Bitcoin vs Skycoin approach to hardware manufacturing
Global adoption of a stateless, un-censorable digital money has been the dream of Bitcoiners and crypto-Austrians in the years since Bitcoin has succeeded in not failing.
However, the ICO boom of last year and ‘Scambrian explosion’ of shitcoins distracted many from Satoshi’s original vision — that of a global financial system and payment rail infrastructure beyond the seignorage of an inflationary fiat banking system.
There many obstacles to widespread use of digital currencies. In this article we focus on one key aspect — hardware. Any hardware device that can reduce the friction of using cryptocurrencies in everyday life will greatly accelerate its uptake.
Essential blockchain hardware use cases
We see three blockchain hardware use cases in urgent need of development:
Point of Sale systems, near-field hardware wallets, low-cost bearer hardware wallets
For cryptocurrencies to become widespread as a medium of exchange, there needs to be simple and affordable tools that allow their transaction. Buyers need to simple devices for holding and transferring daily amounts of crypto. Merchants need devices that easily allow them to receive crypto payments at the point of sale.
Without such devices that compete with the user experience of VISA or MasterCard payment terminals, there is little chance in dis-intermediating incumbent 3rd party payment processors.
The long term goal is the creation of a closed loop economy in which people can earn, spend and save coins without necessitating transfer into fiat currency. Hardware plays a key role in this transition.
Low-cost hardware wallets, secure dedicated crypto phones, laptops and terminals
Security is paramount for devices conducting digital payments which are immutable and non-reversible. Without low cost, easy to use hardware devices, people will store their coins on insecure computers or mobile wallets. As the value of coins increases, the incentive for theft increase commensurately.
Hardware devices must be accessible and cheap in order to prevent coin thefts and losses, which harms adoption in non-technical users.
For institutions to purchase and own large amounts of cryptocurrency, there needs to be highly secure hardware devices built specifically for that purpose.
Plug-and-play Bitcoin/lLightning/Skycoin full nodes
The decentralization of Bitcoin and other similar peer-to-peer software networks is jeopardized by the absence of geographically distributed nodes. It is therefore imperative to reduce the barriers to running Bitcoin or Skywire nodes.
This can be achieved my manufacturing plug-and-play node hardware that can be readily installed and maintained by those unfamiliar with command-line programming.
Without accessible and easy to run node hardware, decentralized software is run on centralized web servers that severely compromise their value proposition.
Current Bitcoin offerings
There is progress along these fronts by several companies working specifically on Bitcoin and some supporting alt coins as well.
Trezor, Ledger and Keepkey all offer multi-coin hardware wallets that are currently the gold-standard in personal coin storage.
Coinkite, founded by Bitcoin maximalist Novak, sell a range of open source hardware devices. These include the OpenDime, that acts as a Bitcoin bearer instrument, and a Bitcoin point-of-sale terminal for merchants to accept Bitcoin (currently in development). Coinkite also manufacture the Coldcard hardware wallet that allows completely offline Bitcoin transactions, which sets the bar for secure Bitcoin storage.
Casa, who are working on an improved coin custody solution, are shipping Bitcoin/Lightning hardware nodes based on Raspberry Pi computing board and a Seagate HDD. Nodl and Bitseed have plug-and-play Bitcoin full nodes designed to make running a full node as easy as possible.
Challenges to blockchain hardware development
Despite this progress, blockchain hardware offerings are somewhat scarce, considering 10 years has elapsed since the launch of Bitcoin. We speculate that there are several reasons for this :
- Incentives/Funding. The incentives for manufacturing consumer-facing hardware are significantly lower than the innovation incentives for developing Bitcoin mining hardware (which has driven ASIC innovation). Businesses can only profit from the sale of the hardware device.
- Manufacturing. Hardware manufacturing is an extremely centralized process that requires a physical location, employees a balance sheet and customer support. The same people who anonymously code the Bitcoin protocol are not the same people who will publicly found and run hardware device companies.
- Software integration. Hardware development requires good software development and integration. Even the most efficient, high quality and low cost devices will not see mass uptake if the user interface is un-intuitive, the device is difficult to set up, or there is lots of friction. Again, this requires a degree of coordination in development and continuity that is difficult to achieve in purely decentralized online community of developers.
