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?
What 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.
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
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.
Open Programming Language Standards
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.
Decentralized Ledger and Smart Contract
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.
Blockchain Metaverse and it's Importance
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
Permission to users to own their data on a decentralized blockchain without any party interference.
More autonomic space within the digital world.
With blockchain Metaverse, users can experience creative human experience in the virtual world. It can do this due to its augmented reality technologies.
Blockchain Metaverse completely removes the limitation of any physical work. At the same time, creating a virtually limitless space.
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.
How does a Metaverse Work?
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.
Portability
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"
Decentralized Nodes
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.
To Wrap It Up
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.
Serum: A Blend of Speed, Convenience and Trustlessness
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!
What is Serum?
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.
Solana Blockchain
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.
Serum Token (SRM)
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:
All Serum's net fees go to burn.
50% off on all Serum fees on holding a token.
Fees payment with SRM.
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.
MegaSerum Tokens (MSRM)
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.
Project Serum Cryptocurrency Ecosystem
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.
Serum and Staking Nodes
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.
Staking
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.
Node Rewards
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.
How to Use Serum
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.
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
Here is a link that explains how to create a Solana wallet.
After creating a Solana wallet, on the first opening, you’ll be asked to write down your recovery keys. Make sure to write them somewhere first as you’ll be needing them some other time.
Often, we advise users to create a password immediately after creating their Solana wallet.
After creating a password, you’ll be asked to re-enter your new password for confirmation.
After doing this, you click on continue. There you have it. You have just created your Solana wallet.
On your Solana wallet, you can deposit Eth and convert it to Sol and vice versa. As you’ll expect, there are conversion fees associated with this.
From another exchange system, you can click on the cryptocurrencies you have there and transfer them to your Solana wallet. In withdrawing your cryptocurrencies, you’ll be needing your already copied Solana wallet link to be able to receive your money.
To successfully withdraw, you will need to authenticate your transactions.
After a complete authentication, you can head to your Solana wallet. It’s critical to mention that this transaction doesn’t take long. It only takes a maximum of two minutes to complete a transaction.
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.
These wrapped tokens can then be in the deposit and become real underlying assets.
Also important to note is the small fee attached to adding tokens to a Solana wallet.
The next thing to do is to find a Serum-based DEX to connect to this wallet.
Connecting your Wallet to Serum DEX
Connecting your wallet to Serum DEX shouldn’t be challenging provided you follow these easy steps. Below are simple steps on wallet connection.
On the Serum DEX interface, click on "connect" on the top right corner of the interface.
Ensure you must have selected your desired wallet before clicking connect.
And if you wish to change your wallet, you must disconnect from the current wallet, then, you can click the select wallet feature to pick your new wallet.
The Value of Serum
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.
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.
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!
Casper Network: History, Protocol and CSPR Token
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:
Scalability
Provision of e enterprise-level security
Decentralization on a blockchain protocol
Before we fully delve into the benefits, here is a brief on how the Casper Network came into existence and its operations.
The History of Casper Network
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.
Highway Protocol
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.
CSPR Token
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.
Clean Energy Blockchain
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.
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.
Developer-Friendly Features
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.
Upgradeable Smart Contracts
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.
Lower Gas Costs
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.
Weighted Keys
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.
Casper's New Solution for Defi
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.
Flexible Protocol
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.
Energy Efficient and High Finality Defi
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.
Deterministic 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.
User-Developer Friendly Platform
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.
Upgradeable Smart Contract
The Casper Network can upgrade smart contracts on-chain directly without technical difficulties. This is due to its advanced protocol design and governance procedures.
Sharding Layer 1 Solution
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.
How Casper Works
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.
The Mechanism of How The Casper Network Communicates
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.
The Identity
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
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.
Network
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.
Node Discovery
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.
To Wrap It Up
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.
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.
What is 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:
Networking
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.
Startup sequence
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:
The startup node haphazardly connects with another bootstrap node by opening a Web Socket connection. However, users can have specific nodes to connect to. To do this, users can open a command line or use the configuration file.
Once the former node connects to the bootstrap node, the bootstrap node sends a peer list broadcast to other nodes.
