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Stakenet (XSN) - A DEX with interchain capabilities (BTC-ETH), Huge Potential [Full Writeup]
Preface Full disclosure here; I am heavily invested in this. I have picked up some real gems from here and was only in the position to buy so much of this because of you guys so I thought it was time to give back. I only invest in Utility Coins. These are coins that actually DO something, and provide new/build upon the crypto infrastructure to work towards the end goal that Bitcoin itself set out to achieve(financial independence from the fiat banking system). This way, I avoid 99% of the scams in crypto that are functionless vapourware, and if you only invest in things that have strong fundamentals in the long term you are much more likely to make money. Introduction
Stakenet is a Lightning Network-ready open-source platform for decentralized applications with its native cryptocurrency – XSN. It is powered by a Proof of Stake blockchain with trustless cold staking and Masternodes. Its use case is to provide a highly secure cross-chain infrastructure for these decentralized applications, where individuals can easily operate with any blockchain simply by using Stakenet and its native currency XSN.
Ok... but what does it actually do and solve? The moonshot here is the DEX (Decentralised Exchange) that they are building. This is a lightning-network DEX with interchain capabilities. That means you could trade BTC directly for ETH; securely, instantly, cheaply and privately. Right now, most crypto is traded to and from Centralised Exchanges like Binance. To buy and sell on these exchanges, you have to send your crypto wallets on that exchange. That means the exchanges have your private keys, and they have control over your funds. When you use a centralised exchange, you are no longer in control of your assets, and depend on the trustworthiness of middlemen. We have in the past of course seen infamous exit scams by centralised exchanges like Mt. Gox. The alternative? Decentralised Exchanges. DEX's have no central authority and most importantly, your private keys(your crypto) never leavesYOUR possession and are never in anyone else's possession. So you can trade peer-to-peer without any of the drawbacks of Centralised Exchanges. The problem is that this technology has not been perfected yet, and the DEX's that we have available to us now are not providing cheap, private, quick trading on a decentralised medium because of their technological inadequacies. Take Uniswap for example. This DEX accounts for over 60% of all DEX volume and facilitates trading of ERC-20 tokens, over the Ethereum blockchain. The problem? Because of the huge amount of transaction that are occurring over the Ethereum network, this has lead to congestion(too many transaction for the network to handle at one time) so the fees have increased dramatically. Another big problem? It's only for Ethereum. You cant for example, Buy LINK with BTC. You must use ETH. The solution? Layer 2 protocols. These are layers built ON TOP of existing blockchains, that are designed to solve the transaction and scaling difficulties that crypto as a whole is facing today(and ultimately stopping mass adoption) The developers at Stakenet have seen the big picture, and have decided to implement the lightning network(a layer 2 protocol) into its DEX from the ground up. This will facilitate the functionalities of a DEX without any of the drawbacks of the CEX's and the DEX's we have today. Heres someone much more qualified than me, Andreas Antonopoulos, to explain this https://streamable.com/kzpimj 'Once we have efficient, well designed DEX's on layer 2, there wont even be any DEX's on layer 1' Progress The Stakenet team were the first to envision this grand solution and have been working on it since its conception in June 2019. They have been making steady progress ever since and right now, the DEX is in an open beta stage where rigorous testing is constant by themselves and the public. For a project of this scale, stress testing is paramount. If the product were to launch with any bugs/errors that would result in the loss of a users funds, this would obviously be very damaging to Stakenet's reputation. So I believe that the developers conservative approach is wise. As of now the only pairs tradeable on the DEX are XSN/BTC and LTC/BTC. The DEX has only just launched as a public beta and is not in its full public release stage yet. As development moves forward more lightning network and atomic swap compatible coins will be added to the DEX, and of course, the team are hard at work on Raiden Integration - this will allow ETH and tokens on the Ethereum blockchain to be traded on the DEX between separate blockchains(instantly, cheaply, privately) This is where Stakenet enters top 50 territory on CMC if successful and is the true value here. Raiden Integration is well underway is being tested in a closed public group on Linux. The full public DEX with Raiden Integration is expected to release by the end of the year. Given the state of development so far and the rate of progress, this seems realistic. Tokenomics 2.6 Metrics overview (from whitepaper)
Ticker: XSN. Currency type: Coin.
Consensus: Minting Proof of Stake, Trustless Proof of Stake.
XSN is slightly inflationary, much like ETH as this is necessary for the economy to be adopted and work in the long term. There is however a deflationary mechanism in place - all trading fees on the DEX get converted to XSN and 10% of these fees are burned. This puts constant buying pressure on XSN and acts as a deflationary mechanism. XSN has inherent value because it makes up the infrastructure that the DEX will run off and as such Masternode operators and Stakers will see the fee's from the DEX. Conclusion We can clearly see that a layer 2 DEX is the future of crypto currency trading. It will facilitate secure, cheap, instant and private trading across all coins with lightning capabilities, thus solving the scaling and transaction issues that are holding back crypto today. I dont need to tell you the implications of this, and what it means for crypto as a whole. If Stakenet can launch a layer 2 DEX with Raiden Integration, It will become the primary DEX in terms of volume. Stakenet DEX will most likely be the first layer 2 DEX(first mover advantage) and its blockchain is the infrastructure that will host this DEX and subsequently receive it's trading fee's. It is not difficult to envision a time in the next year when Stakenet DEX is functional and hosting hundreds of millions of dollars worth of trading every single day. At $30 million market cap, I cant see any other potential investment right now with this much potential upside. This post has merely served as in introduction and a heads up for this project, there is MUCH more to cover like vortex liquidity, masternodes, TOR integration... for now, here is some additional reading. Resources
In response to the post about merchandise pinned here , I was wondering would it be possible to create a custom cryptocurrency version of Monopoly called (of course) Moonopoly! Christmas is just around the corner and it would make a great gift to a fellow crypto enthusiast, or could even be given out as prizes! Anyway, regardless of whether or not this is a good idea that can be taken seriously, or something completely ridiculous, I figured we could have some fun now deciding how this game would hypothetically be played and allocating the squares for the board. Here are my ideas: It would work just like normal Monopoly which we're all familiar with. But instead of being handed out a set amount of $ or whatever, the currency for Moonopoly could be Dai/Satoshis...or even Moons! Instead of the 28 properties we could have 28 cryptos. (Just like in standard monopoly, their value doesn't have to be exact to real life.) Bitcoin and Etherum are the equivalent of the premium properties (Mayfair and Park Lane on UK Monopoly). Perhaps nano could be the cheap Old Kent Road (Don't hate me nano fans, I love nano really. In fact nano could be the Free Parking square!) So let's say you land on the Bitcoin (Mayfair) square and want to buy it. That will cost you 0.1 BTC. If someone lands on it, they have to give you 0.01 BTC. Instead of building houses and hotels, you can add more Bitcoins/Eth etc, which would then increase the amount someone would have to pay when they land on your crypto. The 4 railroads could be exchanges (Binance, Coinbase etc.) and perhaps the two utilities could be something deFi like Uniswap and Honeyswap. We could have a lot of fun with the Chance and Community Chest cards. Here are some ideas: -You entered your seed in a phishing site. Pay 0.3 BTC. -You've received an airdrop. Collect 0.2 BTC. -Binance has been hacked. Pay 0.5 BTC. -Bullrun confirmed! Collect 0.4 BTC. -The ICO you invested in has exit scammed. Pay 0.2 BTC. -You didn't file your crypto taxes. Go to jail. Don't pass Go. Don't collect 0.1 BTC... For the pieces (i.e. the dog, the boot, the hat..) we could have: -Doge -Carlos Matos -Bogdanoff -Victor Cobra? Alright, it might sound a bit silly. I mean who are we going to play this with? But let's not worry about that. I want to know, what would you have on your Moonopoly board?
Decentr ($DEC) - foundational cross-chain and cross-platform DeFi protocol
Decentr is a protocol designed to make blockchain/DLT mainstream by allowing DeFi applications built on various blockchains to “talk to each other”. Decentr is a 100% secure and decentralised Web 3.0 protocol where users can apply PDV (personal data value) to increase APR on $DEC that users loan out as part of of our DeFi dLoan features, as well as it being applied at PoS when paying for stuff online. Decentr is also building a BAT competitor browser and Chrome/Firefox extension that acts as a gateway to 100% decentralised Web 3.0
Allows DeFi Dapps to access all Decentr’s dFintech features, including dLoan, dPay. Key innovation is that the protocols is based on a user’s ability to leverage the value of their data as exchangeable “currency”.
