Skycoin, a blockchain created by original developers of Bitcoin and Ethereum, is looking to address the faults found in previous blockchains.
April 09, 2018, Shanghai – Bitcoin looked great on the surface, with very noble ideals of bringing financial freedom to those who would not deal with traditional finance any longer or could not access the financial system. As the idea of cryptocurrencies started gaining traction, the scene expanded rapidly, and a new cryptocurrency was born that would usher in the start of “cryptocurrency 2.0”. This new cryptocurrency would serve as the launching point for hundreds of projects looking to make their way into the blockchain space. The second generation cryptocurrency was Ethereum.
Bitcoin and Ethereum, at their very core, are broken.
Bitcoin and Ethereum both employ the Proof-of-Work (PoW) algorithm to achieve consensus on their networks. In a basic sense what this means is miners are in a race against each other to solve complex mathematical problems in order to verify that a network transaction has completed successfully. The “winner” gets paid for doing the work or proving the work, with the payment being a fraction of the total transaction amount.
In Bitcoin’s early programming, there was a fundamental miscalculation that the mining process would produce an economic incentive structure conducive to decentralization. Instead, PoW has concentrated influence among mining pools that can operate the resource-intensive miners with cheap electrical power. These same influential groups can orchestrate widespread changes to the network with things such as soft forks. Satoshi Nakamoto identified mining control as the biggest non-cryptographic threat to the Bitcoin network, due to the possibility of 51% attacks when more than 50 percent of the hashing power is confined to one entity.
According to Energy Researcher Sebastiaan Deetman:
“If the bitcoin network keeps expanding…it could lead to a continuous electricity consumption…[equivalent to] the total consumption of…Denmark by 2020. The continuous consumption of electricity through the processing power required by mining incurs monthly costs in the tens of millions. There is little sustainability in this over the long-term.”
Obelisk distributes influence over the network according to a web-of-trust architecture. Instead of miners, the network consists of nodes. These nodes are substantially less expensive to produce, acquire and operate than any traditional miner used to mine Bitcoin or Ethereum. Obelisk was designed to be a scalable and computationally-inexpensive alternative to PoW, enabling the algorithm to be run on budget hardware. Centralisation becomes nigh-impossible when virtually anyone is able to operate a node.
This web-of-trust consensus also prevents the development of centralized power. Skycoin does not rely on mining incentives, therefore it is not susceptible to a 51% attack. In addition, there is no reason for mining farms to start buying up thousands of computers to run Obelisk because there is no chance to take over the network and have complete influence. In addition, if one group did pool enough resources to disrupt the network, there would be little impact on network users as this type of takeover will be detected immediately and shut down.
Currently, the easiest way to operate an Obelisk node is to purchase a Skywire Miner or build a DIY version on your own. While running an Obelisk node itself does not produce monetary value, it does keep the Skycoin blockchain safe. When building a Skyminer, one can choose to contribute resources by operating nodes on the Skywire network and earn Skycoin (SKY) for those resources and bandwidth. Skywire is the decentralized peer-to-peer network that is incentivized through SKY. This incentivization mechanism gives Skycoin inherent value. Where Bitcoin’s value is derived by speculating on the value provided by the network in the future, Skycoin’s value is immediate and here as soon as Skywire testnet launches.
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