you can exercise your right to buy. A Premium is also paid to make a Buy Put. The risk involved with a Buy Put is minimal, as the maximum amount you can lose is the Premium paid.
For example, if the Strike Price of Ethereum is $500, and you place a Put-Call at $400 within a week at a premium fee of $10, you can exercise your right to buy once the price gets to $400 or below before the expiry date. You will make a profit of $90 because the Premium will be subtracted from the gain. If the price does not decrease below $500 at the end of the week, you will lose just $10.
A Sell Call is a choice you make to sell a Call Option when the price falls below the Strike Price. A Premium is paid by the buyer of the call to you. Risk is high, as you are obliged to sell at the Strike Price if the buyer exercises the right to buy.
For example, if the Strike Price of Ethereum is $300, and the price falls below the Strike Price at the contract’s expiration. The seller will get a profit from the Premium paid. If the price becomes higher than the Strike Price, the seller will have an obligation to sell Ethereum at $300.
A Sell Put is the choice you make to sell a Put Option when the price falls below the Strike Price. A Premium is paid by the buyer of the call to you. Risk is high, as you are obliged to sell at the Strike Price if the buyer exercises the right to sell.
For example, if the Strike Price of Ethereum is $300, the price rises above the Strike Price at the contract’s expiration. The seller will get a profit from the Premium paid. If the price becomes lower than the Strike Price, the seller will have an obligation to buy Ethereum at $300.
Three elements affect the Options price. These elements are:
The time remaining for an Option contract to expire is called the Time to Expiration. A holder or writer can decide to exercise the, stop the contract to take profit or loss before the contracts expire, or let the contract expire and become worthless.
This is the Strike Price set for an asset. Any price above the underlying asset’s price in the Call Option is called out of the money. At the same time, any price below it is called in the money. The reverse is the case for the Put options. An increase in the underlying asset price causes an increase in the Call Option Premium and a decrease in the Put Option. A reduction in the asset price causes a decrease in the Call Option Premium and an increase in the Put Option.
This is the extent to which an asset’s price swings. It can be a high volatility asset or a low volatility asset. The higher the volatility, the higher the price, and the lower the volatility, the lower the price.
In conclusion, Hegic uses the American style Options to exercise your right before the expiration date. This style of usage is an excellent advantage of Hegic over the other decentralized Option trading platform.
Also read about Opium protocol.
Decentralized exchanges have been gaining more and more traction. It has been observed that a total of $1.48 billion in trading volume occured in UniswapV3 alone. Although protocols such as Uniswap, Curve, and SushiSwap significantly provide the exchange services within the Ethereum ecosystem. However, these exchanges do not support the swap between the different blockchain networks. So the question is, is there any way to swap native assets to other blockchains? For example, trade between Binance and Avalanche blockchain.
Here the THORChain comes as the solution to this.
THORChain is a decentralized cross-chain liquidity protocol that allows its users to trade digital assets from one blockchain to another in a frictionless, secured and decentralized manner. There are no custodians and wrappings. Users are paid to stake their assets in the liquidity pool to earn a fee at every swap.
Before we take a deep delve into the mechanics of THORChain, let's have a quick view of its history.
THORChain was founded in 2018 in a Binance Chain hackathon by a pseudorandom team. The team hasn’t come up with the real identity until now, but they have continued their research even after the hackathon. Later, advancements in Tenderment, Cosmos SDK, and working implementation of threshold signature scheme- TSS have helped them develop a fully cross-chain decentralized exchange. The TSS here is a cryptographic primitive for distributed key generation and signing.
THORChain will start by allowing trades of Ether(ETH), Bitcoin(BTC), Litecoin(LTC), and Binance Chain(BNB). But more is coming shortly as a limited mainnet called "Multichain ChaosNet" was also released in April 2021.
Also read about Tendermint and Cosmos SDK.
One important thing to mention here is that the native token of THORChain is RUNE. Every token in the THORChain has an equal value associated with the RUNE token in that blockchain.
RUNE is the native coin of THORChain, which empowers its economic ecosystem while providing incentives to the network. It serves as a settlement asset or liquidity in the network, providing security and governance to the THORChain network. The total supply available of RUNE is $484 million, while 50% of its supply has been burnt.
The network has specific roles. These are the following roles in the THORChain network.
Liquidity providers are the users who add their assets to the pool to gain incentives and rewards.
Swappers use liquidity to swap their asset by paying some amount of fee to the pool.
Node operators are those who validate transactions, reach consensus and add that transaction to the blockchain.
Traders are responsible for maintaining the pool by paying fees with the intent to earn a profit.
Churning is a mechanism in which only one node is active and can sign the transaction while others are waiting on standby. For every 50,000 blocks, the churning mechanism hits the system to replace the older nodes with the set of standby nodes. It makes sure that each node that fulfills the criteria must have a turn in the system to verify the transactions. Even though a high amount of RUNE is required for a fully functioning node, nodes with less RUNE can still verify the transaction without signing it.
THORNode services the THORChain network. THORChain is designed in such a way that anybody with funds can join the secured network. However, it has taken a step further with a high churn schedule that continuously emits the nodes. THORNodes comprises multiple independent servers which run a full node for each connected chain.
Bifrost is a protocol that provides the service of connecting each chain. Once all the nodes are in sync, the observer starts monitoring the vault address. Whenever they see any inbound transactions, they validate them and convert them into witness transactions. THORChain observes each transaction and collects it's node signer to confirm that they both are identical. As the nodes reach consensus, the transaction moves from the pending state to the finality state.
The state machine is responsible for performing the finalized transaction's logic and delegating them to the outbound vault.
As the transaction reaches a finalized state, the signer marks the valid transaction to their respective chains. This transaction is then sent to the TSS module, where it performs key-signing and broadcasts it to their respective chains.
The THORChain protocol is a network built with Tendermint in a Cosmos SDK ecosystem in which the application layer is not attached to the consensus and networking layers.
The consensus mechanism in THORChain is significant as the nodes inside the protocol must work together to record the transactions coming from different blockchains. To understand how it works, let’s take a simple example over here.
Let’s assume Alice wants to initiate a trade between ETH on the Ethereum network and BNB on the Binance Smart Chain. Alice will send a transaction to her ETH vault, where it keeps being monitored by the THORChain network. Here a Bifrost protocol will act as a connecting layer between the THORChain and the other blockchain networks. Its function is to keep track of the vault address and the inbound transactions. First, ETH is traded to RUNE in the Ethereum network, and as the nodes reach the consensus, the RUNE is then traded into BNB.
One thing which is essential to mention is that if a person wants to trade ETH against BNB. The user will be responsible for paying the ETH gas fee, while the BNB trade fee will be deducted from the outbound.
THORChain envisions empowering its economic ecosystem, and with continuous growth is proving its vision. More and more nodes are adding, increasing the trading volume and total locked value of the network.
Also read ConsenSys Quorum Blockchain
Flow is a user-friendly, decentralized, and, scalable Blockchain designed to support the creation of crypto-related games, digital assets, and applications that power them. Flow ensures scalability without sharding which makes it possible to keep transactions atomic, consistent, isolated, and durable (ACID).
Developed in 2018 by dapper labs, the Flow was licensed for use in 2020 for developers interested in creating and trading NFT. It gives the power to control data to the consumers, and it also gives the liberty to create any digital asset that can be traded anywhere in the world. Flow is an open-source Blockchain with its smart contract, which can be used by billions of people to power their applications.
In 2017, the dapper team launched CryptoKitties on the Ethereum network. CryptoKitties is a crypto-related game that allows you to buy, train, and sell cats online. The game became so popular that it brought congestion to the Ethereum Blockchain, causing it to stop. This event made the dapper’s team develop another Blockchain called FLOW.
Flow was designed to meet the demand of crypto-games like CryptoKitties and other non-fungible token collectibles.
Flow uses the multi-approach model to operate. This model is grouped into four pillars.