Decentr is building foundational chain-agnostic protocols that will support “true” 100% DeFi Dapps, a 100% secure and decentralised, user-centric alt economy. DeFi dApps inter-connected by Decentr can talk to each other and share PDV (personal data value) of their users. PDV is best described as a personalized “exchange rate” (in a sense social reputation where more effort leads to more rewards and NOT more capital to more rewards. ) between currencies that users apply at point-of-sale to make the cost of goods and services cheaper online. PDV is applied to the APR users earn on $DEC (native token) that they hold that they loan out as part of the investing pool. PDV will also allow uncollateralized loans on their dLoan platform, and also on platforms like Aave and Compound.
Decentr will implement ZKsync to get super cheap and super fast transactions across the ETH network. It is also working with HoloChain and Tomochain to allow connect their DeFi ecosystem to the Ethereum DeFi ecosystem. Decentr has DEEP TIES and a PARTNERSHIP with Holochain: https://medium.com/@DecentrNet/decentr-holochain-ama-29d662caed03
Decentr is also building a browser and Chrome/Firefox extension - a gateway that “transitions” Web 2.0 into a 100% decentralised Web 3.0 via their suite of decentralised dFintech and dCommunications features. The browser adds a 100% decentralised “user layer” to current blockchain protocols so that applications built on blockchain can actually “talk to each other”. The browser uses encryption all the time and the power of blockchain to keep private keys safe. Browser will offer a more robust and innovative type of blockchain storage and caching that is much faster than VPN or TOR. It will allow surfing .onion addresses as well as the regular ones. >>BAT browser 400m marketcap, DEC marketcap 4m<<
Decentr is researching a hardware application, powered by Decentr software, that would greatly enhance current IoT networks. It’s called a “Smart Chip Node” (SCN) and will adhere to 4G LTE standards (with in-built 5G capability), which means connectivity between devices will match or exceed current speed and connectivity, dramatically improving stability and coverage of standalone devices, such as a laptop or tablet, as well as IoT devices, such as home routers and modems.
Decentr uses Coinbase API to optimise integrated implementation of the user layer and Blockchain as a Service (BaaS) to allow users to leverage cloud-based solutions to build, host and use their own blockchain apps. Tierion’s technological infrastructure, the Chainpoint Proof protocol, will come into play whenever a user adds something in Tierion’s data store. Hyperledger Fabric and R3 Corda private blockchains are used as an immutable transaction database for data transfers, including the following tech: R3 Corda, Hyperledger Fabric, Ansible, Bitbucket Pipelines, AWS, Node.JS, GoLang, Kotlin and CouchDB.
Implements a system of layered security protocols based on a radically-new software architecture that combines Elliptic Curve Cryptography (ECC)4 and Sobol sequencing with a n-dimensional chain as part of AI-enhanced, platform-wide community consensus mechanism — a mechanism that assigns mutually agreed value to data and user security protocol upgrades (further encouraging enhanced data integrity) by deploying a Delegated Proof of Stake (DPoS) protocol.
Bank of England has reached out to Decenr to discuss the potential of a UK CBDC upon hearing about the potential of their tech. Decentr is consistent with their own R&D into a "dGBP" and they requested a top-level document for review >> Decentr created this proposal: https://decentr.net/files/Decentr_Consultancy_Doc_UK_CBDC.pdf
A fee is charged for every transaction using dPay whereby an exchange takes place between money (fiat and digital) and data, and vice versa, either as part of DeFi features or via a dApp built on Decentr. They are launching pilot programmes in the following industries:
Banking/PSP Industry: On Product launch, due to Decentr’s powerful PSP connections (including the worlds #2 PSP by volume), a medium-scale pilot program will be launched, which will seed the network with 150,000 PSP customers in primarily the Spanish/LAC markets, generating revenue from day one.
“Bricks and Mortar” Supermarket/Grocery Industry: Decentr aims to ensure the long-term competitiveness of “bricks and mortar” supermarkets against online-only grocery retailers, such as Amazon, by a) building secure tech that allows supermarkets to digitise every aspect of their supply chains and operational functions, while b) allowing supermarkets to leverage this incredibly valuable data as a liquid asset class. Expected revenue by Year 5: $114Mn per year.
Online Advertising Industry: Decentr’s 100% decentralised platform credits users secure data with payable value, in the form of PDV, for engaging with ads. The Brave browser was launched in 2012 and in 8 years has reached over 12 million monthly active users, accented by as many as 4.3 million daily active users.
TOKEN $DEC AND SALE
Decentr recently complete their token sale on a purchase portal powered by Dolomite where they raised $974,000 in 10 minutes for a total sale hardcap of 1.25M. The $DEC token is actively trading on multiple exchanges including Uniswap and IDEX. Listed for free on IDEX, Hotbit, Hoo, Coinw, Tidex, BKex. Listed on CoinGecko and Coinmarketcap. Listed on Delta and Blockfolio apps. ➡️ Circulating supply: 61m $DEC. ➡️ Release schedule and token distribution LINK -> NO RELEASE UNTIL 2021.
A tradeable unit of value that is both internal and external to the Decentr platform.A unit of conversion between fiat entering and exiting the Decentr ecosystem.A way to capture the value of user data and combines the activity of every participant of the platform performing payment (dPay), or lending and borrowing (dLend), i.e a way to peg PDV to tangible/actionable value.Method of payment in the Decentr ecosystem.A method to internally underwrite the “Deconomy.
Aryacoin is a new cryptocurrency, which allows for decentralized, peer to peer transactions of electronic cash. It is like Bitcoin and Litecoin, but the trading of the coin occurs on sales platforms that have no restriction to use. Further, it was created with the goal of addressing the double spend issues of Bitcoin and does so using a timestamp server to verify transactions. It works by taking the hash of a block of items to be timestamped and widely publishing the hash. The timestamp proves that the data must have existed at the time in order to get the hash. Each timestamp then includes the previous timestamp in its hash, forming a chain. The Aryacoin team is continuously developing new use cases for the coin, including exchanges where users can exchange the coins without any fees or restrictions, and offline options where the coins can be bought and sold for cash. The coins can also be used on the company’s other platform, mrdigicoin.io. Along with the coin, there is a digital wallet that can be created and controlled by the user entirely, with no control being retained by the Aryacoin team.
The concept of Blockchain first came to fame in October 2008, as part of a proposal for Bitcoin, with the aim to create P2P money without banks. Bitcoin introduced a novel solution to the age-old human problem of trust. The underlying blockchain technology allows us to trust the outputs of the system without trusting any actor within it. People and institutions who do not know or trust each other, reside in different countries, are subject to different jurisdictions, and who have no legally binding agreements with each other, can now interact over the Internet without the need for trusted third parties like banks, Internet platforms, or other types of clearing institutions. When bitcoin was launched it was revolutionary allowing people to transfer money to anytime and anywhere with very low transaction fees . It was decentralized and their is no third party involved in the transaction , only the sender and receiver were involved. This paper provide a solution to the double-spending problem using a peer-to-peer distributed timestamp server to generate computational proof of the chronological order of transactions.The system is secure as long as honest nodes collectively control more CPU power than any cooperating group of attacker nodes. Bitcoin was made so that it would not be controlled or regulated but now exchanges and governments are regulating bitcoin and other cryptocurrencies at every step. Aryacoin was developed to overcome these restrictions on a free currency. Aryacoin is a new age cryptocurrency, which withholds the original principle on which the concept of cryptocurrency was established. Combining the best in blockchain technology since the time of its creation, Aryacoin strives to deliver the highest trading and mining standards for its community.
