Skycoin, the Bitcoin challenger
Tales From the Crypt — Rabbit Hole Recap is a high quality podcast by Marty Bent and Matt Odell discussing Bitcoin and crypto news. In the episode 2019–01–28 they were joined by Murad Muamadov, one of the most respected commentators in the space.
Odell, a dyed in the wool BTC maximalist, clashed several times with Murad who often plays devils advocate to Bitcoin moonboy-ism. The topic of conversation turned to the likelihood that Bitcoin gets supplanted by an altcoin. Murad —
‘Bitcoin is a 10x improvement over gold and fiat. In order to supplant it, you need to do at least another 6x, which is much harder. What Bitcoin did to gold…doing that to Bitcoin is significantly more difficult.
Its also important to understand that these currencies are not competing just technologically, they are also competing in terms of the Lindy effect, the community, the religiosity aspect…so usurping Bitcoin will be incredibly difficult…but I wouldn’t go as far to say its completely impossible but its probably extremely, extremely difficult’.
Murad’s point is that merely creating an alternative cryptocurrency with ‘improved’ technical specifications (e.g. transactions per second) is insufficient to ensure its widespread adoption as money. There are a host of less tangible characteristics that influence adoption and ultimately success of a new money. These can be thought of as the ‘social’ network effects.
Supplanting Bitcoin
We re-frame Murad’s statement into a question. Is there an altcoin in existence that has the potential to improve Bitcoin by 6–10x across both technical and intangible features?
As the bear market looks to be coming to an end, coins that haven’t exit scammed have gone broke and disappeared. The VC-funded ‘blockchain industry’ with its smooth talking snake oil salesmen have gone into hibernation as technological utopism meets the cold reality of software engineering. Gun-for-hire coders who forked Bitcoin and spun up ERC20 tokens hoping to create their own currency with a seignorage rights are being taught a harsh economic lesson.
Skycoin, the crypto Black Swan
We believe that Skycoin is the only coin in current development that has a possibility to supplant Bitcoin based on both technological features and these softer, non-tangible features. This article assumes some basic knowledge of Skycoin, so read more here and checkout our previous pieces. From the Skycoin GitHub readme —
Skycoin was written from scratch and designed over four years to realize the ideal of Bitcoin and represents the apex of cryptocurrency design. Skycoin is not designed to add features to Bitcoin, but rather improves Bitcoin by increasing simplicity, security and stripping out everything non-essential.
Some people have hyped the Skycoin Project as leading into “Bitcoin 3.0”. The coin itself is not “Bitcoin 3.0”, but is rather “Bitcoin 1.0”. Bitcoin is a prototype crypto-coin. Skycoin was designed to be what Bitcoin would look like if it were built from scratch, to remedy the rough edges in the Bitcoin design.
- no duplicate coin-base outputs
- enforced checks for hash collisions
- simple deterministic wallets
- no transaction malleability
- no signature malleability
- removal of the scripting language
- CoinJoin and normal transactions are indistinguishable
- elimination of edge-cases that prevent independent node implementations
- <=10 second transaction times
- elimination of the need for mining to achieve blockchain consensus
Let’s take a dive into the features of Skycoin that could see it supplant bitcoin in the future:
Technological competition
Skycoin
As outlined above, the actual Skycoin blockchain has been designed to address Bitcoin design flaws, particularly surrounding modularity of the codebase. As the first cryptocurrency that actually worked, Satoshi didn’t know to separate different vital components of the code. Therefore many attempts to add features to Bitcoin are stymied by the unacceptable risk of breaking critical functions like consensus. Skycoin fixes these problems.
Skycoin can also incorporate any open-source Bitcoin-designed software, including services like BTCPay Server, which is currently being implemented.
The Skywire internet protocol
Skywire is a new networking protocol implementing software-defined networking (SDN), intended to replace the current IPv4/v6 stack by offering decentralization, faster traffic routing and a high level of privacy. Skywire also refers to the wireless mesh network being built to run this new protocol. It is the most advanced incentivized wireless mesh network in current development.
Built as an application on top of the Skycoin blockchain, it uses off-chain micropayments to meter internet bandwidth. People are paid in Coin hours to build, run and maintain the antennas and routers of SKywire. The Skywire protocol is aiming to obsolete the current internet conventional ISPs, TOR, as well as become the foundation for new sovereign data storage.
There are currently over 9500 nodes active on Skywire testnet which equates to 1200 distinct computing units (approx. 8 hardware nodes per Skyminer device). The developer version of mainnet was recently released for bug fixing and open sourcing.
In fact, network rewards and bandwidth payments could be the largest method of distributing cryptocurrency the world has seen yet, and could drive the creation of wireless mesh networks in every city of the world within two years.
Coin Hours
Coin hours are an inflationary parallel Skycoin currency generated passively for holding Skycoins. They will be used to purchase bandwidth on Skywire. Further development of the Skycoin ecosystem will see applications like DEXs and online gaming that also use this inflationary currency in a circular economy.
Coin hours could represent 10x improvement over Bitcoin when they establish a real market value because they are a powerful incentive for owning and holding the underlying Skycoin. Supply hoarding could send Skycoin into a deflationary spiral, as circulating coins are rapidly pulled from the market.