Traditionally, nodes operate and process Blockchain transactions and carry out all the operations involved in transactions. The roles result in a slow transaction and cause the transaction not to be serialized. Flow was able to solve this problem without compromising scaling productivity with pipelining – a technique used for dividing the roles of the validator nodes into four.
They are as follows:
The consensus and verification nodes handle the security of the Blockchain. The nodes ensure that the network is functional and accountable through the use of crypto-economic incentives. If a faulty collection or execution node introduces erroneous data into the Blockchain, any other honest node can punish and recover from the erroneous data. The consensus and verification node only allows a high level of participation from individuals.
The execution and collection node takes care of the scalability and security of the network. The beauty of the multi-role architecture is that all nodes are accountable and verifiable by one another.
Learn about TRON Blockchain.
Flow uses a high-level programming language called "Cadence". Cadence is easy to read and enjoy because of its ergonomic syntax. It is easy to learn, audit, and highly productive. It was designed to be secure, minimize runtime error, and easy to use to create unique and durable applications. To learn Cadence, visit the Flow playground on play.onflow.org.
A developer determines the tools that can affect their productivity. The criteria for selecting the tools depends upon the installation process, configuration, administration, usage, and maintenance. Flow has designed open-source tools that meet the above criteria. The tools are:
Also, Flow made it possible for developers that built their smart contracts to deploy it to the mainnet in a ‘beta form'. This gives room to update before releasing it. Once released, the contract becomes immutable. Furthermore, Flow alerts the users that the code is not complete, so they can decide to wait until completion before use. This method of smart contract deployment is a deviation from the previous ways where a smart contract cannot be updated after launch.
Flow reduces finality i.e. time taken for a transaction to be included in a block permanently - on Blockchains. Finality happens on Flow in seconds, which was previously not possible with other Blockchains.
You can pay with fiat, FLOW token or other crypto tokens for you to access the Flow network. Flow also gives the flexibility of owning a smart contract wallet that does not require seed phrases. You can easily create a smart user account on your wallet that is secured and supports automated processes.
Flow was designed as a solution to the “slow finality” of the Blockchain without sharding. It had achieved this without compromising the safety and serialization of the Blockchain. The Flow team partnered with the NBA, and this partnership has increased the popularity of the Flow network. Flow has made it possible to build an application that users can enjoy worldwide.
Also, read about Azure Blockchain.
The Opium protocol is a robust and universal platform that allows users to create, settle, and trade decentralized derivatives on Ethereum. A token represents every option on Opium, and it can be traded, sent, or stored in cold wallets. The system provides robust and universal financial primitives on-chain. It also allows for more advanced features like order books, combined orders, and market-making features to happen off-chain by leveraging meta-transactions.
The Opium protocol currently supports two products; swap.rate and opium.exchange. In simple terms, swap.rate enables users to create derivatives. On the other hand, the Opium.exchange is an open trading exchange specifically designed for decentralized derivatives.
Arjan Van Der Kooij and Andrey Belyakov founded the Opium protocol. Before creating this, Arjan has been a serial entrepreneur and private investor with 20 years of experience in business management. On the other hand, Andrey has been a professional derivative trader with ten years of experience to his belt. He is also a member of the CFA Institute.
Currently, the financial derivative market is the largest in the market but has always been under the control of banks. Other centralized financial institutions also own a large chunk of the derivative market. These entities provide the clearing, settlement, and trading of derivatives. The goal of the Opium Protocol is to move these traditional functions of centralized entities to the blockchain. By moving these traditional functions to a trustless, distributed, and immutable system, Opium will lower the cost and increase security. It will also make it possible to accommodate unbanked individuals in the world’s financial system. As an Opium user, you can be an investor, a hedger, speculator, margin trader, or arbitrageurs.
In an interview with CoinDesk, Andrey Belyakov said that they created the protocol to solve three specific problems experienced in the traditional derivative market. These problems include:
There must be a very good reason(s) to make us abandon the traditional players in the derivatives market. What are the things that set the Opium ecosystem apart from the centralized financial entities in the market? The Opium system is built to be compatible with both the DeFi market and the professional market. Most of the derivative protocols we have on the DeFi space today bring theoretical risks with them. They do this by using on-chain liquidity pools or the use of automated market makers (AMMs). Opium provides a robust and simple on-chain infrastructure that users can leverage off-chain.
The implication of having an alternative to on-chain infrastructure is the presence of more complex features. Some of these features include advanced derivatives, market-making strategies, order books, arbitrage combined orders, etc. All the features mentioned above are implemented at the layer 2 level. As a user, you can create decentralized derivatives benefiting from a risk profile that is more similar to the traditional financial products. However, these products may appeal more to a broader range of users than the on-chain derivatives.
The Opium protocol is live on the Ethereum mainnet, and SamrtDec audits it. Thus, it gives users the peace of mind necessary to try out new things with DeFi. There are currently at least three working products that are built on the Opium Exchange. These products have been assisting about four independent establishments in bringing their derivatives to the market by leveraging the Opium Protocol.
The Opium.Exchange product is a non-custodial platform built for decentralized derivatives. You can trade, hedge, or invest without the need for intermediaries. It also allows you to benefit from high-speed orders on meta-transactions. You will also enjoy secure settlement on-chain.
Every position created using the Opium Protocol is represented by ERC-721o tokens. These tokens are specifically designed to help you trade financial instruments. The Opium team created the tokens by combining the ERC-20 and ERC-721 standards with more functionality. Users can combine these tokens into portfolios, and they are backward compatible with the ERC-721stanbdard. The implication is that these tokens can be used in existing ecosystems. The ERC-721o standard has primary portfolio functions which include the following:
A portfolio is composed of the entire portfolio that can be managed or traded as a single ERC-721o token, hence saving gas fees. The portfolio decomposes when the tokens used to compose the portfolio are minted again and stored on your balance. You can recompose a portfolio by removing or adding to/from an already existing portfolio. However, you must ensure that you do that in a gas-efficient way.
This is a platform designed to help users hedge against or take advantage of the interest rate fluctuations in the DeFi lending and borrowing space. It also allows users to create contracts for interest rate swaps. One stream of future interest payments is swapped for another based on the stipulated principal amount.
The Opium Protocol is undoubtedly revolutionizing the derivatives market. Without millions of dollars, you cannot make derivatives, but Opium is changing all that. Now, everyone can run his own derivates in the most efficient way possible. You can follow the Opium project on social to stay up to date with the happenings in the derivatives market.
You can also read about Compound Defi Protocol.
Most people in the blockchain space know MakerDAO as the protocol behind the stablecoin DAI. DAI is a cryptocurrency that always maintains a 1:1 peg to the United States dollar. You can think of 1 DAI as equivalent to $1. Meanwhile, the interesting thing here is that Ether backs each DAI and not a third party. The volatility of Ether poses some notable challenges in terms of maintaining the peg.
This MakerDAO project joins a DAO with another crypto-collateralized stablecoin called DAI. The aim is to build a complete, decentralized finance ecosystem that permits loans and savings on the Ethereum blockchain network. The responsibility of creating and developing the Maker Protocol also saddles this project. The Maker Protocol aims to permit and control the emission of DAI anchored to the dollar. All these things happen on a series of smart contracts on the Ethereum blockchain.
What has made MakerDAO the largest DeFi project in the crypto and blockchain space? How did it come about? What does the future hold for this project? This article will answer all these and many more questions.
Rune Christensen started the creation of the MakerDAO project in 2015. In his first work on Reddit, Christensen explained his idea of creating a DAO on Ethereum and using it to generate a stablecoin that will be pegged to the dollar.
Christensen’s idea went further, and led to the formation of the Maker Foundation. The role of the foundation is to direct all developmental and management efforts of the MakerDAO project. In August 2015, the project launched its Maker (MKR) token. The token established the foundation of the government of the Maker Protocol.
In December 2017, the first stablecoin came into existence, governed by DAO in the crypto space.
According to the whitepaper, the Maker project aims to create an independent system controlled by smart contracts that manage collateralized debt positions (CDPs) using Ether. Thus, issuing a stable currency hinged on the price of the dollar. This offers new financing options in the relatively nascent blockchain ecosystem.