1.1 OVERVIEW ABOUT ARYACOIN
Aryacoin is a new age cryptocurrency, which withholds the original principle on which the concept of cryptocurrency was established. Combining the best in blockchain technology since the time of its creation, Aryacoin strives to deliver the highest trading and mining standards for its community. Aryacoin is a blockchain based project that allows users to access their wallet on the web and mobile browsers, using their login details. Aryacoin can be mined; it also can be exchanged by other digital currencies in several world-famous exchanges such as Hitbtc, CoinEx, P2pb2b, WhiteBit, Changelly and is also listed in reputable wallets such as Coinomi and Guarda. Aryacoin is a coin, which can be used by anyone looking to use cryptocurrency which allows them to keep their privacy even when buying/selling the coin along with while using the coin during transactions. Proof of work and cryptographic hashes allows transactions to verified. Stable Fee Per AYA is a unique feature of Aryacoin, so by increasing the amount or volume of the transaction, there is no change in the fee within the network, which means that the fee for sending an amount less than 1 AYA is equal to several hundred million AYA. Another unique feature of Aryacoin is the undetectability of transactions in Explorer, such as the DASH and Monero, of course, this operation is unique to Aryacoin. Using Aryacoin digital currency, like other currencies, international transactions can be done very quickly and there are no limitations in this area as the creators claim. Aryacoin aims to allow users to access the Aryacoin wallet via the web and mobile browsers using their login details. Aryacoin is a peer-to-peer electronic cash system that enables users to send and receive payments directly from one party to another, and allow them to transfer funds across borders with no restriction or third party involvement. The blockchain-based system embraces the digital signature, which prevents double spending and low transfer fees, which enables users to transfer huge amounts with very low fees. The proof-of-work consensus mechanism allows each transaction to be verified and confirmed, while anonymity enables users to use the coin anywhere at any time. According to the website of the operation, each wallet is divided into 2 or more AYA wallet addresses for each transaction, and depending on the volume of the transaction block, the origin, and destination of transactions in the network can not be traced and displayed to the public. In fact, each wallet in Aryacoin consists of a total of several wallets. The number of these wallets increases per transaction to increase both security and privacy. Aryacoin also uses the dPoW protocol. In the dPoW protocol, a second layer is added to the network to verify transactions, which makes “51% attack” impossible even with more than half of the network hash, and blocks whose Blockchain uses this second layer of security never run the risk of 51% attacks. AYA has been listed on a number of crypto exchanges, unlike other main cryptocurrencies, it cannot be directly purchased with fiats money. However, You can still easily buy this coin by first buying Bitcoin from any large exchanges and then transfer to the exchange that offers to trade this coin.
1.1.1 ARYACOIN HISTORY
Aryacoin (AYA) is a new cryptocurrency, which has been created by a group of Iranian developers, is an altcoin which allows for decentralised, peer to peer transactions of electronic cash without any fees whatsoever. Along with the coin, there is a digital wallet that can be created and managed by the user entirely, with no control being retained by the Aryacoin team. Aryacoin’s founder, Kiumars Parsa, has been a fan of alternative currencies and particularly Bitcoin. “We see people from all around the world using Blockchain technology and the great benefits that came with it and it then that I decided to solve this puzzle for find a way of bringing the last missing piece to the jigsaw. The idea for Aryacoin was born.” Parsa said. Parsa and his team of Iranian ex-pats not only persevered but expedited the project and just a year later, in the summer of 2019, the first version of Aryacoin was released. In 2020, Aryacoin is the first and only Iranian coin listed on CMC. Parsa goes on to state that it is now the strength of the community that has invested in the coin that will ultimately drive its success, alongside its robust technology and appealing 0% network fees. “We have thousands of voices behind Aryacoin. People for the people make this coin. It is a massive shout out for democracy. This had made us base the whole team strategy on the benefits for both our users and our traders.” “One key example is that the network fee on AYA Blockchain is 0%. Yes, absolutely nothing, which which differentiates us from other networks. What also differentiates us from other coins is that we have AYAPAY which is the first cryptocurrency Gateway in the world which does not save funds on third party storage with all funds being forwarded directly to any wallet address that the Gateway owner requests”. “So for the first time ever, and unlike other gateways, incoming funds will be saved on the users account with submitted withdrawal requests then made on the Gateway host website. In AYAPAY which has also been developed by the Aryacoin team, all funds without extra fees or extra costs will directly forwarded to users wallets. We have named this technology as CloudWithdrawal.” “We are continuously challenging ourselves as it is a crowded marketplace. We are striving to have a safer Blockchain against 51% attacks, faster confirmations speeds of transactions, cheaper network fee, growing the market by cooperation with Top tier Exchangers.”
1.1.2 ARYACOIN’S MAIN GOAL
Aryacoin’s main goal is to educate people and give them the freedom to use cryptocurrency in any way they want. Aryacoin empowers the users to transfer, pay, trade cryptocurrency from any country around the globe. Platforms that have been created by Aryacoin Team, as well as those that will go live in future, operate on the same principle and exclude absolutely no one.
1.1.3 PROBLEM ARYACOIN SEEKS TO SOLVE
Aryacoin aims to provide a long-term solution to the problem of double spending, which is still common in the crypto market. The developers of the system have created a peer-to-peer distributed timestamp server that generates computational proof of the transactions as they occur. Besides, the system remains secure provided honest nodes control more CPU power than any cooperating group of attacker nodes. While Bitcoin was designed not to be regulated or controlled, many exchanges and governments have put regulatory measures on the pioneer cryptocurrency at every step. Aryacoin aims to overcome these restrictions as a free digital currency.
1.1.4 BENEFITS OF USING ARYACOIN
Aryacoin solution offers the following benefits:
Real-time update: whether you’re going on a holiday or a business trip, no problem. You can access your coins all over the world.
Instant operations: Aryacoin makes it quite easy for you to use your digital wallet and perform various operations with it.
Safe and secure: all your data is stored encrypted and can only be decrypted with your private key, seed, or password.
Strong security: The system has no control over your wallet. You are 100% in charge of your wallet and funds.
1.1.5 ARYACOIN FEATURES
1. Anonymity The coin provides decent level of anonymity for all its users. The users can send their transactions to any of the public nodes to be broadcasted , the transaction sent to the nodes should be signed by the private key of the sender address . This allows the users to use the coin anywhere any time , sending transactions directly to the node allows users from any place and country . 2. Real Life Usage aryacoin’s team is continuously developing new and innovative ways to use the coins , they are currently developing exchanges where the users can exchange the coins without any fees and any restrictions . They also are currently developing other innovative technologies, which would allow users to spend our coins everywhere and anywhere. 3. Offline Exchanges They are also working with different offline vendors which would enable them to buy and sell the coins directly to our users on a fixed/variable price this would allow easy buy/sell directly using cash . This would allow the coins to be accessible to users without any restrictions which most of the online exchanges have, also increase the value and number of users along with new ways to spend the coin. This would increase anonymity level of the coin. In addition, introduce new users into the cryptomarket and technology. Creating a revolution, which educates people about crypto and introduce them to the crypto world, which introduces a completely new group of people into crypto and a move towards a Decentralized future! 4. Transactions When it comes to transactions, Aryacoin embraces a chain of digital signatures, where each owner simply transfers the coin to the next person by digitally signing a hash of the previous transaction and the public key of the next owner. The recipient can then verify the signatures to confirm the chain of ownership. Importantly, Aryacoin comes with a trusted central authority that checks every transaction for double spending. 5. Business Partner with Simplex Aryacoin is the first and only Iranian digital currency that managed to obtain a trading license in other countries. In collaboration with the foundation and financial giant Simplex, a major cryptocurrency company that has large companies such as Binance, P2P, Changelly, etc. Aryacoin has been licensed to enter the world’s major exchanges, as well as the possibility of purchasing AYA through Credit Cards, which will begin in the second half of 2020. Also, the possibility of purchasing Aryacoin through Visa and MasterCard credit cards will be activated simultaneously inside the Aryacoin site. plus, in less than a year, AYA will be placed next to big names such as CoinCapMarket, Coinomi, P2P, Coinpayments and many other world-class brands today.
1.1.6 WHY CHOOSE ARYACOIN?
If you want to use a cryptocurrency that allows you to keep your privacy online even when buying and selling the coins, the Aryacoin team claims that AYA is the way to go. Aryacoin is putting in the work: with more ways to buy and sell, and fixing the issues that were present in the original Bitcoin, plus pushing the boundaries with innovative solutions in cryptocurrencies. You can get started using Aryacoin (AYA) payments simply by having a CoinPayments account!
1.1.7 ARYANA CENTRALIZED EXCHANGE
Aryana, the first Iranian exchange is a unique platform with the following features:
The first real international Persian exchange that obtains international licenses and is listed in CoinMarketCap.