First-party hardware — the Skycoin approach
Skycoin lead developer Synth saw that a different approach was necessary to mass produce blockchain hardware and thus drive adoption. Skycoin has adopted a model of first-party hardware manufacture through their ‘hardware incubator’.
This approach offers the ability to vertically integrate hardware manufacture with software development — making hardware products that are designed to be 100% compatible with a software ecosystem. By selling hardware to users directly, Skycoin can use the revenue to fund further hardware & software R&D.
In this way, Skycoin can direct resources to manufacture hardware in all the categories mentioned above, in a much more efficient manner.
The Skyminer is the first example of Skycoin’s 1st party device — a computing unit that uses 8 Orange Pi boards each serving as a node on the network. Currently each board is running as a VPN node on Skywire, the new incentivized peer-to-peer internet based on CJDNS/Hyperboria.
Purchasing an official Skyminer from Skycoin gives a guaranteed ‘first adopter’ reward equivalent to the cost of the miner across 2 years . This is intended to incentivized the initial build out of the network. Official Skyminers also earn network bandwidth payments from forwarding traffic on the Skywire mainnet.
With further development and the addition network attached storage, nodes will run Skycoin (or Bitcoin) consensus nodes. For example, Bob could own a Skyminer and dedicate 6 of his Pi boards to Skywire packet forwarding, earning coin hours for providing bandwidth to the network. Because he is a Bitcoin/Skycoin maximalist he could use his 7th computing board to run his Skycoin consensus node and his 8th board to run a Bitcoin full node.
The Skywallet is the second Skycoin first-party hardware device. Based on the open source Trezor hardware wallet, it is configured to work natively with the Skycoin desktop wallet.
Skywallets will ship soon for $30. They are a key component of the Skycoin plan to lower the barrier of entry of secure hardware wallet ownership. This is significantly cheaper than the current 3rd party offerings.
Mesh Network antennas
Skycoin has grand plans for its Skywire ‘application’, which is essentially a distributed peer-to-peer networking protocol built to seamlessly integrate into the SKY platform. It is envisioned that the Skywire protocol will replace current internet standards as a new encrypted, high speed internet.
Skywire will also have a physical component — as a Mesh network of WiFi antennas and long-range radio nodes that connect to each other and allow a distributed marketplace in bandwidth. Constructing such a mesh network is a massive undertaking, but Synth and Skycoin have aligned incentives perfectly.
People are incentivized to purchase, install and run Skyminers and Mesh antennas for the return they receive in Skycoin and Coin hours. No central planning is necessary — the free market and economic decisions of autonomous actors will build out the Skywire infrastructure.
Open sourcing blockchain hardware
In addition to first-party manufacturing, Skycoin are pushing hardware design to the open source community. Many of the nodes on the Skywire were built by the community as DIY Skyminers. Many inexperienced, computer illiterate users have successfully built Skyminers and earned Skycoins because there is a financial incentive to do so.
It is quite possible that the most effective method for mass distribution and use of cryptocurrency will be Skycoin bandwidth rewards on Skywire. People with no prior interest in digital currency will become interested if they can earn Skycoins for running a Skyminer in their living room.
Adaptability of crypto hardware
Whether or not you believe that a single coin will come to dominate, the reality is that different usability and privacy features will mean different coins will be demanded as media of exchange. The beauty of the open source movement is the adaptability of hardware to support different coins — and the choice of the free market. The only barrier is the enthusiasm of the developer community:
- Ledger/Trezor hardware wallet devices already support (too) many different coins and tokens
- OpendDimes and ColdCards can be programmed to hold Skycoin as readily as Bitcoin
- Skywallets will support BTC and likely several other major coins
Skycoin hardware moving forward
For all those who believe in a stateless store-of-value and medium-of-exchange, the progress that Skycoin is making towards mass adoption through hardware manufacturing is commendable.
With a fixed supply of 100 million coins, time locked for distribution over the next 14 years, Skycoin is as hard money as Bitcoin. Whereas Bitcoin development remains incredibly conservative, Skycoin’s more centralized governance allows them to innovate in software development and manufacture 1st party hardware devices.
We believe that Bitcoin and Skycoin are the only two coins that have the potential to fulfill the role of censorship-resistant global digital money. Skycoin and Bitcoin could be the ultimate barbell (more on that in a future article).