Creating a decentralized operating and governance infrastructure that enables people to develop a stablecoin with global reach is the main objective of MakerDAO. Also, the project seeks to create a mechanism that gives users access to decentralized finance (DeFi) through the use of cryptocurrency. This mechanism encourages people to convert their Ether to DAI.
The Maker protocol is a built-in smart contract and runs on the Ethereum blockchain network. This protocol allows the operation of a platform specifically for the generation and control of DAI stablecoin. The protocol also handles Maker Vault, Oracles, and voting within the entire system. With the Maker protocol, you can control the fundamental parameters of the whole system. This includes stability fees, interest rates, collateral assets, and many other things.
The protocol permits a democratized process where most MKR token holders must sanction every proposed change. This process ensures that the system doesn’t fall into a few hands and prevents manipulation in any way.
The DAI stablecoin is the second element that enables the MakerDAO to function efficiently and effectively. You can only generate the DAI stablecoin under certain conditions and with the use of the Maker protocol. The conditions in question are the ones decided by the community governing the protocol. By implication, DAI is an impartial and decentralized stablecoin.
Unlike most other stablecoins, DAI does not depend on banks, and it also doesn’t have collateral in fiat. It makes use of cryptocurrency as collateral. You can store your DAI in wallets that support the standard ERC-20 tokens. As DAI is built in this standard. If you want to generate DAI, you need to lock Ether or any currency accepted by the protocol within the Maker Vaults. The Maker Vaults will utilize such cryptocurrencies to create a collateralized debt position (CDP), thus generating the corresponding DAI. You can also save it as savings using a Maker protocol known as DAI Interest Rate (DIR).
The DAI stabelcoin can function as the following:
Before you can generate, support, and maintain the value of a stable DAI, you must first collateralize its value. To do so, you will use different tokens that can be deposited into the Maker Vaults. The Maker protocol ensures every DAI stablecoin has real value support that permits the supporting and issuance of each DAI within the ecosystem.
All collaterals accepted on MakerDAO are all tokens that are supported by the Ethereum blockchain network. Initially, collaterals started as something much more straightforward. Ether was once accepted as the only collateral, but it changed in 2019 upon releasing the multi-collateral DAI protocol (MCD). Other tokens began to be accepted. Today, the accepted tokens include all Basic Attention Tokens (BAT), USDC, wBTC, TUSD, KNC, ZRX, MANA, and Ether.
The collateralization value for every token varies, and the governance of the Maker protocol decides them.
Also read Ampleforth: A Comprehensive Guide.
In the course of this article, you must have come across Maker Vaults multiple times. They are the storehouses that hold all cryptocurrencies that act as collateral for DAIs. Using the Maker Vaults, you can:
It is important to note that the interaction with the Maker Vault is done without an intermediary. The user interacts with it directly. There are rules of operation guiding the operation of the Maker Vaults. If you send tokens as collateral to a Maker Vault to generate DAI, the collateral will always be available under certain conditions. If the token price fluctuates beyond the “Settlement Ratio,” the system liquates the position.
It means that the Maker Vault will sell your crypto to maintain the positive and stable relationship of the DAI. What matters most is to avoid losses to the protocol and to the people who support it. The liquidation is executed by the Maker protocol as stipulated in the interaction of users and the Maker Vaults.
The Maker Governance Framework (MGF) is in charge of handling the governance of MakerDAO. It is based on thoroughly analyzed and reproducible scientific models created by experts with a proven track record. The framework falls into the following components:
They are symbolic votes that are used to scrutinize community sentiment towards particular models or data sources.
They help to rectify the Risk Parameters identified by the models and data accepted by the Government Proposals. Executive votes bring about status change within the DAI Credit System, and it happens every quarter.
In the governance of MakerDAO, the role of the Maker Foundation is vital and very fundamental. The foundation directs the development and management efforts of the project. Aside from that, the Maker Foundation is also dedicated to expanding the project and also seeking financial and institutional support for the protocol.
The governance model of the Maker protocol ensures that neither the MKR holders nor the Maker Foundation has absolute powers to dictate what happens in the system.
The future looks great for the MakerDAO ecosystem and its users. Today, developers continue to use DAI and the Maker Protocol to create innovative decentralized finance applications. It thus increases the accessibility to users all over the world. Although people can argue that we are still at the early stage of things, the achievements so far are massive.
Also, read CURVE FINANCE: Let’s Take A Curve Into Defi Of Stablecoins.
The Cosmos network aims to build an internet of blockchain to enable blockchain networks to communicate with each other. Currently, blockchain systems operate in the form of an “island.” Blockchain networks operate in their world without any form of interoperability amongst themselves. There has been a lot of b bickering and maximalism among supporters of the different blockchain networks.
Many have asked, can there ever be one blockchain network to unite all other blockchains? This brings us to the Cosmos blockchain network, also called the internet of blockchains.
The Cosmos network is an independent and decentralized network of blockchain systems. Each of these systems is powered by the Byzantine Fault Tolerance (BFT) consensus algorithm. It serves as an ecosystem of blockchains with the ability to scale and interoperate with each other. Before the advent of Cosmos, blockchain networks cannot communicate with each other. They are not easy to build and can only handle quite a small amount of transactions.
The Cosmos network aims to create a system where a blockchain system can share data, communicate and transact with another blockchain. Cosmos’ inter-blockchain protocol was launched in February 2021. By allowing blockchain interoperability, Cosmos eliminates the need for different blockchain networks to compete ruthlessly to become the best. With Cosmos, many blockchain networks can coexist with one another, while leveraging their individual advantages. And use cases.
The Cosmos blockchain network goes beyond making it possible for different blockchains to interact and share data. It has also created a streamlined process that makes it possible for developers to create their own custom blockchain. The creation of a functional blockchain system takes years but it can be achieved within months using Cosmos. To showcase the immense power of the Cosmos blockchain network, the team built a copy of Ethereum on Cosmos. The Ethereum copy is known as Ethermint and it works just like the parent Ethereum network. It is also very much compatible with already existing smart contract features and other Ethereum tools like MetaMask.
In 2017, Interchain Foundation, a non-profit establishment that funds open-source blockchain projects contracted Tendermint Inc. to develop and launch the Cosmos software. The Tendermint platform was founded by Jae Kwon. He developed his own byzantine fault-tolerant (BFT) consensus mechanism. Kwon also contributed to the Cosmos whitepaper as a co-author.
The Cosmos blockchain network comprises independent blockchains that use the byzantine fault-tolerant (BFT) consensus mechanism. Blockchain networks that do not utilize BFT algorithms connect to the Cosmos blockchain network using “adoptor” blockchains. The Cosmos network wasn’t designed for a particular use case; rather it can adapt to suit multiple use cases.
Cosmos has two different types of blockchains; the Zones and Hubs. Zones are the regular blockchain while hubs connect zones with one another on the network. Cosmos Hub was the first to be launched in the Cosmos ecosystem. It is a proof-of-stake (PoS) blockchain system with ATOM as the native blockchain.
Cosmos’ IBC protocol was designed to solve the lack of communication and data sharing between different blockchain networks. For blockchain to enjoy widespread real application, its ability to interoperate and communicate with both external and internal blockchain protocols is very essential. You can imagine a telephone network with the capacity to only communicate with those in its immediate geographical location. It will certainly not last.
The Cosmos IBC enables makes it possible for several blockchains to communicate seamlessly with one another.
A Deep Dive into the Ontology Network.
It is an open-source and scalable infrastructure designed in such a way that it builds multi-asset public PoS blockchains. The Cosmos SDK can also be deployed to build permissioned proof-of-authority (PoA) blockchain systems. It also serves as a modular framework that can be used to construct application-based blockchain networks and not virtual machine-based applications. Software engineers always seek simplicity and ease of use when trying to build interoperable and application-specific blockchains.