The first Iranian exchange that has been cooperating with a legal and European exchange for 3 years.
The possibility of trading in Tomans (available currency in Iran) at the user’s desired price and getting rid of the transaction prices imposed by domestic sites inside Iran.
There is an internal fee payment plan by Iranian domestic banks for depositing and withdrawing Tomans for Aryacoin holders in Aryana Exchange.
The number that you see on the monitor and in your account will be equal to the number that is transferred to your bank account without a difference of one Rial.
The last but not least, noting the fact that there is a trading in Tomans possibility in Aryana exchange.
Aryana Exchange is using the most powerful, fastest, and most expensive server in the world, Google Cloud Platform (GCP), which is currently the highest quality server for an Iranian site, so that professional traders do not lag behind the market even for a second. The feature of Smart Trading Robots is one of the most powerful features for digital currency traders. Digital cryptocurrency traders are well aware of how much they will benefit from smart trading robots. In the Aryana exchange, it is possible to connect exchange user accounts to intelligent trading bots and trade even when they are offline. The injection of $ 1 million a day in liquidity by the WhiteBite exchange to maintain and support the price of Tether and eliminate the Tether fluctuations with Bitcoin instabilities used by profiteers to become a matter of course.
1.1.8 HOW DOES ARYACOIN WORK?
Aryacoin (AYA) tries to ensure a high level of security and privacy. The team has made sure to eliminate any trading restrictions for the network users: no verification is required to carry out transactions on AYA, making the project truly anonymous, decentralized, and giving it a real use in day-to-day life. The Delayed-Proof-of-Work (dPoW) algorithm makes the Aryacoin blockchain immune to any attempts of a 51% attack. AYA defines a coin as a chain of digital signatures — each owner transfers the coin to the next owner by digitally signing the hash of the previous transaction and the public key of the next owner, and the receiver verifies the signatures and the chain of ownership.
2. ARYACOIN TECHNOLOGY
They use a proof-of-work system similar to Adam Back’s Hashcash to implement a distributed timestamp server on a peer-to-peer basis, rather than newspaper or Usenet publications. The proof-of-work involves scanning for a value that when hashed, such as with SHA-256, the hash begins with a number of zero bits. The average work required is exponential in the number of zero bits required and can be verified by executing a single hash. For their timestamp network, they implement the proof-of-work by incrementing a nonce in the block until a value is found that gives the block’s hash the required zero bits. Once the CPU effort has been expended to make it satisfy the proof-of-work, the block cannot be changed without redoing the work. As later blocks are chained after it, the work to change the block would include redoing all the blocks after it. The proof-of-work also solves the problem of determining representation in majority decision making. If the majority were based on one-IP-address-one-vote, it could be subverted by anyone able to allocate many IPs. Proof-of-work is essentially one-CPU-one-vote. The majority decision is represented by the longest chain, which has the greatest proof-of-work effort invested in it. If honest nodes control a majority of CPU power, the honest chain will grow the fastest and outpace any competing chains. To modify a past block, an attacker would have to redo the proof-of-work of the block and all blocks after it, then catch up with, and surpass the work of the honest nodes.
The steps to run the network are as follows:
New transactions are broadcast to all nodes.
Each node collects new transactions into a block.
Each node works on finding a difficult proof-of-work for its block.
When a node finds a proof-of-work, it broadcasts the block to all nodes.
Nodes accept the block only if all transactions in it are valid and not already spent.
This is a very simple system that makes the network fast and scalable, while also providing a decent level of anonymity for all users. Users can send their transactions to any of the public nodes to be broadcast, and the private key of the sender’s address should sign any transaction sent to the nodes. This way, all transaction info remains strictly confidential. It also allows users to send transactions directly to the node from any place at any time and allows the transferring of huge amounts with very low fees.
2.3 AYAPAY PAYMENT SERVICES GATEWAY:
According to creators Aryacoin, the development team has succeeded in inventing a new blockchain technology for the first time in the world, which is undoubtedly a big step and great news for all digital currency enthusiasts around the world. This new technology has been implemented on the Aryacoin AYAPAY platform and was unveiled on October 2. AYAPAY payment platform is the only payment gateway in the world that does not save money in users’ accounts and transfers incoming coins directly to any wallet address requested by the gateway owner without any additional transaction or fee. In other similar systems or even systems such as PayPal, money is stored in the user account.
2.4 CONSENSUS ALGORITHM IN ARYACOIN
The devs introduced the Delayed-Proof-of-Work (dPoW) algorithm, which represents a hybrid consensus method that allows one blockchain to take advantage of the security provided by the hashing power of another blockchain. The AYA blockchain works on dPoW and can use such consensus methods as Proof-of-Work (PoW) or Proof-of-Stake (PoS) and join to any desired PoW blockchain. The main purpose of this is to allow the blockchain to continue operating without notary nodes on the basis of its original consensus method. In this situation, additional security will no longer be provided through the attached blockchain, but this is not a particularly significant problem. dPoW can improve the security level and reduce energy consumption for any blockchain.
2.5 DOUBLE-SPEND PROBLEM AND SOLUTION
One of the main problems in the blockchain world is that a receiver is unable to verify whether or not one of the senders did not double-spend. Aryacoin provides the solution, and has established a trusted central authority, or mint, that checks every transaction for double-spending. Only the mint can issue a new coin and all the coins issued directly from the mint are trusted and cannot be double-spent. However, such a system cannot therefore be fully decentralized because it depends on the company running the mint, similar to a bank. Aryacoin implements a scheme where the receiver knows that the previous owners did not sign any earlier transactions. The mint is aware of all transactions including which of them arrived first. The developers used an interesting solution called the Timestamp Server, which works by taking a hash of a block of items to be ‘timestamped’ and publishing the hash. Each timestamp includes the previous timestamp in its hash, forming a chain. To modify a block, an attacker would have to redo the proof-of-work of all previous blocks, then catch up with, and surpass the work of the honest nodes. This is almost impossible, and makes the network processes more secure. The proof-of-work difficulty varies according to circumstances. Such an approach ensures reliability and high throughput.
3. ARYACOIN ROADMAP
April 2019: The launch of Aryacoin; AYA ICO, resulting in over 30BTC collected December 2019: The launch of AYA Pay April 2020: The successful Hamedan Hardfork, supported by all AYA exchanges, aimed at integrating the dPoW algorithm, improving the security of the AYA blockchain. June 2020: Aryana Exchange goes live, opening more trading opportunities globally July 2020: The enabling of our Coin Exchanger November 2020: The implementation of Smart Contracts into the Aryacoin Ecosystem Q1 2021: Alef B goes live (more details coming soon)
Aryacoin (AYA) is a new age cryptocurrency that combines the best of the blockchain technology and strives to deliver high trading and mining standards, enabling users to make peer-to-peer decentralized transactions of electronic cash. Aryacoin is part of an ecosystem that includes payment gateway Ayapay and the Ayabank. AYA has a partnership with the Microsoft Azure cloud platform, which provides the ability to develop applications and store data on servers located in distributed data centers. The network fee for the AYA Blockchain is 0%. In Ayapay service, which has been developed by the Aryacoin team, all funds without extra fees or costs are directly forwarded to users’ wallets with technology called CloudWithdrawal. The devs team is introducing new use cases including exchanges where users will exchange AYA without any restrictions. You can buy AYA on an exchange of your choice, create an Aryacoin wallet, and store it in Guarda.
Here is how to play the altcoin game - for newbies & champs
I have been here for many previous altcoin seasons (2013,2017 etc) and wanted to share knowedle. It's a LOOONG article. The evaluation of altcoins (i.e not Bitcoin) is one of the most difficult and profitable exercises. Here I will outline my methodology and thinking but we have to take some things as a given. The first is that the whole market is going up or down with forces that we can't predict or control. Bitcoin is correlated with economic environments, money supply increases, safe havens such as Gold, hype and country regulations. This is an impossible mix to analyze and almost everyone fails at it. That's why you see people valuing Bitcoin from $100 to $500k frequently. Although I am bullish on the prospects of Bitcoin and decentralization and smart contract platforms, this is not the game I will be describing. I am talking about a game where you try to maximize your BTC holdings by investing in altcoins. We win this game even if we are at a loss in fiat currency value. To put it another way:
If you are not bullish in general on cryptocurrencies you have no place in investing or trading cryptocurrencies since it's always a losing proposition to trade in bubbles, a scientifically proven fact. If on the other hand you are then your goal is to grow your portfolio more than you would if holding BTC/ETH for example.