Obelisk, a PoW alternative
An alternative block consensus algorithm to Proof-of-Work that uses Web-of-Trust dynamics. Individual nodes subscribe to a list of trusted nodes from which consensus of the current state of the blockchain is reached. To prevent Sybil attacks, it uses a separate gossip channel to record consensus decisions of individual nodes. This allows the identification of malicious nodes which are then kicked.
One of the most important security features of Obelisk is its uncoupling of blockchain security from coin creation (read more here). This ensures that even if a majority of consensus nodes are malicious, they are unable to steal coins, only slow down the network. If successfully implemented, Obelisk could represent a 10x improvement over PoW and cryptocurrency design.
CXO
Obelisk will leverage another Skycoin sub-project called CXO, an immutable object system that allows decentralized data storage using content-addressable storage. Data is hashed then replicates peer-to-peer, like torrenting. CXO is the future for decetralized data storage that will allow us to replace the current centralized, privacy-depriving web applications of Big Tech.
CX, the Skycoin programming language
A truly deterministic programming language designed to support coding of blockchain applications with very low margin for error. CX’s affordances packages and other features were specifically designed to address smart contract vulnerabilities as seen with Ethereum’s DAO and Parity hacks written in Solidity.
CX is designed to ensure native compatibility with the Skycoin blockchain, and already has a community-created game library under development that will bootstrap gaming written in CX.
Privacy features
Skycoin is incorporating G Maxwell’s CoinJoin on the base layer, and several conjoin servers will provide coin mixing. The Coin hour bank will allow trading of Skycoins through coin hours, which are completely fungible. These features provide privacy without compromising the ability to audit total supply of coins, a key problem affecting many other coins.
Fiber
Fiber is a Skycoin platform for development of non-monetary uses of blockchain — online gaming, DEXs, etc. Rather than shoving all dApp traffic on a single, global public blockchain as Ethereum tried (and failed — see KittyCash, the DAO hack), Fiber gives blockchain projects their own customizable blockchain, a ‘fork’ of the Skycoin main chain that will have modular features (coin supply/consensus nodes/block minting nodes) depending on the use case. This solves both the chain bloating problem and the issue of competing dApp developers for blockchain space.
Hardware
Only the hardcore Bitcoin users currently build and run Bitcoin full nodes. The Skyminers that forward bandwidth on Skywire provide the ideal basis for running Skycoin blockchain full nodes. People earning coins for providing bandwidth can dedicate one of their 8 nodes to Skycoin (or Bitcoin) full node using network attached storage.
The Skycoin hardware suite is also composed Skywallets and wireless mesh network antennas. The first-party approach to hard ware manufacturing has several advantages, which we have previously analyzed.
The scope of the technical features of Skycoin we believe could provide this 10x improvement over Bitcoin. What are the potential non — technical features that could see Skycoin overtake Bitcoin?
Social network effect features
Religiosity
Skycoin’s lead developer Synth is a veteran cypherpunk. He was fixing bugs on Bitcoin before it compiled on Linux and was hosted on Github predecessor Sourceforge. Anyone who has watched his interviews is immediately captivated by his knowledge and passion. His opinions on world events are insightful and fascinating. He has spawned his own cult following among the Skycoin community.
Lindy Effect
Popularized by Nassim Nicholas Taleb, the Lindy effect refers to the phenomenon that the longer some non-perishable good has existed, the longer it will continue to exist. At 10 years of use, Bitcoin has significant Lindy effects as most of the cryptocurrency industry is built on it. Skycoin’s has developer Lindy effects because the project is as old as Litecoin, and has established support from OG cypherpunk factions that split off early after Bitcoin’s success.
Developer incentives
Coins with centralized governance structures might have the edge over Bitcoin because they can direct development resources towards software and hardware R&D as needed. Bitcoin’s lack of direct developer incentive is one of the major unknowns regarding the protocol’s future success and sustainability.
Addressable market/community
Perhaps most importantly, any challenger to Bitcoin must have an equally fanatical community. While many coins may claim to have a strong community, one metric that demonstrates the effectiveness of the Skycoin approach is the number of people who have built out Skyminers all around the world.
At the end of the day, most people just want to get rich. We would argue that Skycoin will generate a more fanatical community following for the precise reason that it allows people to ‘mine’ Skycoin much more easily than Bitcoin. In the interview, Murad makes this point continually. Speculation will ultimately be the driving force of adoption, and Skycoin’s incentive structure is a true 10x upgrade over Bitcoin for purchase and holding of coins.
Conclusion
There are many unanswered questions about the final implementation of various Skycoin features and their functionality under sustained usage/attack. Despite this, Skycoin clearly has enormous potential to onboard millions of people into cryptocurrency through its Skywire decentralized internet protocol.
We believe it is the only complete challenger to Bitcoin in the long term. But don’t take our word for it. Audit some of their 50 public Github repositories, listen to some Synth interviews and see the global distribution of Skywire nodes.
Skycoin has the potential to make enormous contributions to censorship-resistance of payments and information flow. In the decade since Bitcoin’s launch it sometimes feels like the founding ethos of the movement has been forgotten. Skycoin is carrying Satoshi’s torch onward.
An excellent tweet summary of the conversation here —
Skyfleet Captains Log — a collection of Skycoin community articles
r/Skycoin — for Skycoin discussion.
Skycoin Telegram — the most active platform for project discussion
Skycoin GitHub — the master directory for all Skycoin ecosystem repositories
Remember, this is not investment advice. Always do your own research.