Virtual machine-based blockchain networks like Ethereum were built to host application development on existing blockchain as smart contracts. There are certain specific use cases of smart contracts that are beneficial, like in the case of single-use applications. However, they fall short when it comes to the development of complex decentralized networks. Smart contract technology is limited in its versatility, technical performance, and sovereignty.
With the Cosmos SDK, developers can choose between using pre-built modules and their own custom-built modules. Such a feature allows developers to test their minimum viable product before they launch their mainnet. Additionally, with the Cosmos SDK, users can connect their individual blockchain to the Cosmos network using IBC, increasing liquidity as well as user adoption. Also, the Cosmos SDK has been utilized in creating key blockchain and crypto projects like Binance, Kava, Terra, and IRISNet.
ATOMs are the native token of the Cosmos Network. The first ATOM tokens were created when the Cosmos mainnet was launched. It was distributed to initial donors, token sale participants, the Cosmos Foundation, and the core developers of the network. Today, new ATOMs are routinely generated as rewards for the network validators.
Holders of the ATOM token can stake and validate blocks, vote on the governance issues of the network. The holder can also pay for transaction fees on the Cosmos network using the ATOM tokens. You can decide to run your own validator node in order to earn rewards in ATOMs or you can delegate your ATOM coins to a validator. These validators lock their ATOMs as well as run specialized software that helps to maintain the Cosmos network. This is achieved by proposing new blocks and validating transactions.
The Cosmos blockchain network has become the popular go-to place for dApp developers who desire to build efficient cross-chain dApps. Some prominent decentralized applications (dAPPs) currently operating on Cosmos blockchain include:
The Cosmos network is still in its “infant” stage and hasn’t yet realized the vision in the project's whitepaper. However, the network is moving in the right direction and with time, it will certainly realize its full potential in the blockchain space.
Also read about NFTs in this article.
You must have heard about non-fungible tokens and wondering what’s all about and their benefits to you. As a Blockchain enthusiast, hearing about a piece of Blockchain news and knowing nothing about it can leave you helpless and thinking. Reading about Beeple making $69 million off something you know nothing about can create a lot of curiosity.
Recently, the CEO of Twitter put up the first tweet for sale as an NFT. This tells you about the future potential of NFTs. Now, you may be wondering what an NFT is and why there is so much buzz about it. In this post, we shall thoroughly explore and explain the concept of NFTs, and how they are gradually transforming the acquisition of tangible assets.
They are cryptographic assets integrated on the Blockchain and can be used to represent real-world items like artworks and real estate. These NFTs come with unique identification codes as well as metadata that sets them apart from each other. They are not like cryptocurrencies that we can trade and exchange at equivalency. Cryptocurrencies are fungible tokens that are identical to each other and can be used for commercial transactions.
Today, we are seeing how these NFTs are taking the world of digital art and collectibles by storm. We are seeing the lives of digital artists change for the better. Also, many celebrities are joining the fray as they see it as an opportunity to further connect with their fans. You can use these non-fungible tokens to represent any unique asset. It is like a deed for an item in the physical or digital realm.
NFTs, let us tokenize items like art, real estate, collectibles, etc. There is only one official owner at any given time. The Ethereum Blockchain network secures the NFTs. You cannot modify the record of ownership and neither can you copy/paste a new non-fungible token into existence. Four years ago in 2017, Ethereum Request for Comments 721 (ERC-721) was released as a cryptocurrency standard for non-fungible tokens. The ERC-721 standard makes it much easier for the implementation of NFTS. It wasn’t long after that and NFTs hit the mainstream with CryptoKitties leading the way. The NFT ecosystem has expanded and is constantly growing. Today, there have been several companies finding novel applications of NFTs like domain names. Others utilize them as crypto art museums, physical collectibles, art marketplace, etc.
NFTs are designed to offer you something that cannot be duplicated or copied. For example in the use of NFTs for art or other collectibles, you will retain 100% ownership of the work but the artist will still have the copyright and reproduction rights. This is just like what we experience with physical artworks where anyone can buy a Monet print, but only one person owns the original piece.
The major characteristics of non-fungible tokens include the following:
You cannot use a CryptoPunk character on the CryptoKitties games, and vice versa. It is also the same thing with NFT collectibles like trading cards where you cannot use a Blockchain Heroes card on the Gods Unchained trading card game.
Unlike bitcoin or other fungible tokens, NFTs cannot be divided into smaller components. You can only get them as a “whole” item and they exist exclusively like that.
Since they are stored on the Blockchain, you cannot replicate, destroy, or remove any NFT data. Therefore, all ownership of these tokens is immutable. Thus, gamers and item collectors own their NFTs and not the companies that created them. This is unlike what we experience on iTunes stores where you can buy songs but you don’t own them. You only purchase the license to listen to those songs.
One of the major characteristics of NFTs is that they can be traced back to the original creator. Therefore, you can authenticate the art or collectibles without the need for third-party verification.
Also read our article Consensys Quorum Blockchain A Comprehensive Review.
Today, these NFTs have become so popular in the crypto and Blockchain space due to the way they have revolutionized the collectibles, arts, and gaming industry. Since November 2017, more than $174 million has been spent on NFT projects. The advent of Blockchain technology has made it possible for collectors and gamers to be immutable owners of in-game items and other unique items.
There have been cases where people create and monetize structures like casinos as well as virtual parks in virtual worlds like Decentraland and Sandbox.
A good example is William Shatner, popularly known as Captain Kirk from “Star Trek.” He ventured into digital collectible last year (2020) and issued about 90,000 digital cards on the WAX Blockchain network. These digital cards showcased different images of himself. Whenever any of those cards are sold, Shatner receives passive royalty income.
Like every asset, supply and demand are the key determinants of price. The scarce nature of NFTs and the high demand for them have made them valuable in the market. There are always gamers, collectors, and investors readily prepared to pay huge sums for these NFTs.
Some of these tokens have the potential to make a lot of money for their owners. A gamer on the Decentraland virtual land platform bought 64 lots and then infused them into one estate. The estate was dubbed “The Secrets of Satoshis Tea Garden” the estate sold out for $80,000 because of its good location and road access. Recently Beeple made a whopping $69 million from an NFT art piece. There was also an investor who paid $200,000 for a segment of the digital Monaco racing track in the Formula 1 Delta Time game.
The non-fungible token industry is still unfolding and the full potential is yet to be realized. It is certainly opening a new frontier in the crypto space. Time shall tell how this newfound marketplace unravels, but it certainly is a great one.
Read about Elastic Cryptocurrency, Ampleforth.
Curve finance is a decentralized exchange that facilitates the swapping of crypto-tokens. But it is specifically designed for stablecoins like DAI or USDT with low slippage and low transaction fee while using the liquidity pools like those of Uniswap. Let’s back up a little and first clear the basics.
Let’s say Alice wants to send money to Bob. She can transfer the assets by going to a bank. Here a bank works as a centralized entity and verifies the transfer but cryptocurrencies are known for being decentralized.
In a decentralized environment, Alice can send Bob assets without the need of a central entity, and a set of independent nodes to verify the transfer.
Liquidity is the process where liquidity providers pour in their crypto tokens in a pool and allows others to exchange the tokens. They earn a fee on every swap where slippage is the price change of a token during a transaction.
X * Y = K
Understanding this formula is extremely important as it is widely used in the decentralized exchange world to determine the price of two tokens in a particular pool. The variables x and y in the formula represent the quantities of two tokens and k being the constant.
If the value of one token increases the value of the second token automatically decreases in order to maintain the constant k. However, this formula could be problematic when dealing with stablecoins as the stablecoins should remain constant. Also, while dealing with different flavors of the same tokens, prices have to be the same for each flavor.
The curve finance is a platform for the exchange of tokens rather particularly famous for stable tokens. Stable tokens are tokens whose value does not fluctuate rather remain stable.
It offers different flavors of similar tokens like ETH and BTC while using a formula called the STABLE-SWAP INVARIANT for swapping.
The flat line in the graph ensures the stable swap of two coins. Uniswap uses the x * y = k formula where one token’s price can grow exponentially and the other token can lose its price and the two tokens could be dollars to pennies. Curve introduced the Stable-swap invariant in which both the tokens tend to remain stable.