From that list, peer nodes decide on which peer to connect with.
You can repeat the third step till the nodal connection is fully saturated. That is, the maximum number of peers in a connection is attained.
Peer connections lifestyle
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.
Nodal messaging
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.
Identity: An identity message helps peers to identify themselves
Peer list: A peer list message contains a list of peers that are actively connected to a node
Signal: A signal message indicates the real-time connection between peers
Cannot satisfy request: Pops up whenever a problem occurs
Nodal messaging styles
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.
Mining
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.
Storage
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?
Note
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.
Nullifier
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
Merkel tree notes
The Merkel tree note as an accumulator data structure presents several elements with a tiny identifier. A Merkel note consists of the following
Value commitment: A Pedersen commitment of a note's value
Note commitment: A windowed Pedersen commitment that hashes the contents of a Merkel note.
Public key: A public key is created after the creation of an associated note. A public key helps the recipient spend and decrypt notes in the nearest future. This is done by using the Diffie Hellman key exchange.
Encrypted note: An encrypted note can be decrypted using a public key.
Note encryption keys: A note encryption key holds all the info necessary to encrypt a note for transaction sake.
Merkel nullifiers
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.
Account creation
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.
Secret key
The secret key is necessary for constructing one's wallet and it's a 32-byte random number.
Spending key
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.
Nullifier keys
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.
View key pair
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.
Transaction creation
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.
Verification and consensus
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.
sequence
noteCommitment
previous block hash
timestamp
target
randomness
minersFee
nullifierCommitment
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.
Iron Fish Gossip Protocol
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.
Iron Fish Zero-Knowledge Proof
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.
To Wrap It Up
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.
This article will discuss the Golem Network and how it operates intensively.
Introduction
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.
History of 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.
What is Golem Network?
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.
Application Registry and Transaction Framework
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.
What is an Application Registry?
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.
The Working Principle of Golem
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 requesters visit the Golem Network
They submit a task on the network
The task is broadcasted on the network with the demand and necessary information such as the specs of required resources
The providers publish an offer for their computational resources
The demand and the published offer is matched to check if they agree with each other
The requestors meet these potential providers and "terms of business" are negotiated
Once an agreement is reached on the business terms, input files get transferred to the provider node
The provider starts the task
Once the task is complete, the output files get transferred to the requestor from the provider
A payment note is issued, so the providers get rewarded for their services
Payment is through the Golem token (GNT)
The Architecture of the Task Template and Reputation System
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:
The source code to be run
Splitting of the task into subtasks and sending it into different nodes
Verification of final results
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's Use-case
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.
Summary
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.
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.
A Brief History of Augur
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.
What is Augur?
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.
How Augur Works
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:
Market creation
Market trading
Reporting
Settlement
Market Creation
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.
Market Trading
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.
Reporting
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.
Settlement
In this stage, the traders close out their trades and receive their payment.
Major Augur v2 Improvement
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;
0x Mesh Off-Chain Ordering
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.
Dai Stable Betting Unit
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.
Uniswap Price Feed Oracle
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.
More Seamless User Experience Using Portis, Formatic, and Torus Wallets
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.
Conclusion
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.
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.
Introduction
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.
What is Digital Identification in 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.
Why Digital Identification on Blockchain?
Digital identification on the blockchain could solve some of the problems associated with our present identification process. These problems are:
Data Theft: Currently, most of our identity credentials are stored on a centralized database which can easily be attacked. The database operates with a single point of failure, which makes it a target for attackers. It also contains many people's "Personal Identifiable Information" (PII), which is accessible to hackers sometimes because the database might be weak and outdated. The hackers who access this information can sell it to the dark web marketplace and commit fraudulent activities with the data. In the first half of 2021, data worth about 18.8 billion records were breached, costing billions of dollars.
Inaccessibility: Identity card is not accessible to many people globally especially those in the rural areas of third-world countries. The process associated with getting an identity card, such as registration and cost, is an obstacle that has prevented many from getting one. Without an identity card, these people can't access many things such as banking, applying for an international passport, and applying for certain jobs.
