Blockchain vNext Series (Part 3)
I want to use the third part of my Blockchain vNext series to dive into Lisk. In the first two parts we had a look into FileCoin, IPFS and the Ocean protocol which both might become important foundational parts of the upcoming Blockchain landscape or even the Internet itself.
Lisk is different. It’s a next generation Blockchain ecosystem.
The platform is driven by the LSK token. LSK is no ERC20 token because its not based on Ethereum. That’s one of the reasons why Lisk comes with its own wallet — the Lisk Nano. Lisk Nano has a nice user interface that is also used to vote for “delegates”. Lisk delegates have the task to secure the network. Lisk doesn’t use Proof of Work as consensus algorithm but delegated Proof of Stake (dPoS) — similar to BitShares or EOS. You can find a simple description of dPoS here.
Lisk uses 101 of these delegates to reduce the number of entities to find consensus. Lisk token holders can regularly vote for trusted delegates. The small amount of delegates has the advantage that Lisk has a high transaction throughput and better scalablility than Bitcoin or Ethereum. But there is more to improve scalability: Lisk uses the concept of sidechains to split up the traffic between different dApps running on the Lisk platform.
Every dApp gets its own sidechain and runs isolated from other apps. Each dApp is allowed to create its own custom token or use LSK. Lisk wants to prevent that popular dApps might have a negative impact on its whole ecosystem like this was the case with CryproKitties on Ethereum end of 2017.
The Lisk team is based in Berlin, the Lisk foundation is listed in Switzerland. Founders Max Kordek and Oliver Beddows are driving forces behind the Berlin Blockchain scene. They started Lisk in 2016. Its ICO collected 14.000 BTC at the time. At the time of writing (January 2018) Lisk is valued at 2.6 billion USD and ranked the #20 cryptocurrency on CoinMarketCap. So Lisk has a strong financial basis to bring the platform to life in the upcoming months.
I was really impressed when I read the story of founder Max Kordek about how he plans to spend his part of the pie in the next 10(!) years. His goal is to create as little impact as possible on the market price. Great to see how much thought went into this to establish trust.
Impact on society
At the moment Lisk has also some drawbacks in its token ecosystem design. A transaction currently has fixed costs 0.1 LSK — that’s currently about 2€ and might get significantly more if the token valuation should rise further. The dynamic gas prices for transactions on Ethereum seem to be a better choice to me.
Another downside: Token holders are charged 1 LSK to vote for up to 33 preferred delegates. If you own a small amount of — let’s say 20 — LSK tokens: Would you sacrifice one of them to select a delegate? Yes you get paid back by your delegates with each transaction, but this is small money compared to your voting investment. First I thought I got something wrong. But according to this article it doesn’t make too much sense to vote if you have less than ~750 LSK (~15k€) in your wallet (see comments and replies for details). I wonder whether this economic argument might be critical for the robustness of the dPoS algorithms? Feedback on this point are highly welcome!
Another thing I don’t fully get yet is: What are the best criteria for token holders to select a trustworthy delegate? Yes: there are economic aspects and even tools to calculate the RoI. But are there other arguments? I’ve got the strong feeling that the selection of delegates should be automated and built into the system…
It will be very interesting to see if one of the many new Blockchain ecosystems like Lisk, EOS or NEO will win the race to become the big competitor for Ethereum. There is a lot of potential for sure. At the same time Ethereum gains more and more traction as an ecosystem and works on its transaction speed and scalability (see Raiden, Casper and Plasma).
2018 for sure will be an interesting year to watch these emerging technologies closely!
Disclaimer: This article is not intended to be an investment advice of any sort. Do your own research and search for professional support if you intend to invest in one of the projects mentioned in this article.