Let’s understand this with the help of an example:
Suppose, Uniswap pool has a pair of USDT/DAI, both of which are of $1 with a proportion of 50/50. After some swapping the pool becomes unstable now with a proportion of 60/40. Now we have an excess of USDT and a scarcity of DAI. So, the price of USDT will become slightly less than 1$ (0.97$) and DAI will become slightly more expensive than 1$ (1.03$) and the pool becomes lopsided. Here, Curve will incentivize the liquidity providers to pour in DAI thus making the pool stable. The formula handling this is known as the Stable-Swap Invariant.
This is what the Stable-Swap Invariant looks like:
Stablecoins have become an integral part of De-fi with more and more varieties of stablecoins in the market. Which means that there is a bigger space for people trading stablecoins. The curve has captured the market and emerged to become a giant by offering low fees and slippage at the same time. Stablecoins on other exchanges might deviate from their price whereas Curve ensures stability, which is one of the many reasons behind Curve’s success.
Learn about Nexus Mutual, a DeFi Project.
Liquidity providers can earn rewards by providing liquidity in Curve pools just like Uniswap. Additionally, there is another way liquidity providers can earn extra rewards; by the concept of lending. Curve finance offers lending pools where liquidity providers can lend tokens to other exchanges like Compound. This takes place in the background and liquidity providers earn fees on top of the transaction fee, as some protocols enable lending and borrowing functionality to the users.
It’s important to note that the rewards are based on the transaction volume; they can be high or low.
You might be wondering about the security risks that might occur while lending a token to another exchange. Curve solves this issue by wrapping the token as a cToken(wrapped token) and lending it to Compound while backing the cToken to the original token.
With Curve, we can have a pool of three or four tokens as well.
Once you deposit the tokens in, you can split it among all the tokens in the pool or you can add just one token. After adding tokens to the pool you will get LP tokens. These LP tokens represent your share in the pool which can be used to stake and mine new CRV tokens.
The 3Pool is a pool with 3 tokens DAI, USDC and USDT, it does not matter in what token the user adds the liquidity as the reward generated is the same. You can get the LP tokens in all the tokens or in a single token.
A metapool is a pool where a stablecoin is paired against an LP token from another pool. For example, a liquidity provider can deposit DAI into 3Pool and earn pools liquidity token 3CRV.
CRV is Curve’s native token, which is generated when the user deposits and stakes the tokens on the Curve platform. It is awarded to liquidity providers, proportional to their share from the yields created by their pools. With Curve’s transition to become a DAO, CRV tokens also represent the holders’ rights to take part in its governance mechanism. That way they can make proposals and vote on them with CRV. Their Governance follows a ‘time-weighted’ voting system which simply means that the longer they hold CRVs, the greater their voting power in the DAO becomes.
Curve’s smart contract is audited by Trail of Bits but this doesn’t eliminate risks completely. Curve lends tokens to other exchanges and hence opens up another front to security risks. Curve finance is in the market for around a year and needless to say that hackers for sure have tried their unsuccessful attempts to steal the funds.
Here’s a link to Curve-fi: https://curve.fi/
“Curve is an exchange expressly designed for stablecoins and Bitcoin tokens on Ethereum”
- Michael Egorov (Founder and CEO of Curve)
Also read, Uniswap v3: Power To Liquidity Providers.
The financial industry is considered the first to be disrupted Blockchain technology, and ConsenSys Quorum Blockchain seems to be the culprit. However, we need to understand that emerging technologies often experience slow adoption. The primary reason is that organizations seek to better understand the technology and how to use it better.
ConsenSys is a Blockchain software technology founded in 2014 by the co-founder of Ethereum Joseph Lubin. It develops decentralized applications and other infrastructure for the Ethereum Blockchain. Some of the applications created by ConsenSys include Metamask, uPort, Gnosis, etc.
J.P. Morgan developed the ConsenSys Quorum chain. It is one of the significant steps towards the common adoption of Blockchain by financial industries. In this post, we shall explore the ConsenSys Quorum Blockchain, its features, and use cases.
The ConsenSys Quorum chain is an enterprise-focused and permissioned Blockchain network specifically built for financial use cases. It is a fork of “GoQuorum,” a lightweight of geth designed to leverage the R&D inside the Ethereum community. “Geth” is a public Ethereum client. It has lots of protocol-level enhancements created to support business needs. The goal of this Blockchain is to create an enterprise Ethereum client that empowers businesses to adopt and leverage the benefits of Blockchain technology.
We can also see ConsenSys Quorum as Ethereum-based decentralized ledger technology. It offers a permissioned way to apply the Ethereum network to support the privacy of contracts. The ConsenSys Quorum chain like Ethereum but with minor differences. It differs from Ethereum in:
Read about Binance Ecosystem.
The ConsenSys Quorum chain is designed to be permissioned. It means that all the networks using Quorum will not be open to all, unlike Ethereum. Therefore, permissioned Blockchain networks operate differently. There are completely different expectations of trust between approved nodes in the network compared to permissionless ones.
In other words, the ConsenSys Quorum Blockchain system is a consortium Blockchain. It is only implemented between participants that have been pre-approved by a designated authority. Although consortium Blockchain systems run in the same manner and with the same features and protocols of a normal Blockchain, it relies only on permitted nodes. The implication is that organizations can consider the feasibility of Blockchain technology without the possibility of failure.
Financial institutions have always prioritized the confidentiality of records. This is one of the issues that regular Blockchain systems like Ethereum failed to resolve. When it comes to corporations and industries, the pseudonymous nature of the transaction can be easily undermined. Aside from its permissioned nature, the ConsenSys Quorum chain further improves privacy by integrating private and public on-chain transactions.
While the public transactions function like that of Ethereum, the private transactions are verified. However, the details of the private transactions are not disclosed. With the use of a system known as Constellation, ConsenSys Quorum is able to manage much of its secure message transfers. In simple terms, Constellation is a general-purpose mechanism that is not entirely Blockchain-related. The ConsenSys Quorum chain owes its superior speed to Constellation and the architecture it supports.
Aside from the privacy in transactions, it also offers privacy for smart contracts. Smart contracts are something banks and other financial institutions are wary of exposing due to security reasons. These smart contracts could contain sensitive information like investment strategies, transaction data, or internal information. In addition, ConsenSys Quorum has been partnering with Zcash to integrate the zero-knowledge security layer (ZSL) into the ConsenSys Quorum protocol. Both of them have released a proof-of-concept technical design document detailing the project.
Its consensus mechanism is called the ConsenSys QuorumChain. It is initiated inside the genesis block. The ConsenSys QuorumChain is a simple, straightforward majority voting protocol. The fact that consortium chains are permission means there is no need to have an expensive PoW mechanism. However, ConsenSys QuorumChain offers different consensus mechanisms suitable for private Blockchain networks. These mechanisms include the following:
RAFT achieves consensus through an elected leader. The leader is saddled with the responsibility of executing log replication to the followers. In this form of consensus mechanism, the leader can decide on placing new entries and establishment of data flow to other servers without consulting those servers. The leader continues to lead until it fails or disconnects, and then a new leader is elected.
Since this is a Byzantine fault tolerance algorithm is based on the Practical Byzantine Fault-tolerant (PBFT) consensus algorithm, the PBFT supports immediate transaction finality and provides liveness and safety under the standard Byzantine fault threshold assumptions.
This is a Proof-of-Authority (PoA) consensus algorithm. It is readily available with “geth,” the Go Ethereum client.
There are many use cases of the ConsenSys Quorum Blockchain. It is used but not limited to healthcare, identity, payments, property, capital markets, etc. Here is a list of some of the projects and brief descriptions:
It is a distributed ledger developed by HIS Markit. The project helps you to keep track of all cash movements.
This project is designed to promote the immediate settlement of transactions. The transactions are basically between clients of the financial institution’s wholesale payment business.
This is a decentralized marketplace where people come to seek access to loans. StreamSource develops the platform.
