Skycoin Obelisk

The Revolutionary Skycoin Consensus Algorithm

Published in
6 min readMay 7, 2018


If you’ve spent any time learning about cryptocurrencies, you’ve likely discovered that most blockchain-based projects use Proof of Work (PoW) or Proof of Stake (PoS) consensus algorithms. These protocols are still considered the de facto for most platforms, however, that doesn’t mean they are flawless. PoW and PoS algorithms have security holes that make them a relic in the new age of blockchain 3.0. Centralization issues, 51% attacks, mining problems, slow transaction speeds and energy waste are only a few of the critical disadvantages that old consensus algorithms face. To counter this, Skycoin has developed Obelisk, the new distributed consensus algorithm that solves the problems of previous generations and makes them obsolete.

The Dire Flaws With Existing Consensus Algorithms

The entire premise of Bitcoin was decentralization, however, this did not play out due to the lack of a protocol to regulate greed. As the majority of hashing power became concentrated within the server hardware of only a handful of individuals, centralization had begun. Unfortunately, this completely defeats the purpose of a distributed ledger-based cryptocurrency. Not only was the monopolization of mining pools starting, but the vast amount of waste coming from this entire process proved that the current consensus algorithms aren’t viable long-term.

PoW already showed that it was susceptible to manipulation, so PoS was introduced in an attempt to counter mining monopolies. Those who had the most ownership of a particular digital asset would also gain authority rights and voting privileges to make technical changes in the network. Not only did this make the problem worse for balancing control over the network, but it also creates substantial economic issues for stakeholders holding an excessive amount of a particular token. Synth, being one of the early developers working on Bitcoin, quickly realized this problem and started to brainstorm a way to eliminate mining rewards and also fix these flaws, giving rise to Obelisk.

The Web of Trust

Obelisk is often described as a “web of trust”, meaning that influence is distributed over the entire network as nodes are strung together in an interlocking web. Trust can be obtained by having nodes subscribe to each other. Nodes with the highest degree of subscribers are considered most trustworthy and therefore have the most influence over the network. Every node is assigned a blockchain to ensure complete transparency, where every action the node makes is publicly recorded and visible. In addition to this, every node is addressed only by its unique public key so that each has a unique identity. These processes create a system of checks and balances where the community and other nodes can audit the behavior of the network with a high degree of accuracy.

This web of nodes gives the community the ability to self-regulate the network. By being able to cut off suspicious nodes for malicious behavior, the network becomes stronger as trust is maintained. Not only can trust be managed by quarantining nodes, but this process also allows for the community to rebalance power in the network. Since subscriber density creates trust, no one particular node can have overwhelming influence over the network. Third party audits also have the ability to manually edit trust relationships if one node is deemed too concentrated, for maintenance of balance. Likewise, if a node is lacking support, power can be rebalanced with that particular node.

Highlights of Obelisk

Obelisk benefits from a number of advantages when compared to PoW and PoS algorithms, resulting in a more efficient operation of the entire Skycoin ecosystem. For adoption of a new consensus algorithm to occur on a large scale, there will be high demand for what it needs to deliver. At the same time, it must address and solve the problems of previous protocols. Skycoin has taken this into account and has produced a consensus algorithm that succeeds in fulfilling these requirements.

Obelisk’s high level of security comes from the implementation of a robust mechanism to counter any coordinated network attacks, and it achieves this in a variety of ways. Obelisk can synchronize and update the state of the Skycoin blockchain with split-second convergence rates, meaning every node in the network stays up to date with accounting at all times. This accountability is particularly useful when calculating public key balances at different nodes. Since the entire network is in sync, it would be impossible to fabricate this numerical data without being immediately detected by the group consensus and instantly banned from the network.

Obelisk also shows it’s integrity by only needing minimal traffic to operate at 100% efficiency. Regardless if other nodes are taken out for malicious behavior, the network will not become weaker and more susceptible to attacks by removal of a few bad actors. Consensus nodes also can make this a semi-automated process. If consensus-related messages signed by unverifiable or untrusted nodes try to interact with active nodes, they can be automatically ignored to reduce the risk of malicious behavior entering the network.

For the network to operate in its most efficient state, maintenance of transparency and privacy are essential. The dichotomy between these two features isn’t so ironic because they compliment each other well in the consensus process. Since nodes are continually recording and broadcasting all their actions publicly, reassurance that every node is acting in the best interest of the network can be guaranteed. In addition to this, a node’s IP address is only known by the nodes directly connected to it. Communication and consensus decisions can, therefore, be readily audited by the community without sacrificing privacy.

By design, Obelisk also benefits from being highly scalable, computationally inexpensive, and energy efficient.

Not only are there eco-friendly perks to using this algorithm, but DIY builds using budget hardware can also join and contribute resources. Block-making nodes also can run on budget hardware making it a feasible alternative to PoW. This further increases the strength of the network as it encourages more nodes to get connected as they are inexpensive to build and operate.

Consensus Nodes vs. Block-Making Nodes

There are two different types of nodes necessary for the consensus algorithm to operate correctly. Block-making nodes have a purpose to send data to consensus nodes, but what exactly does this data contain? Block-making nodes collect new transactions and verify them against the unspent transaction output (UTXO) of the desired sequence number. This information is packaged into a new block where it is then shared across the entire network for safekeeping on a public record. A consensus node’s job is to acquire all the created blocks from a block-making node and store them in a specific container that is separate from its private blockchain. This locked container can only be keyed by the block’s sequence number, which is another preventive mechanism against fraud. A consensus node can receive a significant amount of blocks before a winner is selected, which is determined by the block that required the most block-making nodes to create. This entire process is authorship-verified meaning that all transactions received are checked for their legitimacy before proceeding, so no fraudulent transaction can ever be passed onto a created block.

Skycoin Obelisk is the future of consensus algorithms, solving the problems of its predecessors. Join the revolution, and be a part of all that Obelisk and the Skycoin ecosystem has to offer.

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