Skycoin demystified. Part 1
A sojourn into the cryptoverse remains a daunting prospect for the average person. Not only does one need to acquire the appropriate new vocabulary, but also scale a tech learning curve akin to mount Everest in order to navigate the world of distributed ledger technology. The rapid rate at which new projects are being launched only serves to further complicate and confuse the intrepid crypto-adventurer.
Skycoin is one of the oldest projects in the cryptosphere and one of the more complex and difficult for the uninitiated to understand. It is however among the most promising crypto projects and well worth the effort of becoming better acquainted with.
This multi-part series of articles is aimed at clarifying Skycoin for the lay user. This, the first in the series, will examine the origins and positioning of Skycoin within the world of crypto.
A second chance at getting it right
When Satoshi Nakamoto conceptualised Bitcoin, he/she/they envisioned a truly distributed currency free from centralised control and manipulation driven by a network of community owned computers securing transactions for everything from a cup of coffee to real estate. Sadly this vision failed to materialise as Bitcoin today is neither decentralised nor a viable currency for micro transactions. A few centralised mining pools dominate the network resulting in the failure of democracy while high transaction fees and long confirmation times makes it a bad idea to buy a cup of coffee with Bitcoin. The Proof of work algorithm used to secure the Bitcoin network requires enormous amounts of electricity which further adds to transaction costs and negative environmental impact.
It can thus be stated that Bitcoin, having served the purpose of introducing distributed ledger technology, can be compared to the model T Ford. It introduced the automobile to the world, radically altered the way we do things and will always be a sought after, valuable classic but is no longer a viable option to fulfil the original function it was intended for.
The creators of Skycoin realised the shortcomings of Bitcoin back in 2012 while contributing code to the Bitcoin project and initially attempted to rectify these problems but politics within the developers community soon made them realise that they will have to fix this with an entirely new project and thus Skycoin was spawned.
The first call of business was a consensus algorithm. As mentioned before, POW (proof of work) is clunky and leads to centralisation, high transaction fees and long confirmation times. The Skycoin consensus algorithm is called Obelisk and the main difference between Obelisk and POW is that Obelisk doesn’t require large computational problems to be solved. Instead, it is a mathematical expression of opinion dynamics, where a web of trust secures the network. I will write more extensively on Obelisk in a future article but what is important for the end user to know is that Obelisk makes it possible to have virtually instant confirmation times, no transaction fees and requires no mining and therefore free of the energy overhead of POW.
A new consensus algorithm wasn't enough
Most people would have been satisfied at this point having identified and solved major design flaws in Bitcoin but the Skycoin guys didn’t stop here. In fact they only just got started. They realised that sentiment and speculation drove the value of cryptocurrency which inevitably results in a bubble and bubbles inevitably will pop. Instead of relying on exchange listings, FOMO and speculative hype, Skycoin derives it’s value from an actual commodity.
The creators of Skycoin understood that just another coin, no matter how technically sound it was, would not be enough and created Skywire as the commodity which makes Skycoin valuable. Skywire is literally a new internet which solves the issue of net neutrality by allowing anyone to be an ISP and be rewarded in Skycoin to participate in the network by routing data in a mesh network using a device called a Skyminer.
I realise things do become a tad confusing here as Skycoin requires no mining in the traditional sense of the word and yet here we have a Skyminer. Well, this “miner” is in actual fact a data router, an open design hardware device which can be built at home and used to participate in the Skywire mesh network to earn Skycoin.
All that was now needed to complete the picture was a programming language with which to write applications to run on this new internet and true to form, the Skycoin guys created CX, a turing complete scripting language as well as CXO, a distributed object storage system. The first applications using these have already been built.
Beyond Ethereum
Arguably, one of the best early indicators of the quality of the Skycoin project was the amount of times it was cloned on Github and used to create new coins by independent parties. The logical next step was then to create a platform on which the Skycoin technology could be used by companies to mint coins containing all the functionality of Skycoin. This platform came to be known as Skyledger. Unlike ERC20 tokens on Ethereum which all rely on a single bloated blockchain which is often overloaded, coins on Skyledger each get their own Blockchain in what is known as a fiber, basically an infinitely scalable series of blockchains running in parallel.
It is worth noting at this point that there are entire projects based on just one of the features of Skycoin. It is a highly ambitious one with many moving parts but it is a mature project with mature code and many active contributors to the thirty-some-odd Skycoin Github repo’s. As such, attempting to summarise the Skycoin project in a single article is futile so I will be posting a series of articles over the coming weeks in which I will examine and attempt to explain every component of Skycoin in laymen’s terms.