The project allows its member banks to exchange information at the same time in order to verify payments.
The ConsenSys Quorum system has a lot of tools that help to improve both user and developer experience. These tools are mainly made up of network management, deploying and monitoring utilities, and others. The tools include ConsenSys Quorum support in truffle, Blockchain explorer for ConsenSys Quorum by Web3 labs, Cakeshop. Also, this Blockchain is available on cloud platforms like Azure and Kaleido. There is also the reporting tool that provides convenient APIs that help to generate reports concerning contracts deployed to a particular network. Some third-party tools like Splunk and Prometheus are also very useful in the deployment of the ConsenSys Quorum Blockchain network.
The ConsenSys Quorum Blockchain offers an enterprise-grade Blockchain network with high performance and privacy. Myriads of features made this chain an excellent choice for enterprise use cases. At the moment, ConsenSys Quorum appears to be a great idea and approach that can revolutionize the financial industry. The acquisition of Quorum by ConsenSys is great news to the enterprise Blockchain community. It also reinforces the impact of Blockchain in the financial industry.
Also read Stellar Payment Network: Detailed Explanation.
What is Hummingbot? We will answer the question but first, let us have a clear overview of what it is all about. Hummingbot went live on April 4, 2019. Since then, it has been an amazing high-frequency market-making trading bot. The software is available on several platforms like Github and docker. Since its launch, the Hummingbot community has had a massive increase in the number of its members.
HummingBot is designed for traders, developers, exchanges, and token issuers. According to CEO David Garcia, “Liquidity is a core piece for healthy markets. HummingBot is building the next generation liquidity platform by empowering users and traders to participate in the markets with the right incentives.”
There have been more than 4,000 unique Github clones as well as Docker downloads. The code has also been forked on Github more than 100 times.
Crypto exchanges and token projects spend an estimated $1.2 billion yearly on market making. Since, the cost is in the form of rebates, fees, and cost of inventory. As a result of financial and technical requirements, the crypto market makers can be likened to quantitative hedge funds that charge exorbitant fees on and may demand millions worth of inventory. All these necessitated the development of Hummingbot.
Now, it is time to answer the question we asked in the first sentence of this post. It is an open-source software client that offers users the opportunity to create and monetize automated and algorithmic trading bots. Alternatively, it is an easy-to-use command-line interface that makes it possible for you to configure, customize, and run automated bots and other strategies. With this, users can make markets on both decentralized and centralized digital asset exchanges. Market making is a trading strategy that is previously accessible to only algorithmic hedge funds.
Market making is a trading strategy where HummingBot continues to post limit bids and ask for offers on the market and then waits for the various market participants to fill their orders. As a market maker, HummingBot quotes two-sided markets by making bids and offers available on the market. If market making is still confusing to you, then consider this example. A shop X buys a product from Mr. A at a cheaper price and sells it to Mr. B at a higher price for a specific amount of profit. The shop X is the market maker in this case. This is exactly what HummingBot does through the use of bots.
Today, anyone can be a high-frequency trader, earning huge profits from market-making. The software enables users with limited technical know-how to engage in out-of-the-box frequency market making. The Hummingbot software is built for institutional-grade performance, and most importantly reliability.
It is built on technologies like Cython (Python compiled into C). Hummingbot also utilizes low-level programming to optimize the memory-efficient and speed required to carry out high-frequency trading algorithms. It will serve as a base platform where users can customize and build their market-making and trading strategies. The design philosophy of Hummingbot is to fuse simplicity and to make it easy to use with performance and flexibility. Now we have a clear understanding of what Hummingbot is. Let's go-ahead to explore the Hummingbot command-line interface (CLI).
Every user operates Hummingbot through an interactive command-line interface (CLI). It is a text-based interface designed for entering commands. There is a “command” prompt on the CLI and it is displayed whenever the interface is ready to accept a “command.”On the CLI, you can only execute tasks by entering a command. The command-line interface employed by Hummingbot helps users to configure and run the bot. CLI also helps to generate logs of the trades that were executed. The command-line interface (CLI) splits into five panes and they include the following:
In order to start Hummingbot from the source, here are the prerequisites:
To run a trading bot, users need some inventory of cryptocurrency assets available on the exchange. Or in their Ethereum wallet, if they are using Ethereum-based decentralized exchanges. Every user needs an inventory of both the base asset and the quote asset. The base asset is the asset that you are buying or selling while the quote asset is the one you exchange for the base asset.
To run a bot on centralized crypto exchanges like Coinbase, Binance, etc, users will need to enter the exchange API keys. You will have to do this during the Hummingbot configuration process.
For users to be able to earn rewards from liquidity bounties, they will need an Ethereum wallet when running Hummingbot on an Ethereum-based decentralized exchange.
When running a Hummingbot on an Ethereum-based decentralized exchange, your wallet will send signed transactions to the blockchain system through an Ethereum node.
The Hummingbot Miner is a liquidity mining platform that makes it possible for sponsors to incentivize liquidity provision by leveraging token rewards on order book-based exchanges. If you sign up for the Hummingbot Miner, you can earn token rewards for providing liquidity for some trading pairs.
Users can set up their liquidity mining on the Miner App in order to see real-time rates of their rewards and performance. It also allows you to keep track of your payouts and check market leaders. Liquidity mining is the term for a community-based and data-driven approach to market-making. Here, a token issuer or an exchange rewards a pool of miners to ensure liquidity is available for a particular token.
It is open, hence anyone can participate and you can track your earnings every minute. Also, it is non-custodial meaning that the platform doesn’t have control over your token. To start as a liquidity provider on Humminmgbot, you will need two sets of API Keys. Also, you can use your own trading bots and strategies to take part in liquidity mining. For those that don’t have their own trading bots, Hummingbot allows them access to quant/algo strategies.
| Platform | Binary | Docker | Source |
| Windows | yes | yes | yes |
| macOS | yes | yes | yes |
| Linux | - | yes | yes |
| Raspberry Pi | - | yes | yes |
For experienced and technical users, it is advisable you set up a cloud instance, then install the Docker version or from the source. Doing this enables the Hummingbot software to run 24/7. You can use Hummingbot as a long-running service using cloud platforms like Google Cloud Platforms, Amazon Web Services, and Microsoft Azure.
Hummingbot is in collaboration with many well-known decentralized finance (DeFi) platforms. They received a development grant from 0x, a leading open-source protocol for DEXs. The grant was to support the 0x ecosystem with Hummingbot. Hummingbot’s collaboration with 0x will help lower the barriers to providing liquidity in the 0x ecosystem.
The team plans to continue to build additional capabilities on the Hummingbot network to maximize its utility for the growing users. They also, intend to continually roll-out more exchange connectors to help link Hummingbot to more exchanges. Also, there is a constant tweaking of the graphical user interface (GUI) to make it more user-friendly.
In this article, we have taken time to answer the question, “what is Hummingbot?” The article also explores other functions and capabilities of this open-source protocol for crypto traders. The platform is also seeking partnerships with cryptocurrency exchanges. It also welcomes the token issuers with interest in the professional deployment of Hummingbot.
Learn about Phantasma Chain in our article.
Many analysts have dubbed the Avalanche chain as the new DeFi Blockchain. The launch of the Avalanche platform has attracted attention from DeFi community enthusiasts. Avalanche features 3-built-in Blockchain networks, and all three are secure and validated by the main network. The main network of the Avalanche platform functions as a special subnet. Every member of all custom subnets must be a member of the main network. They can do that by staking at least 2,000 AVAX, which is the native token of the Avalanche Blockchain network.
In this article, we shall explore the Avalanche network and what you should all expect.
It is a relatively new Blockchain network and boasts of sub-second transaction times and low transaction fees. The platform was developed by Ava Labs under the leadership of Emin Gun Sirer. Avalanche’s mainnet was launched in September 2020. The project raised $18 million from notable investment firms like Andreesen Horowitz and Polychain Capital. They also raised another $42 million with the public launch of the native token (AVAX) in July 2020. Their goal is to be better than ETH 2.0 in terms of throughput and latency.
