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Information Obelisk: The Skycoin Consensus Algorithm
Posted by: skyguy - 12-04-2017, 03:31 PM - Forum: New to Skycoin - Replies (1)

[Image: obelisk-the-skycoin-consensus-algorithm.png]

The Skycoin blockchain makes use of a novel type of consensus algorithm called “Obelisk” that replaces both Proof of Work (“PoW”) and Proof of Stake (“PoS”).

The aim of the developers of Skycoin was to correct the major security flaws and “centralizing tendencies” associated with blockchain networks in which consensus is based on PoW or PoS algorithms and coin creation is linked to a mining process. Skycoin is therefore trying to create a cryptocurrency that better fulfills Satoshi’s original vision of a fully decentralized digital currency system.

In doing so, Skycoin technology creates a blockchain network with no mining requirement, fixed supplies of crypto-tokens, 10-second transaction times, and greater security. In a system in which the connection between coin creation and control over the network is severed, crypto-tokens lose their political function and begin to act more like a form of digital property in the straightforward sense.

Proof of Work and the Bitcoin system

It was a fundamental miscalculation in the early programming of Bitcoin that the mining process would produce an economic incentive structure that would promote decentralization. In fact, the link between consensus and hashing power incentivizes the purchase of ever increasing processing capacity to control the consensus network.

The Bitcoin network, for instance, is de facto controlled by three for-profit mining pools which have been able to concentrate a large part of the network’s hashing power on its servers. These pools have begun to act as a cartel, splitting hashing power among each other by agreement. The link between mining and control of the network was already identified by Satoshi as the main non-cryptographic threat to the stability of the network. It allows actors who accumulate sufficient processing power and achieve a majority hash rate to falsify or revert transactions on the network in a 51% attack. Some argue that this vulnerability has become less pressing in an environment where hash power is highly centralized with actors who have invested large sums in the Bitcoin network and depend for their survival on the high value of the coin. Yet the power to influence the network is still highly concentrated, defeating the purpose of a distributed ledger-based cryptocurrency.

The Bitcoin network’s PoW algorithm thus introduces security and monopoly problems by placing power over the network with the actor capable of mobilizing enough economic resources to control the mining process.

This also implies that the operation of the network is both economically and environmentally inefficient. The continuous input of processing power required by the mining process uses up large amounts of electricity, incurring monthly costs in the tens of millions. These costs can only be offset with an exponentially growing influx of new capital along with new users. Only a very small number of well-established coins, like Bitcoin and Ethereum, will be able to attract enough users to achieve such a continual flow. In the case of most other PoW/PoS-based coins, the cost of PoW/PoS mining is paid for in a lower market valuation as money is bled out of a coin by mining costs until the coin is abandoned.

Quote:Right now the Bitcoin economy consists of new users putting their money in and then the money being thrown in a pit and burned in a sacrifice ritual to the mining electricity costs. If the average user had to pay the miners’ electricity cost directly as transaction fees, instead of it being robbed from them through inflation by the creation of new coins, then each Bitcoin transaction would cost more than $50. It would be more expensive than an international bank transfer.

The centralizing tendency of Proof of Stake

Although Proof of Stake algorithms tackle the security issue of 51% attacks, they are arguably even more vulnerable to centralization than PoW networks. In PoS, the size of network participants’ holdings of the cryptocurrency in the network determines their authority and voting power to implement technical changes in the network. Participants are able to mine an equivalent portion of their stake regardless of processing power.

This principle significantly increases the economic barriers to launching a 51% attack because the financial cost of acquiring the majority of tokens on the network in the open market is very likely to exceed the potential gain. If an attacker ends up as the majority stakeholder in the network, he will suffer most from the impact of the attack on the stability of the network or the external value of the cryptocurrency.