Improvement of Cryptography and Smartphone Upgrade: The sophistication of smartphones has made it easier to build a digital identity on the blockchain. The digital identity will be readily available to many people as smartphones are becoming readily available to them.
Education Verification: Identification on the blockchain will block the loopholes of presenting fake certificates because it will verify the certificate's authenticity wherever it is used.
Banking: There would be no need for login details at all times before anyone can bank. It will eradicate that and make banking more secure.
Businesses: It will prevent a company from paying huge fines due to data breaches on their centralized database.
Healthcare: It makes it easy for health workers to operate as they can easily confirm data swiftly between themselves, providing quality care to their patients.
Previous Digital Identity Models: The earlier models were not the best as they exposed too much information to third parties.
Models of Digital Identity Management
Centralized Federation Model: This is the first model of digital identity, which has a point of failure and is purely centralized. The sole identity provider (IdP) is the organization, which collects and assigns identity information to its users. So, each user always has a new digital identity for every new site or company they interact with, which results in a poor user experience.
Federation Model: The second model tries to solve the problems of the first model by allowing the digital identity of a large and trusted site that you registered on to be available for you to access an organization or website. An example of this model is Logging in with Google. The user can easily log in to a website by using their Google digital identification credentials. This model is still largely in use today.
User-Centric Model: This model requires a centralized device, where the information about a user is stored. In the user-centric model, a user needs a Personal Authentication Device (PAD) to store their credentials which can then be accessed through a PIN on the device. This model is used in our smartphones and similar gadgets.
The Self-Sovereign Identity (SSI) is the fourth digital identity model, based on blockchain technology. Since our focus is Self-Sovereign Identity, provided by the blockchain, we will dig deep and correlate it to Microsoft's solution.
What is Self-Sovereign Identity?
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 Working Priciple of Digital Identity on the Blockchain
The digital identity in a blockchain is decentralized, and it operates based on the following components:
Decentralized Identifiers (DID): These are the identifiers that users create and control without any interference from centralized identity providers or authorities. DIDs are unique and global and could be used by companies, objects, or individuals.
Identity Management: This is a distributed ledger that gives everyone who is using the protocol, access to view the information about valid credentials. It also shows who endorsed the validity of the information without compromising the identity of the actual data.
Verifiable Credentials: These are statements made by an issuer to verify your identity without showing the actual data. For instance, a third party can confirm that you are a doctor without showing them your identity card or calling your issuer. The issuer gives a user the verifiable credentials with their public DID attached. The blockchain also houses the DID for everyone to see. So, anyone who wants to verify the validity of a credential can do so by checking the DID on the blockchain and know the issuer. In essence, anyone can easily check the blockchain to know the organization that owns a specific public DID.
Advantages of Digital Identification in Blockchain
Blockchain identification has numerous advantages, which are elaborated on below.
Decentralized Public Key Infrastructure (DPKI): This is the powerhouse of blockchain identification. DPKI allows everyone to create cryptographic keys on the blockchain in an orderly fashion. These keys give access to others to confirm the data of an identity holder. The DPKI made all these possible because it creates a trusted medium that distributes the encryption keys and verifies the identity holders.
Decentralized Storage: Digital identification on the blockchain is safer and easily accessible when compared to ones stored on a centralized database. Identity storage on the blockchain limits identity theft, hence protecting an individual's private information. It also gives the user the privilege to use their data on multiple platforms and for different reasons.
Manageability and Control: A decentralized identification gives the users the sole control of their data, including security, and they can decide to do what pleases them. The scenario is not the same in a centralized identity system, where the identity's control and security are in the hands of the entity providing the identity.
What is ION?
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.
ION Architecture
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.
How to Run ION and Create DIDs
To run ION, you need to meet certain hardware and software requirements.
Hardware requirement;
i5 processor (2017+ models)
6GB of RAM
1TB of storage
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;
Generate a DID locally. To do that, use the command line here, for Linux users.
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.
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.
Traditional Lending and its Problems
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.
Financial Exclusion
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.
Liquidity inefficiency
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.
Subprime problems
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.
Legacy infrastructure
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.
Key Concepts in DeFi Lending
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
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.
IOU token
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.
Collateral
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.
Liquidation
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.