The subnets or subnetworks are a special set of validators that works together to achieve consensus on the condition of a set of Blockchain systems. One subnet validates a particular Blockchain network. A node can belong to many subnets, and every subnet manages its own membership. However, it may require that the constituent validators have certain properties.
The Avalanche chain is made up of multiple Blockchain networks. It makes use of a novel proof-of-stake consensus mechanism to reach a high throughput. The platform is estimated to execute more than 4500 transactions per second. According to the team behind the project, Avalanche combines the benefits of “Nakamoto consensus” and “Classical Consensus". The Nakamoto consensus involves robustness, scalability, and decentralization. Also, the Classical consensus involves speed, quick finality, and energy efficiency. Both the Classical and Nakamoto consensus mechanisms combine to create a revolutionary consensus engine.
According to Emin Gun Sirer, “only three times in the 45-year-old history of distributed systems have we had a new family emerge. Avalanche is a brand new family, as big of a breakthrough as Satoshi’s protocol was. It combines the best of Satoshi and the best of classical in scales like no other that allow anyone to integrate themselves into the consensus layer.”
In the Avalanche model, each chain is a separate representation of a virtual machine. It supports multiple custom machines like Ethereum virtual machine (EVM) and WASM, thus allowing chains to imbibe case-specific functionality. Each of the virtual machines is deployed on a custom Blockchain network known as a subnet. The subnet consists of a special set of validators that work together to achieve consensus. Each of the subnets has its own incentive mechanisms to ensure the validators are honest in their activities.
It is not out of place to call the Avalanche chain a “platform of platforms".The network consists of thousands of subnets that come together to form one interoperable network.
Optimistic Rollups: What are They?
Ava Labs, through its accelerator, Avalanche-X is investing in grants to DeFi projects. ChainSafe got one of these grants to develop a cross-chain Ethereum bridge. The Avalanche-Ethereum Bridge was set in motion last month, and it functions as a two-way token bridge. It allows for seamless ERC-20 and ERC-721transfers between the Avalanche Chain and Ethereum network. To use Ethereum-based assets with dApps on the Avalanche network, users will have to lock the asset in the ChainBridge contract, and then mint an equivalent token on the Avalanche Blockchain.
Therefore, you can bridge ETH and ERC-20 tokens between the Avalanche and Ethereum networks. Many benefits come with the Avalanche-Ethereum Bridge. It represents a step towards redeploying Ethereum’s slow and expensive DeFi infrastructure to the faster and cheaper Avalanche Blockchain. On the Avalanche network, transaction fees are rarely more than a few cents. On the other hand, the cost of complicated computations is always in the single-digit dollar range, and the execution is significantly faster.
The X-Chain functions as a decentralized network for creating and trading digital assets. It is a representation of a real-world resource such as bonds and equity with specific rules that govern their actions. Whenever you initiate a transaction on the Avalanche blockchain, you get to pay a fee in AVAX. The Exchange Chain is an example of the Avalanche Virtual Machine (AVM). Clients can create and trade assets on the X-Chain and other examples of the AVM with the help of the X-Chain API.
It is the metadata Blockchain on the Avalanche Blockchain network and coordinates validators. The P-Chain also keeps track of active subnets and allows the creation of new ones. It implements the Snowman consensus protocol. The P-Chain API also allows users to create subnets, add validators to the subnets, and build Blockchain networks.
With the C-Chain API, clients can create smart contracts. It is an example of the Ethereum Virtual Machine that is powered by the Avalanche Chain. The C-Chain also serves as the default smart contract blockchain of the Avalanche chain. C-Chain is also very compatible with the Solidity smart contract as well as Ethereum tooling. Therefore, it makes it easy for Ethereum developers to easily port applications into the Avalanche chain.
Meanwhile, there is the primary network that validates all the three built-in blockchains of Avalanche. Every member of the Avalanche network must be part of the primary network. Before any of the Subnets can become a member of the network, it must stake some AVAX tokens
Ever heard about Defi protocol "Compound"?
The impact of the Avalanche network and that of the Avalanche-Ethereum Bridge is far-reaching, to say the least. Here are some of the possible ways the Avalanche network can impact the Blockchain space:
The low cost of transactions on the platform means that it will be more financially viable for small trades. Therefore, it will open up the DeFi ecosystem to smaller players as well as entry-level investors. Although the user experience is still complex and is a significant barrier to entry, improvement in this area can lead to an increased number of participants in the DeFi space.
With the faster transaction and higher throughput of the Avalanche Blockchain system, price slippage reduces significantly. Therefore, the network ensures instant trades while also bringing the experience of trading on decentralized exchanges closer to centralized counterparts.
The Avalanche chain is revolutionary and is on the right track to transforming the DeFi space. A day after the launch of the Avalanche Bridge contract, more than $30 million worth of Ethereum-based assets were locked up. This is evidence of the strong adoption of the Avalanche network.
Phantasma Chain is a fast, scalable, and highly secure blockchain network. Its governance token called SOUL and energy token KCAL powers it. Although the Phantasma blockchain system maintains a decentralized governance protocol, it also offers interoperability with other blockchain systems. The innovative mechanism employed by Phantasma Chain such as dual token system and advanced non-fungible tokens (NFTs) makes it possible for users to have digital goods and services.
Some of such digital goods and services include communication, entertainment, the marketplace, and storage. The ecosystem consists of active block producers, block verifiers, and standby block producers who serve as backups. Also, the Phantasma Chain has high transaction per second (TPS) and low transaction fees for better communication and entertainment.
Learn about Architecture Of Stellar Network.
Here are some of the great benefits of the Phantasma Chain in the blockchain space:
Phantasma blockchain system adopts a special proof-of-stake. Here, users who desire to be validators will have to put a stake in the Phantasma network. As an incentive for this task, the transaction fees will be shared amongst the validators. The master nodes or block producers for the Phantasma network use a rotational scheduling side-chain to identify an active validator.
This process occurs in parallel, hence it allows for horizontal scaling and boosting of the theoretical transaction per second (TPS). An active validator node is saddled with the responsibility of accepting transactions from Phantasma users. The validator verifies signatures and transaction contents. If the transaction is accepted, it will be the job of the validator to add it to the next block.
Phantasma network recently launched the Phantasma SDK with support for C# and Javascript languages. It also has support for a chain node, smart contract compiler, block explorer, wallet, and lots of applications. Finally, the full mainnet of the Phantasma chain supports Solidity, Python, and C#.
This is another great feature of the Phantasma network, especially when NFTs could be an important component of the digital economy. Having a token that represents digital goods makes it more convenient to buy or sell digital goods using blockchain technology. The Phantasma platform allows the trading of NFTs from different chains supported by the Phantasma network. Since, in the coming years, non-fungible tokens have the potential to be the driving force of blockchain.
The Phantasma Chain has infinite side chains made possible due to its new PoS+ mechanism. As each of these side chains retains its 5k transactions per second. Therefore, the benefit of these multiple side chains is that they provide a solution to the scalable issues of blockchain networks. To know the total TPS of the Phantasma ecosystem, multiply the total number of chains available with 5k TPS.
By leveraging the inter-chain technology and the connectivity of the side-chains, developers can build revolutionary dApps.
This is a system within the Phantasma blockchain network. It is an on-chain liquidity sharing system that allows users to connect to the decentralized exchange system of the Phantasma network. These users can benefit from the same liquidity pool. With the cosmic swaps framework and the custom-built connection, the network offers token and coin swaps in the App. Therefore, users don’t have to go through an exchange to get tokens or coins. Companies seeking to develop decentralized exchanges on Phantasma can connect directly to the same liquidity pool managed by Phantasma.
Phantasma system deploys an integrated name system at a time that most of the known blockchain systems use archaic systems. Other blockchain systems require users to public addresses to receive coins or tokens. Meanwhile, the Phantasma Chain has a built-in protocol that allows people to use username as their public address.The network seeks to offer the best user experience possible and position for the mainstream adoption of blockchain.