Bitcoin is the big boy
How the market works is not easily identifiable if you haven't graduated from the 2017 crypto university. When there is a bull market everything seems amazingly profitable and things keep going up outgrowing Bitcoin by orders of magnitude and you are a genius. The problem with this is that it only works while Bitcoin is going up a little bit or trades sideways. When it decides to move big then altcoins lose value both on the way up and on the way down. The second part is obvious and proven since all altcoins from 2017 are at a fraction of their BTC value (usually in the range of 80% or more down). Also, when BTC is making a big move upwards everyone exits altcoins to ride the wave. It is possible that the altcoin market behaves as an inversed leveraged ETF with leakage where in a certain period while Bitcoin starts at 10k and ends at 10k for example, altcoins have lost a lot of value because of the above things happening.
We are doing it anyway champ!
OK so we understand the risks and just wanna gambol with our money right? I get it. Why do that? Because finding the ideal scenario and period can be extremely profitable. In 2017 several altcoins went up 40x more than BTC. But again, if you don't chose wisely many of them have gone back to zero (the author has first hand experience in this!), they have been delisted and nobody remembers them. The actual mentality to have is very important and resembles poker and other speculative games: A certain altcoin can go up in value indefinitely but can only lose it's starting investment. Think about it. You either lose 1 metric or gain many many more. Now that sounds amazing but firstly as we said we have the goal to outperform our benchmark (BTC) and secondly that going up in value a lot means that the probability is quite low. There is this notion of Expected Value (EV) that poker players apply in these kind of situations and it goes like that. If you think that a certain coin has a probability let's say 10% to go up 10X and 90% probability it goes to zero it's an even bet. If you think that probability is 11% then it's a good bet, a profitable bet and you should take it. You get the point right? It's not that it can only go 10X or 0X, there is a whole range of probability outcomes that are too mathematical to explain here and it doesn't help so much because nobody can do such analysis with altcoins. See below on how we can approximate it.
How to evaluate altcoins
A range of different things to take into account outlined below will form our decision making. Not a single one of them should dictate 100% of our strategy.
It's all about market cap. Repeat after me. The price of a coin doesn't mean anything. Say it 10 times until you believe it. I can't remember how many times I had conversations with people that were comparing coins using their coin price instead of their market cap. To make this easy to get.
If I decide because the sky is blue to make my coin supply 100 Trillion FoolCoins with a price of $0.001 and there is another WiseCoin with a supply of 100 Million and price of $1 then FoolCoins are more expensive. - Alex Fin's Cap Law
This is done usually in the stock world and it means that each company has some fundamental value that includes it's assets, customers, growth prospects, sector prospects and leadership competence but mostly centered in financial measures such as P/E ratios etc. Valuation is a proper economic discipline by itself taught in universities. OK, now throw everything out of the window!. This kind of analysis is impossible in vague concepts and innovations that are currently cryptocurrencies. Ethereum was frequently priced at the fictional price of gas when all financial systems on earth run on the platform after decades (a bit of exaggeration here). No project is currently profitable enough to justify a valuation multiple that is usually equal to P/E in the thousands or more. As such we need to take other things into account. What I do is included in the list below:
Check Github. You need to make sure there is active development for the platform and it's a very bad sign if the project is either keeping the code closed source or even worse there is simply no development. No projects are "complete".
Check Website. If the website is written in bad English the Chinese google translate type it means that they are not serious enough to produce an unbreakable decentralized project. If you can't write English you can't change the world, period. That's a deal breaker.
Check Team's Linkedin. Numerous projects have either fake Linkedin accounts or the team is comprised mainly by unexperienced employees that are even shown to be working in other companies currently.
Check backers. Projects that have Binance, Coinbase or Silicon Valley VC funds backing them are way more legit but way more overpriced too!
One of my favorite ways to value altcoins that is based on the same principle in the stock market is to look at peers and decide what is the maximum cap it can grow to. As an example you take a second layer Ethereum solution that has an ICO and you want to decide if you will enter or not. You can take a look at other coins that are in the same business and compare their market caps. Thinking that your coin will outperform by a lot the top coins currently is overly optimistic so I usually take a lower valuation as a target price. If the initial offering is directly implying a valuation that is more than that then there is no room to grow according to my analysis and I skip it. Many times this has proven me wrong because it's a game theory problem where if many people think irrationally in a market it becomes a self-fulfilling prophecy. But since there is opportunity cost involved, in the long run, getting in initial offerings that have a lot of room to grow will pay off as a strategy.
In 2017 the sexiest sector was platforms and then coins including privacy ones. Platforms are obviously still a highly rated sector because everything is being built on them, but privacy is not as hot as it used to be. In 2018 DEXes were all they hype but still people are massively using centralized exchanges. In 2020 Defi is the hottest sector and it includes platforms, oracles and Defi projects. What I am saying is that a project gets extra points if it's a Defi one in 2020 and minus points if it's a payment system that will conquer the world as it was in 2017 because that's old news. This is closely related to the next section.
Needless to say that the crypto market is a worse FOMO type of inexperienced trigger happy yolo investors , much worse than the Robinhood crowd that drove a bankrupt company's stock 1200% after they declared bankruptcy. The result is that there are numerous projects that are basically either vaporware or just so overhyped that their valuation has no connection to reality. Should we avoid those kind of projects? No and I will explain why. There are many very good technically projects that had zero hype potential due to incompetent marketing departments that made them tank. An example (without shilling because I sold out a while back) is Quantum Resistant Ledger. This project has amazing quantum resistant blockchain, the only one running now, has a platform that people can build tokens and messaging systems and other magnificent stuff. Just check how they fared up to now and you will get the point. A project *needs* to have a hype factor because you cannot judge it as normal stocks that you can do value investing like Warren Buffet does where a company will inevitable post sales and profitability numbers and investors will get dividends. Actually the last sentence is the most important: No dividends. Even projects that give you tokens or coins as dividends are not real dividends because if the coin tanks the value of the dividend tanks. This is NOT the case with company stocks where you get dollars even if the company stock tanks. All that being said, I would advice against betting on projects that have a lot of hype but little substance (but that should be obvious!).
How to construct your portfolio
My strategy and philosophy in investing is that risk should be proportional to investment capital. That means that if you are investing 100K in the crypto market your portfolio should be very different than someone investing 1K because 10% annual gains are nothing in the latter while they are very significant in the former. Starting from this principle each individual needs to construct a portfolio according to how much risk he wants to take. I will emphasize two important concepts that play well with what I said. In the first instance of a big portfolio you should concentrate on this mantra: "Diversification is the only free meal in finance". In the case of a small portfolio then this mantra is more important: "Concentrate to create wealth, diversify to maintain wealth". Usually in a big portfolio you would want to hold some big coins such as BTC and ETH to weather the ups and downs explained in previous paragraphs while generating profits and keep progressively smaller parts of your portfolio for riskier investments. Maybe 50% of this portfolio could be big caps and 10% very risky initial offerings. Adapting risk progressively to smaller portfolios makes sense but I think it would be irrational to keep more than 30% of a portfolio no matter what tied to one coin due to the very high risk of bankruptcy.
The altseason is supposedly coming every 3 months. Truth is that nobody can predict it but altcoins can be profitable no matter what. Forget about maximalists who are stuck in their dogmas. Altcoins deliver different value propositions and it makes sense because we are very far from a situation where some project offers everything like Amazon and we wouldn't even want that in the first place since we are talking about decentralization and not a winner takes all and becomes a monster kind of scenario! Some last minute advice:
Stay out of paid telegram/discord pump groups. They are deadly for your wallet.
Avoid jumping on overhyped coins that have pumped massively during the last days without any very important news.
Don't keep coins in obscure exchanges for too long or you will get burned with certainty.
Stop thinking that your coin will 1000x and overtake Bitcoin!