Interest Rates
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.
Yield
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.
Key Architecture Elements
Oracles
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.
Lending pools
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.
Tokens
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.
Key Participants
Lender and Borrowers
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.
Keepers
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
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.
Types of DeFi Lending Approaches
Protocols in DeFi follow different approaches for lending: Collateralized debt positions, P2P collateralized debt markets, Under collateralized borrowing and Flash loans.
Collateralized Debt Positions
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.
P2P collateralized debt markets
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
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.
Flash Loans
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.
DeFi Lending Snapshot
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.
Discussion
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.
Conclusion
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.
In this article, we will be exploring the Connext Network and its working mechanism.
Introduction
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.
What is Connext?
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.
How Does Connext Work?
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.
How NXTP Carries Out Transactions
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.
Components of the NXTP System
Contract: It follows the instructions given by the users and routers of the system to either lock or unlock funds.
Subgraph: Caches on-chain data and events to enable scalable querying.
TxService: It tries to submit the transaction to the chain even if it has to be done multiple times.
Messaging: It takes care of anything involving message data over NAT.
Router: It gets information from subgraph and messaging and submits the transaction to TxService for sending to the chain.
SDK: It creates a transaction and gets the necessary information to start a transaction on the user side.
Importance of the NXTP Model
It only operates on-chain data.
There is no room for double collateralization; hence transaction service becomes easier.
Data can never get out of sync.
It doesn't give room for browser state data.
Both the receiver-side and sender-side can unlock funds simultaneously, which prevents liquidity from leaking.
Easy accessibility with Automated Market Makers and auctions.
There is the possibility of a fully-stateless router.
There is the presence of great crash tolerance for out of the box event.
The platform is simple to build and easy to use.
Disadvantages of the NXTP Model
It doesn't operate offline data; hence, we can't use it for batched conditional transfers in scalable micropayment.
Though it has a crash tolerance, the router still has to reclaim its fund within a time frame.
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.
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.
What Is Solana Blockchain?
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.
How Does Solana Work?
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).
Tower PBFT
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.
Turbine
It is a block propagation protocol that makes transmission to the blockchain node easy.
Gulf Stream
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.
What Is A Mempool?
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.
How Does Gulf Stream Work?
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.
Sea Level
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.
Pipeline
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.
Data fetching
Signature verification
Banking
Writing
Cloudbreak
Cloudbreak allows the Solana network to achieve a high level of scalability. Before defining Cloudbreak, let's understand the Solana blockchain scalability.
Cloudbreak And How It Achieves 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.
How Solana Achieves Scalability
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.
Archiver
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.
The Solana Ecosystem
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.
Cryptocurrency.ai: this is a cryptocurrency exchange platform that supports the trading of spots and futures.
Crowny: It is a platform where consumers can interact with their chosen brands and get discounts, rewards, and loyalties. CRWNY is the token of the crowny project.
Solarians: these are Non-fungible tokens (NFT) operating on the Solana blockchain
Raydium: it is the first automated market maker (AMM) built on the Solana blockchain.
Tether: it is a stable coin and has a high use case in the decentralized finance sector. USDT has announced it would be migrating to the Solana blockchain.
Cope: This project uses an index known as "cope score" to allow traders to score their trading outcomes and access other people's trading outcomes.
Audius is a music streaming platform where content creators can upload their work while consumers stream it.
Senswap: this is the first AMM built on Solana and serum platform
Hydraswap: this is a decentralized trading platform with lots of centralized trading experiences for Its users.
Solyard finance: this is a yield farming aggregator built on the Solana blockchain
Orca: this is a decentralized cryptocurrency exchange built on the Solana network.
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 Token
SOL is the native token that is used on the Solana protocol. The Sol token has two crucial use cases, which are:
It is used to cater for transaction fees and smart contract operations on the protocol.
You can also stake the Sol token to earn a profit on the Solana protocol.
To stake sol token, you should follow the steps below:
Get a wallet such as SolFlare and Exodus that supports Sol staking
Create your staking account by following the instructions on the wallet.
Follow the instructions on the wallet to choose a validator .
Delegate your stake to your chosen validator.
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.
Conclusion
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.