The Phantasma network has the Ghost Mode feature which allows users to send private transactions. Therefore, private transactions are made possible by the Phantasma protocol. However, there are two separate levels of privacy covered in the Ghost Mode feature. These different layers are dependent on the size of groups in the ring signatures. A higher group size results in more privacy, and more privacy means higher network fees.
phantasma Chain also has a free decentralized solution for its users. The decentralized file storage is available from the mainnet launch day. Meanwhile, a storage dApp will be launched soon after the mainnet.
Phantasma blockchain team aims to make the system a one-stop blockchain for all daily activities and interactions. They are focused to achieve this goal and are currently closer than ever before. However, achieving great in the crypto space often always requires collaborations and integrations. There is currently a chain swap partnership between NEO and the Phantasma Chain which is already live. The partnership was vital for the launching of the Phantasma blockchain.
Another blockchain that will soon be added to the chain swaps is the Ethereum blockchain. This swap partnership makes it possible to swap ETH and some other coins with Phantasma. The swapped coin can be spent within the Phantasma ecosystem. Phantasma Chain swap works in both directions, thus, making it possible for the team to introduce an ERC-20 SOUL token. The major benefit of the swap partnership with Ethereum is that it makes it possible for Phantasma to penetrate the Ethereum market and decentralized exchanges.
This makes it possible for Phantasma to be in a better position to leverage Ethereum dApps for collaborations. Therefore, the team prioritizes the chain swaps between the Ethereum blockchain and Phantasma Chain. The launch of the Ethereum chain swaps will also ensure that non-fungible tokens (NFTs) are swappable. Users of the Phantasma ecosystem can swap Phantasma NFT on Ethereum protocol and can trade on Ethereum NFT platforms. It will ensure that Phantasma NFTs are readily accessible to more buyers and traders. Ethereum users can also swap their NFTs for Phantasma, while also leveraging the Phantasma marketplace’s low transaction fees for trading.
The Phantasma Chain is a revolutionizing ecosystem and has many things in stock for all blockchain enthusiasts. Phantasma may be the missing link that the current blockchain systems need for mass adoption. We will all have the answer with time.
Also read about Binance Ecosystem.
Many people have been asking what is Ampleforth and how does it come into play in decentralized finance? Some protocols like Compound, MakerDao, and Aave have introduced a new dimension of financial possibilities in recent times. These financial possibilities were supply-based interest rates, flash loans, and crypto-collateralized stablecoins. Among these game-changing protocols, Ampleforth has recently taken the spotlight, and many believe it is for a good reason.
Ampleforth aims to redefine how money works. It combines the best of Bitcoin and stablecoins. In this post, we are going to explore all there is about Ampleforth and its impact on the decentralized finance industry.
In simple terms, Ampleforth is a cryptocurrency that is trying to reinvent money. Technically, Ampleforth is a decentralized finance (DeFi) protocol that seeks to completely overhaul how money is designed both inside and outside of cryptocurrency. By creating a stable but flexible currency that can accommodate both inflation and deflation, Ampleforth addresses the problems of traditional finance and decentralized finance.
As a cryptocurrency, Ampleforth can adjust its supply based on demand. It is built on the Ethereum blockchain, and its token is AMPL, an ERC-20 token. When there is an increase in demand, the total supply of AMPL increases. Also, when the demand goes down, AMPL's total supply decreases. It is adaptive money that adjusts supply based on market conditions. The essence of this is to maintain purchasing power irrespective of economic power. AMPL supply adjustments are made directly to all AMPL wallet balances. This helps to maintain the same percentage of total AMPL supply no matter the raw numerical change.
Many people make the mistake of thinking that Ampleforth is a stablecoin like DAI, Tether, etc. Although the purpose of Ampleforth is to provide the same function as a stablecoin, US dollars do not back Ampleforth. Ampleforth is an adaptive base-money that only seeks to reduce volatility.
Read about Tendermint Core.
Ampleforth's smart contract automatically decreases or increases its money supply based on the market conditions. The interesting part is that the system does this without the control of a "central bank." Therefore, wallet balances increase or decrease when the demand is high or low, respectively. This doesn't mean that Ampleforth is dilutive in any way.
When central banks flood the market with the different currencies, they dilute the money supply with inflation. As a holder of the AMPL token, you cannot be diluted by supply inflation. The reason is that adjustments occur proportionally across all users' balances. Therefore, with Ampleforth, your percentage ownership always remains fixed.
For example, let's say you are a whale who owns 15% of the network. In this case, you will always own 15% until you decide to sell your stake. The supply of AMPL can expand and contract out of your wallet. This means that the number of AMPL you own can change depending on the market condition. However, your network percentage remains the same. This daily supply adjustment is known as rebasing.
We have already answered the question, what is Ampleforth? Let's go on to look into the unique token dynamics of the AMPL token. The demand and supply mechanics are what make AMPL token different from other crypto primitives. Primitives are the basis for building a complex system. For example, bitcoin is the base primitive for a censorship-resistant payment rail. However, Ethereum took it a step further by integrating smart contracts to run over the network.
Rebasing is one of the unique attributes of the Ampleforth platform. The AMPL token is a "supply elastic" token. Therefore, the supply of the town changes in response to the price per unit. This price adjustment happens every night at exactly 7 pm Pacific time. This process of supply adjustment is known as rebasing. However, rebase is non-dilutive in the sense that it doesn't change the percentage of the token you hold in your wallet.
According to economists, when demand and supply in a market are in perfect balance with each other, they are in a state of equilibrium. In the case of Ampleforth, equilibrium is attained when a change in demand gives rise to a one-for-one change in supply. For example, if there are 50,000 AMPLs and the price increases from $1 to $2 due to an increase in market demand, the network will set its target price at $1 and expand supply by 100,000 AMPL. The process whereby the supply would increase from 50,000 AMPLs to 100,000 AMPLs is called a "rebase."
Most people think that rebase dilutes existing token holders, but that's not the case. It would be best if you thought about it as owning a fixed amount of the network instead of a fixed amount of tokens. The process is executed in a decentralized manner leveraging the unique capabilities of ERC-20 tokens. Therefore, without the Ampleforth system stealing market share from any holder, these 150,000 AMPLs created by the protocol will be proportionally shared to all AMPL holding addresses. Equilibrium will be achieved when a proportionate 2× decrease in price meets the 2× increase in supply. This keeps the market capitalization stable at $100,000, from our cited example.
By creating a financial incentive for users, Ampleforth helps the network to reach equilibrium. However, the network relies on profit-seeking traders to ensure equilibrium is returned on the demand side immediately the change in supply goes through. The AMPL token is an asset whose price is determined by the free market. Arbitrageurs can sell their newly acquired AMPLs for $2, thus creating market pressure and returning AMPL's cost to equilibrium at the initial $1.
We have known what Ampleforth and its token dynamics are. Do we have any use for AMPL tokens? The answer is a big yes. AMPL tokens serve as a medium of exchange. Ampleforth can scale its supply to meet the demands of billions of users worldwide. However, it can also contract supply if it is only serving a paltry number of 1,000 users.
Due to its elastic supply, Ampleforth is an ideal asset to build a digital economy around. In this form, it can become the perfect collateral for DeFi. The countercyclical behavior of Ampleforth makes it an excellent addition to a crypto portfolio. From a broader perspective, Ampleforth aims to offer an independent alternative to central bank money. This is a long-term goal, and Ampleforth must first gain the trust of the community. It has to prove its utility as a reliable medium of exchange and store of value. Ampleforth also aims to become a multichain asset in the future. A multichain platform helps in the creation and deployment of private blockchains.
Also read Nexus Mutual: A Deep Dive.
Knowing what Ampleforth is and its use cases are essential for every DeFi enthusiast. Although the project is still in its experimental stage, the potential is vast. For the project to achieve its goals, the broader crypto market needs to accept that it is primitive that offers value to users. The project is currently a high-risk play with an immense payoff provided the network achieves its vision.
Read about Binance Ecosystem
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