P.S If you find value in reading this and want more weekly consider subscribing to my newsletterhere
Everyone and his grandma know what cryptocurrency mining is. Well, they may not indeed know what it actually is, in technical terms, but they have definitely heard the phrase as it is hard to miss the news about mining sucking in energy like a black hole gobbles up matter. On the other hand, staking, its little bro, has mostly been hiding in the shadows until recently. by StealthEX Today, with DeFi making breaking news across the cryptoverse, staking has become a new buzzword in the blockchain space and beyond, along with the fresh entries to the crypto asset investor’s vocabulary such as “yield farming”, “rug pull”, “total value locked”, and similar arcane stuff. If you are not scared off yet, then read on. Though we can’t promise you won’t be.
Cryptocurrency staking, little brother of crypto mining
There are two conceptually different approaches to achieving consensus in a distributed network, which comes down to transaction validation in the case of a cryptocurrency blockchain. You are most certainly aware of cryptocurrency mining, which is used with cryptocurrencies based on the Proof-of-Work (PoW) consensus algorithm such as Bitcoin and Ether (so far). Here miners compete against each other with their computational resources for finding the next block on the blockchain and getting a reward. Another approach, known as the Proof-of-Stake (PoS) consensus mechanism, is based not on the race among computational resources as is the case with PoW, but on the competition of balances, or stakes. In simple words, every holder of at least one stake, a minimally sufficient amount of crypto, can actively participate in creating blocks and thus also earn rewards under such network consensus model. This process came to be known as staking, and it can be loosely thought of as mining in the PoS environment. With that established, let’s now see why, after so many years of what comes pretty close to oblivion, it has turned into such a big thing.
Why has staking become so popular, all of a sudden?
The renewed popularity of staking came with the explosive expansion of decentralized finance, or DeFi for short. Essentially, staking is one of the ways to tap into the booming DeFi market, allowing users to earn staking rewards on a class of digital assets that DeFi provides easy access to. Technically, it is more correct to speak of DeFi staking as a new development of an old concept that enjoys its second coming today, or new birth if you please. So what’s the point? With old-school cryptocurrency staking, you would have to manually set up and run a validating node on a cryptocurrency network that uses a PoS consensus algo, having to keep in mind all the gory details of a specific protocol so as not to shoot yourself in the foot. This is where you should have already started to enjoy jitters if you were to take this avenu entirely on your own. Just think of it as having to run a Bitcoin mining rig for some pocket money. Put simply, DeFi staking frees you from all that hassle. At this point, let’s recall what decentralized finance is and what it strives to achieve. In broad terms, DeFi aims at offering the same products and services available today in the traditional financial world, but in a trutless and decentralized way. From this perspective, DeFi staking reseblems conventional banking where people put their money in savings accounts to earn interest. Indeed, you could try to lend out your shekels all by yourself, with varying degrees of success, but banks make it far more convenient and secure. The maturation of the DeFi space advanced the emergence of staking pools and Staking-as-a-Service (SaaS) providers that run nodes for PoS cryptocurrencies on your behalf, allowing you to stake your coins and receive staking rewards. In today’s world, interest rates on traditional savings accounts are ridiculous, while government spending, a handy euphemism for relentless money printing aka fiscal stimulus, is already translating into runaway inflation. Against this backdrop, it is easy to see why staking has been on the rise.
Okay, what are my investment options?
Now that we have gone through the basics of the state-of-the-art cryptocurrency staking, you may ask what are the options actually available for a common crypto enthusiast to earn from it? Many high-caliber exchanges like Binance or Bitfinex as well as online wallets such as Coinbase offer staking of PoS coins. In most cases, you don’t even need to do anything aside from simply holding your coins there to start receiving rewards as long as you are eligible and meet the requirements. This is called exchange staking. Further, there are platforms that specialize in staking digital assets. These are known as Staking-as-a-Service providers, while this form of staking is often referred to as soft staking. They enable even non-tech savvy customers to stake their PoS assets through a third party service, with all the technical stuff handled by the service provider. Most of these services are custodial, with the implication being that you no longer control your coins after you stake them. Figment Networks, MyContainer, Stake Capital are easily the most recognized among SaaS providers. However, while exchange staking and soft staking have everything to do with finance, they have little to nothing to do with the decentralized part of it, which is, for the record, the primary value proposition of the entire DeFi ecosystem. The point is, you have to deposit the stakable coins into your wallet with these services. And how can it then be considered decentralized? Nah, because DeFi is all about going trustless, no third parties, and, in a narrow sense, no staking that entails the transfer of private keys. This form of staking is called non-custodial, and it is of particular interest from the DeFi point of view. If you read our article about DeFi, you already know how it is possible, so we won’t dwell on this (if, on the off chance, you didn’t, it’s time to catch up). As DeFi continues to evolve, platforms that allow trustless staking with which you maintain full custody of your coins are set to emerge as well. The space is relatively new, with Staked being probably the first in the field. This type of staking allows you to remain in complete control of your funds, and it perfectly matches DeFi’s ethos, goals and ideals. Still, our story wouldn’t be complete if we didn’t mention utility tokens where staking may serve a whole range of purposes other than supporting the token network or obtaining passive income. For example, with platforms that deploy blockchain oracles such as Nexus Mutual, a decentralized insurance platform, staking tokens is necessary for encouraging correct reporting on certain events or reaching a consensus on a specific claim. In the case of Nexus Mutual, its membership token NXM is used by the token holders, the so-called assessors, for validating insurance claims. If they fail to assess claims correctly, their stakes are burned. Another example is Particl Marketplace, a decentralized eCommerce platform, which designed a standalone cryptocurrency dubbed PART. It can be used both as a cryptocurrency in its own right outside the marketplace and as a stakable utility token giving stakers voting rights facilitating the decentralized governance of the entire platform. Yet another example is the instant non-custodial cryptocurrency exchange service, ChangeNOW, that also recently came up with its stakable token, NOW Token, to be used as an internal currency and a means of earning passive income.
Nowadays, with most economies on pause or going downhill, staking has become a new avenue for generating passive income outside the traditional financial system. As DeFi continues to eat away at services previously being exclusively provided by conventional financial and banking sectors, we should expect more people to get involved in this activity along with more businesses dipping their toes into these uncharted waters. Achieving network consensus, establishing decentralized governance, and earning passive income are only three use cases for cryptocurrency staking. No matter how important they are, and they certainly are, there are many other uses along different dimensions that staking can be quite helpful and instrumental for. Again, we are mostly in uncharted waters here, and we can’t reliably say what the future holds for us. On the other hand, we can go and invent it. This should count as next. And remember if you need to exchange your coins StealthEX is here for you. We provide a selection of more than 250 coins and constantly updating the list so that our customers will find a suitable option. Our service does not require registration and allows you to remain anonymous. Why don’t you check it out? Just go to StealthEX and follow these easy steps: ✔ Choose the pair and the amount for your exchange. For example ETH to BTC. ✔ Press the “Start exchange” button. ✔ Provide the recipient address to which the coins will be transferred. ✔ Move your cryptocurrency for the exchange. ✔ Receive your coins! The views and opinions expressed here are solely those of the author. Every investment and trading move involves risk. You should conduct your own research when making a decision. Original article was posted onhttps://stealthex.io/blog/2020/09/08/cryptocurrency-staking-as-it-stands-today/
Hey all, I've been researching coins since 2017 and have gone through 100s of them in the last 3 years. I got introduced to blockchain via Bitcoin of course, analyzed Ethereum thereafter and from that moment I have a keen interest in smart contact platforms. I’m passionate about Ethereum but I find Zilliqa to have a better risk-reward ratio. Especially because Zilliqa has found an elegant balance between being secure, decentralized and scalable in my opinion.
Below I post my analysis of why from all the coins I went through I’m most bullish on Zilliqa (yes I went through Tezos, EOS, NEO, VeChain, Harmony, Algorand, Cardano etc.). Note that this is not investment advice and although it's a thorough analysis there is obviously some bias involved. Looking forward to what you all think!
Fun fact: the name Zilliqa is a play on ‘silica’ silicon dioxide which means “Silicon for the high-throughput consensus computer.”
This post is divided into (i) Technology, (ii) Business & Partnerships, and (iii) Marketing & Community. I’ve tried to make the technology part readable for a broad audience. If you’ve ever tried understanding the inner workings of Bitcoin and Ethereum you should be able to grasp most parts. Otherwise, just skim through and once you are zoning out head to the next part.