Yet, although raising the barriers to human-led attacks on the network, PoS creates a centralizing impulse which is as strong as, if not stronger than, in the case of PoW. As Joseph Young summarizes in his comparison of the two systems at [color=#0072ff]coinfox.info, “A system where the major stakeholder enjoys extensive control and authority over both technical and economic aspects of the network creates a major monopoly problem.” While in PoW voting on the implementation of technical changes to the network “is divided among miners, developers and other crucial members of the community,” in a PoS system “major stakeholders have a technical ability to make any changes they like without considering the will of the community, businesses, miners and developers. This centralisation of voting power and, essentially, control of the network defeats the purpose of a distributed ledger-based cryptocurrency since it contradicts its entire principle of distributing all elements within the network to avoid the presence of a central authority.”

Obelisk: Skycoin’s distributed consensus algorithm

To tackle this centralization problem, Skycoin moves beyond PoW/PoS. It uses a distributed consensus algorithm, called Obelisk, which distributes influence over the network according to a “web of trust”. In essence, every node has a list of other nodes that it subscribes to, and the density of a node’s network of subscribers determines its influence on the network. Each node is assigned a personal blockchain which acts as a “public broadcasting channel” on which all of a node’s actions are visible and publicly recorded. As all consensus decisions and communication occur through the personal blockchains of each node, the community can very easily audit nodes for cheating or collusion. How decisions on the network are made and which nodes influence those decisions is completely transparent.

The public record left by each node’s personal blockchain allows the network to react to defections by severing connections with less trustworthy or malicious nodes, contracting the network to a smaller and denser core of trusted nodes. Hence, in principle, if the community does not trust the nodes representing them or feels that power within the network is too concentrated (or not concentrated enough) the community is able to collectively shift the balance of power in the network by collectively changing their trust relationships in the network. The accountability of nodes to the community and 3rd party audits as well as the transparency of consensus strengthens collective decision-making and thus introduces a highly democratic and decentralizing element to the network.

This system provides for a digital currency system with significantly reduced transaction times, no mining requirement, and greater security.

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  SKYcoin AMA Transcript
Posted by: ranev - 12-04-2017, 12:17 PM - Forum: Skycoin Project - Replies (2)

https://www.reddit.com/r/ArkEcosystem/co...h_skycoin/

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  Skywire Miner
Posted by: skyguy - 12-04-2017, 05:56 AM - Forum: Skywire - Replies (5)

The Skywire “miner” is meticulously designed and configured to provide a backbone for the new internet. Its custom-built hardware exceeds technical specifications to deliver maximum power and performance. Skywire functions as a “miner” for Skycoins. It acts as a specialized VPN, using the following hardware configuration:

  • 8 CPU boards
  • 2 GB of RAM per board
  • 4 CPU cores per board
  • 64 GB of storage per board
  • 64-bit Linux (Alpine Linux)
  • Gigabit ethernet, 8+1 port switch
Each board features an ARM processor, 2 GB of RAM, and anywhere from 32 to 256 GB flash storage. The hardware is segmented in such a way that even if one service is compromised, the other services on the same machine can’t be. An OpenWRT router with strict packet forwarding rules and access control increases security. The setup can be further customized to consist of 4, 8, 16, or 32 boards.


[Image: 2zj4CUV.jpg]

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  #Genesis
Posted by: ranev - 12-04-2017, 03:21 AM - Forum: Skycoin Project - Replies (1)

Thanks for setting this up @skyguy!  
This be the start of a decentralised internet future in SA

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Information What is Skywire
Posted by: skyguy - 12-03-2017, 04:05 PM - Forum: New to Skycoin - Replies (17)

[Image: skywire-the-next-internet.png]

In spring 2017, the FCC made a proposal in which internet service providers can collect, use, and sell information about customer browsing habits. ISPs can do this without permission. Customers can’t opt out. Being a customer of one of these corporations means that you’re paying to be tracked, plain and simple.

With customer tracking, unreliable coverage, high rates, long hold times and poor customer service, ISPs have become some of the most hated companies in America. So why do customers pay these companies bill after bill for the privilege of being exploited?

The answer is sad, but not surprising: users feel trapped. There seems to be no other choice. ISPs have monopolistic powers, including the ability to charge customers exorbitant prices for poor service. With net neutrality regulations under threat going into 2018, the situation will only get worse.

That’s why we built Skywire: the next internet. Skywire takes control from ISPs and puts it back into the hands of users where it belongs. With Skywire, there are no huge bills and unfair business practices. It’s a self-sufficient network, 100% owned and maintained by the user community.

How does Skywire work? Think of it as a decentralized internet service provider. Skywire uses blockchain technology to create a peer-to-peer community-driven market for internet service. It’s fast, private, and secure. Best of all, it puts the user first.

With Skywire, you benefit directly from your contributions to the network. Users can earn coins for running hardware nodes and providing bandwidth and storage. You can then spend your coins by consuming media or other network resources. This system makes Skywire self-sustaining and independent: the more you use it, the more robust the network becomes. Skywire is an incentivized mesh network.

Skywire is built for users, by users. Unlike networks under corporate ISPs, decisions on Skywire are made by the community. Nodes function based on a web-of-trust system. Malicious nodes can be cut off by collective agreement, and trustworthy nodes strengthened. Web-of-trust consensus makes Skywire immune to attacks, exploitation, and manipulation. It creates a system where everyone has a say.

Skywire is faster and more secure than other internet alternatives. It’s encrypted and private, which means that you can’t be tracked as you browse. It doesn’t suffer from throttling and other service outages that you get with large ISPs. Instead of paying $150 per month to be tracked by the telecom monopoly, Skywire users get internet service that protects their privacy.
We need Skywire now more than ever. The FCC’s failure to promote net neutrality means that large ISPs will continue to tighten their grip until they achieve a stranglehold over internet experience. Fees will rise. Throttling, censorship, and manipulation could become the norm. Users will have less power than they’ve ever had as their browsing data, privacy, and individuality is bought and sold by corporations looking for a profit.

It’s up to us to regain control. Skywire will protect net neutrality at the hardware level, by taking control of network hardware from the ISPs and putting it the hands of the community. Its peer-to-peer network proves that we don’t have rely on corporate ISPs. Together, we can reinvent the internet with Skywire: a user-powered network that’s free and open to all.

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Information What is Skycoin
Posted by: skyguy - 12-03-2017, 04:04 PM - Forum: New to Skycoin - No Replies

Skycoin is designed to implement Satoshi's original vision and fix the problems with Bitcoin

Satoshi envisioned Bitcoin as a decentralized digital currency. Blockchain networks were intended to democratize finance, eliminating corporate control and spreading power among users. However, Bitcoin and related currencies have become centralized due to their reliance on Proof of Work (PoW) and Proof of Stake (PoS) algorithms, as well as their use of mining to create coins. This centralization defeats the original purpose of digital currencies.

We created the Skycoin blockchain to correct these flaws. The Skycoin blockchain uses a novel consensus algorithm to replace PoW and PoS. It also fixes security problems associated with other blockchain networks and decouples coin creation from the mining process. The result is a fully decentralized cryptocurrency that fulfills Satoshi’s original vision.

The Skycoin blockchain does not use mining, so user power cannot be concentrated in a few large mining pools as it is with Bitcoin today. Coin creation doesn’t give certain users disproportionate control over the network. The supply of Skycoin is fixed. Skycoin transactions occur in seconds and are more secure. With Skycoin, we’ve created an immutable cryptocurrency that functions as digital property, rather than a political tool for amassing control over networks.

Issues with Proof of Work

The PoW algorithm has a fatal flaw: it places control of the network in the hands of those with enough economic power to control mining and thus obtain consensus. The monopolization of mining has become a major problem for blockchain networks.


Bitcoin developers initially believed that the mining system would support decentralization. Instead, it did the opposite. Since consensus was based on processing capacity, the mining system incentivized the purchase of hashing power. By accumulating greater and greater hashing power, certain users obtained disproportionate amounts of control over the network.

This led to the centralization of Bitcoin into just three major mining pools. Today, these mining pools concentrate the network’s hashing power on their servers and occasionally split power between themselves by agreement. Because they have so much processing power, they are able to revert and falsify transactions using 51% attack. Not only does this threaten the stability and security of the network, it destroys any possibility of achieving a truly decentralized currency.