Technology and some more:
The technology is one of the main reasons why I’m so bullish on Zilliqa. First thing you see on their website is: “Zilliqa is a high-performance, high-security blockchain platform for enterprises and next-generation applications.” These are some bold statements.
Before we deep dive into the technology let’s take a step back in time first as they have quite the history. The initial research paper from which Zilliqa originated dates back to August 2016: Elastico: A Secure Sharding Protocol For Open Blockchains where Loi Luu (Kyber Network) is one of the co-authors. Other ideas that led to the development of what Zilliqa has become today are: Bitcoin-NG, collective signing CoSi, ByzCoin and Omniledger.
The technical white paper was made public in August 2017 and since then they have achieved everything stated in the white paper and also created their own open source intermediate level smart contract language called Scilla (functional programming language similar to OCaml) too.
Mainnet is live since the end of January 2019 with daily transaction rates growing continuously. About a week ago mainnet reached 5 million transactions, 500.000+ addresses in total along with 2400 nodes keeping the network decentralized and secure. Circulating supply is nearing 11 billion and currently only mining rewards are left. The maximum supply is 21 billion with annual inflation being 7.13% currently and will only decrease with time.
Zilliqa realized early on that the usage of public cryptocurrencies and smart contracts were increasing but decentralized, secure, and scalable alternatives were lacking in the crypto space. They proposed to apply sharding onto a public smart contract blockchain where the transaction rate increases almost linear with the increase in the amount of nodes. More nodes = higher transaction throughput and increased decentralization. Sharding comes in many forms and Zilliqa uses network-, transaction- and computational sharding. Network sharding opens up the possibility of using transaction- and computational sharding on top. Zilliqa does not use state sharding for now. We’ll come back to this later.
Before we continue dissecting how Zilliqa achieves such from a technological standpoint it’s good to keep in mind that a blockchain being decentralised and secure and scalable is still one of the main hurdles in allowing widespread usage of decentralised networks. In my opinion this needs to be solved first before blockchains can get to the point where they can create and add large scale value. So I invite you to read the next section to grasp the underlying fundamentals. Because after all these premises need to be true otherwise there isn’t a fundamental case to be bullish on Zilliqa, right?
Down the rabbit hole
How have they achieved this? Let’s define the basics first: key players on Zilliqa are the users and the miners. A user is anybody who uses the blockchain to transfer funds or run smart contracts. Miners are the (shard) nodes in the network who run the consensus protocol and get rewarded for their service in Zillings (ZIL). The mining network is divided into several smaller networks called shards, which is also referred to as ‘network sharding’. Miners subsequently are randomly assigned to a shard by another set of miners called DS (Directory Service) nodes. The regular shards process transactions and the outputs of these shards are eventually combined by the DS shard as they reach consensus on the final state. More on how these DS shards reach consensus (via pBFT) will be explained later on.
The Zilliqa network produces two types of blocks: DS blocks and Tx blocks. One DS Block consists of 100 Tx Blocks. And as previously mentioned there are two types of nodes concerned with reaching consensus: shard nodes and DS nodes. Becoming a shard node or DS node is being defined by the result of a PoW cycle (Ethash) at the beginning of the DS Block. All candidate mining nodes compete with each other and run the PoW (Proof-of-Work) cycle for 60 seconds and the submissions achieving the highest difficulty will be allowed on the network. And to put it in perspective: the average difficulty for one DS node is ~ 2 Th/s equaling 2.000.000 Mh/s or 55 thousand+ GeForce GTX 1070 / 8 GB GPUs at 35.4 Mh/s. Each DS Block 10 new DS nodes are allowed. And a shard node needs to provide around 8.53 GH/s currently (around 240 GTX 1070s). Dual mining ETH/ETC and ZIL is possible and can be done via mining software such as Phoenix and Claymore. There are pools and if you have large amounts of hashing power (Ethash) available you could mine solo.
The PoW cycle of 60 seconds is a peak performance and acts as an entry ticket to the network. The entry ticket is called a sybil resistance mechanism and makes it incredibly hard for adversaries to spawn lots of identities and manipulate the network with these identities. And after every 100 Tx Blocks which corresponds to roughly 1,5 hour this PoW process repeats. In between these 1,5 hour, no PoW needs to be done meaning Zilliqa’s energy consumption to keep the network secure is low. For more detailed information on how mining works click here. Okay, hats off to you. You have made it this far. Before we go any deeper down the rabbit hole we first must understand why Zilliqa goes through all of the above technicalities and understand a bit more what a blockchain on a more fundamental level is. Because the core of Zilliqa’s consensus protocol relies on the usage of pBFT (practical Byzantine Fault Tolerance) we need to know more about state machines and their function. Navigate to Viewblock, a Zilliqa block explorer, and just come back to this article. We will use this site to navigate through a few concepts.
We have established that Zilliqa is a public and distributed blockchain. Meaning that everyone with an internet connection can send ZILs, trigger smart contracts, etc. and there is no central authority who fully controls the network. Zilliqa and other public and distributed blockchains (like Bitcoin and Ethereum) can also be defined as state machines.
Taking the liberty of paraphrasing examples and definitions given by Samuel Brooks’ medium article, he describes the definition of a blockchain (like Zilliqa) as: “A peer-to-peer, append-only datastore that uses consensus to synchronize cryptographically-secure data”.
Next, he states that: "blockchains are fundamentally systems for managing valid state transitions”. For some more context, I recommend reading the whole medium article to get a better grasp of the definitions and understanding of state machines. Nevertheless, let’s try to simplify and compile it into a single paragraph. Take traffic lights as an example: all its states (red, amber, and green) are predefined, all possible outcomes are known and it doesn’t matter if you encounter the traffic light today or tomorrow. It will still behave the same. Managing the states of a traffic light can be done by triggering a sensor on the road or pushing a button resulting in one traffic lights’ state going from green to red (via amber) and another light from red to green.
With public blockchains like Zilliqa, this isn’t so straightforward and simple. It started with block #1 almost 1,5 years ago and every 45 seconds or so a new block linked to the previous block is being added. Resulting in a chain of blocks with transactions in it that everyone can verify from block #1 to the current #647.000+ block. The state is ever changing and the states it can find itself in are infinite. And while the traffic light might work together in tandem with various other traffic lights, it’s rather insignificant comparing it to a public blockchain. Because Zilliqa consists of 2400 nodes who need to work together to achieve consensus on what the latest valid state is while some of these nodes may have latency or broadcast issues, drop offline or are deliberately trying to attack the network, etc.
Now go back to the Viewblock page take a look at the amount of transaction, addresses, block and DS height and then hit refresh. Obviously as expected you see new incremented values on one or all parameters. And how did the Zilliqa blockchain manage to transition from a previous valid state to the latest valid state? By using pBFT to reach consensus on the latest valid state.
After having obtained the entry ticket, miners execute pBFT to reach consensus on the ever-changing state of the blockchain. pBFT requires a series of network communication between nodes, and as such there is no GPU involved (but CPU). Resulting in the total energy consumed to keep the blockchain secure, decentralized and scalable being low.
pBFT stands for practical Byzantine Fault Tolerance and is an optimization on the Byzantine Fault Tolerant algorithm. To quote Blockonomi: “In the context of distributed systems, Byzantine Fault Tolerance is the ability of a distributed computer network to function as desired and correctly reach a sufficient consensus despite malicious components (nodes) of the system failing or propagating incorrect information to other peers.” Zilliqa is such a distributed computer network and depends on the honesty of the nodes (shard and DS) to reach consensus and to continuously update the state with the latest block. If pBFT is a new term for you I can highly recommend the Blockonomi article.
The idea of pBFT was introduced in 1999 - one of the authors even won a Turing award for it - and it is well researched and applied in various blockchains and distributed systems nowadays. If you want more advanced information than the Blockonomi link provides click here. And if you’re in between Blockonomi and the University of Singapore read the Zilliqa Design Story Part 2 dating from October 2017. Quoting from the Zilliqa tech whitepaper: “pBFT relies upon a correct leader (which is randomly selected) to begin each phase and proceed when the sufficient majority exists. In case the leader is byzantine it can stall the entire consensus protocol. To address this challenge, pBFT offers a view change protocol to replace the byzantine leader with another one.”
pBFT can tolerate ⅓ of the nodes being dishonest (offline counts as Byzantine = dishonest) and the consensus protocol will function without stalling or hiccups. Once there are more than ⅓ of dishonest nodes but no more than ⅔ the network will be stalled and a view change will be triggered to elect a new DS leader. Only when more than ⅔ of the nodes are dishonest (66%) double-spend attacks become possible.