The economic and environmental cost of these mining processes is astronomical. The electricity required for processing runs in the tens of millions, and cannot be offset by new users and capital except in the rarest cases. Even with large coins like Ethereum and Bitcoin, skyrocketing transaction fees and inflation are bleeding users dry. Each user sacrifices the equivalent of over $50 with each Bitcoin transaction to support the operations of centralized mining pools. That’s more expensive than an international bank transfer. With Bitcoin, users are throwing away their money in support of mining costs that benefit only a select few operators. In the case of smaller coins, high mining costs result in continuous devaluation that eventually extinguishes the coin itself.

In short, PoW-based coins have completely failed to deliver a decentralized system. Mining pools exploit other users in order to subsidize their own costs, while eating up huge amounts of processing power. We can do better. At Skycoin, we tackled this problem head-on in developing our alternative consensus algorithm.

Proof of Stake: More Centralization Problems

With PoW, 51% attacks due to mining are a major security threat. PoS algorithms are intended to solve this problem, but they have centralization problems of their own. At coinfox.info, Joseph Young explains: “A system where the major stakeholder enjoys extensive control and authority over both technical and economic aspects of the network creates a major monopoly problem.” This is exactly what PoS creates.


With PoS, users have voting power on the network in proportion to their cryptocurrency holdings. In other words, users with a greater stake have a greater power to make technical changes. This idea may seem to be a good way to guard against 51% attacks, since majority stakeholders have the most to lose from such attacks and are therefore motivated to avoid them. However, because PoS systems centralize voting power, they allow certain users to make network changes without considering other users or the community at large. In this sense, PoS is just as bad as PoW – it creates a centralization of power that defeats the purpose of the decentralized ledger system.

Obelisk: The Key to Decentralization

It’s clear that both PoW and PoS algorithms are self-sabotaging. These algorithms undermine the idea of decentralized digital currency, since they result in the creation of new central authorities. They concentrate network power in the hands of just a few individuals, preventing users from reaping the benefits of a decentralized network. In fact, PoW and PoS create a system that’s no better than the traditional central banking system cryptocurrency originally sought to replace.

At Skycoin, we want to bring users what they asked for: a true, decentralized network without central authority. To accomplish this task, we went beyond PoW and PoS to create a wholly new decentralized algorithm that reconfigures the inner workings of blockchain. Our distributed consensus algorithm, Obelisk, succeeds in delivering just such a network.

Obelisk is different from both PoW and PoS because it functions based on distributed influence, also known as a “web of trust.” In this system, each node subscribes to a list of other nodes. The density of a node’s network determines its influence. Nodes have personal blockchains that broadcast and record all actions publicly. Because the node’s communications are public and transparent, the community can verify that nodes are operating fairly.

If a node fails to comply with community standards, its actions will be visible in the public record. The network can then sever connections with that node, decreasing its influence over the network. In this way, our web of trust system weeds out malicious nodes and rebalances power according to the collective will of the community. The result is a smaller core of trusted nodes that make network decisions through verified relationships.

The Skycoin blockchain lets the community audit nodes and hold them accountable. This creates a transparent consensus that allows for collective decision-making and true decentralization of power. By eliminating PoW/PoS issues, Skycoin delivers a digital currency that provides all the benefits of a democratic network.

Obelisk is the key to reinventing blockchain. Its web-of-trust style consensus prevents the development of centralized power. Skycoin requires no mining, so the network is immune to 51% attack. Transactions are significantly faster, occurring in seconds. Decisions are made through community consensus, not based on the wishes of a few majority stakeholders. These features make Skycoin the most secure blockchain option available today.

The original purpose of digital currency was to reinvent the economy so that users could be independently empowered to trade in a peer-to-peer fashion, without interference from centralized powers. At Skycoin, we believe strongly in this mission. That’s why the Skycoin blockchain is designed to benefit all users, not just a select few. With Obelisk, we’re solving the problems inherent in PoW- and PoS-based coins to bring you a decentralized and democratic consensus network.

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