If the network stalls no transactions can be processed and one has to wait until a new honest leader has been elected. When the mainnet was just launched and in its early phases, view changes happened regularly. As of today the last stalling of the network - and view change being triggered - was at the end of October 2019.
Another benefit of using pBFT for consensus besides low energy is the immediate finality it provides. Once your transaction is included in a block and the block is added to the chain it’s done. Lastly, take a look at this article where three types of finality are being defined: probabilistic, absolute and economic finality. Zilliqa falls under the absolute finality (just like Tendermint for example). Although lengthy already we skipped through some of the inner workings from Zilliqa’s consensus: read the Zilliqa Design Story Part 3 and you will be close to having a complete picture on it. Enough about PoW, sybil resistance mechanism, pBFT, etc. Another thing we haven’t looked at yet is the amount of decentralization.
Currently, there are four shards, each one of them consisting of 600 nodes. 1 shard with 600 so-called DS nodes (Directory Service - they need to achieve a higher difficulty than shard nodes) and 1800 shard nodes of which 250 are shard guards (centralized nodes controlled by the team). The amount of shard guards has been steadily declining from 1200 in January 2019 to 250 as of May 2020. On the Viewblock statistics, you can see that many of the nodes are being located in the US but those are only the (CPU parts of the) shard nodes who perform pBFT. There is no data from where the PoW sources are coming. And when the Zilliqa blockchain starts reaching its transaction capacity limit, a network upgrade needs to be executed to lift the current cap of maximum 2400 nodes to allow more nodes and formation of more shards which will allow to network to keep on scaling according to demand. Besides shard nodes there are also seed nodes. The main role of seed nodes is to serve as direct access points (for end-users and clients) to the core Zilliqa network that validates transactions. Seed nodes consolidate transaction requests and forward these to the lookup nodes (another type of nodes) for distribution to the shards in the network. Seed nodes also maintain the entire transaction history and the global state of the blockchain which is needed to provide services such as block explorers. Seed nodes in the Zilliqa network are comparable to Infura on Ethereum.
The seed nodes were first only operated by Zilliqa themselves, exchanges and Viewblock. Operators of seed nodes like exchanges had no incentive to open them for the greater public. They were centralised at first. Decentralisation at the seed nodes level has been steadily rolled out since March 2020 ( Zilliqa Improvement Proposal 3 ). Currently the amount of seed nodes is being increased, they are public-facing and at the same time PoS is applied to incentivize seed node operators and make it possible for ZIL holders to stake and earn passive yields. Important distinction: seed nodes are not involved with consensus! That is still PoW as entry ticket and pBFT for the actual consensus.
5% of the block rewards are being assigned to seed nodes (from the beginning in 2019) and those are being used to pay out ZIL stakers. The 5% block rewards with an annual yield of 10.03% translate to roughly 610 MM ZILs in total that can be staked. Exchanges use the custodial variant of staking and wallets like Moonlet will use the non-custodial version (starting in Q3 2020). Staking is being done by sending ZILs to a smart contract created by Zilliqa and audited by Quantstamp.
With a high amount of DS; shard nodes and seed nodes becoming more decentralized too, Zilliqa qualifies for the label of decentralized in my opinion.
Generalized: programming languages can be divided into being ‘object-oriented’ or ‘functional’. Here is an ELI5 given by software development academy: * “all programs have two basic components, data – what the program knows – and behavior – what the program can do with that data. So object-oriented programming states that combining data and related behaviors in one place, is called “object”, which makes it easier to understand how a particular program works. On the other hand, functional programming argues that data and behavior are different things and should be separated to ensure their clarity.” *
Scilla is on the functional side and shares similarities with OCaml: OCaml is a general-purpose programming language with an emphasis on expressiveness and safety. It has an advanced type system that helps catch your mistakes without getting in your way. It's used in environments where a single mistake can cost millions and speed matters, is supported by an active community, and has a rich set of libraries and development tools. For all its power, OCaml is also pretty simple, which is one reason it's often used as a teaching language.
Scilla is blockchain agnostic, can be implemented onto other blockchains as well, is recognized by academics and won a so-called Distinguished Artifact Award award at the end of last year.
One of the reasons why the Zilliqa team decided to create their own programming language focused on preventing smart contract vulnerabilities is that adding logic on a blockchain, programming, means that you cannot afford to make mistakes. Otherwise, it could cost you. It’s all great and fun blockchains being immutable but updating your code because you found a bug isn’t the same as with a regular web application for example. And with smart contracts, it inherently involves cryptocurrencies in some form thus value.
Another difference with programming languages on a blockchain is gas. Every transaction you do on a smart contract platform like Zilliqa or Ethereum costs gas. With gas you basically pay for computational costs. Sending a ZIL from address A to address B costs 0.001 ZIL currently. Smart contracts are more complex, often involve various functions and require more gas (if gas is a new concept click here ).
So with Scilla, similar to Solidity, you need to make sure that “every function in your smart contract will run as expected without hitting gas limits. An improper resource analysis may lead to situations where funds may get stuck simply because a part of the smart contract code cannot be executed due to gas limits. Such constraints are not present in traditional software systems”.Scilla design story part 1
Some examples of smart contract issues you’d want to avoid are: leaking funds, ‘unexpected changes to critical state variables’ (example: someone other than you setting his or her address as the owner of the smart contract after creation) or simply killing a contract.
Scilla also allows for formal verification. Wikipedia to the rescue: In the context of hardware and software systems, formal verification is the act of proving or disproving the correctness of intended algorithms underlying a system with respect to a certain formal specification or property, using formal methods of mathematics.
Formal verification can be helpful in proving the correctness of systems such as: cryptographic protocols, combinational circuits, digital circuits with internal memory, and software expressed as source code.
“Scilla is being developed hand-in-hand with formalization of its semantics and its embedding into the Coq proof assistant — a state-of-the art tool for mechanized proofs about properties of programs.”
Simply put, with Scilla and accompanying tooling developers can be mathematically sure and proof that the smart contract they’ve written does what he or she intends it to do.
Smart contract on a sharded environment and state sharding
There is one more topic I’d like to touch on: smart contract execution in a sharded environment (and what is the effect of state sharding). This is a complex topic. I’m not able to explain it any easier than what is posted here. But I will try to compress the post into something easy to digest.
Earlier on we have established that Zilliqa can process transactions in parallel due to network sharding. This is where the linear scalability comes from. We can define simple transactions: a transaction from address A to B (Category 1), a transaction where a user interacts with one smart contract (Category 2) and the most complex ones where triggering a transaction results in multiple smart contracts being involved (Category 3). The shards are able to process transactions on their own without interference of the other shards. With Category 1 transactions that is doable, with Category 2 transactions sometimes if that address is in the same shard as the smart contract but with Category 3 you definitely need communication between the shards. Solving that requires to make a set of communication rules the protocol needs to follow in order to process all transactions in a generalised fashion.
There is no strict defined roadmap but here are topics being worked on. And via the Zilliqa website there is also more information on the projects they are working on.
Business & Partnerships
It’s not only technology in which Zilliqa seems to be excelling as their ecosystem has been expanding and starting to grow rapidly. The project is on a mission to provide OpenFinance (OpFi) to the world and Singapore is the right place to be due to its progressive regulations and futuristic thinking. Singapore has taken a proactive approach towards cryptocurrencies by introducing the Payment Services Act 2019 (PS Act). Among other things, the PS Act will regulate intermediaries dealing with certain cryptocurrencies, with a particular focus on consumer protection and anti-money laundering. It will also provide a stable regulatory licensing and operating framework for cryptocurrency entities, effectively covering all crypto businesses and exchanges based in Singapore. According to PWC 82% of the surveyed executives in Singapore reported blockchain initiatives underway and 13% of them have already brought the initiatives live to the market. There is also an increasing list of organizations that are starting to provide digital payment services. Moreover, Singaporean blockchain developers Building Cities Beyond has recently created an innovation $15 million grant to encourage development on its ecosystem. This all suggests that Singapore tries to position itself as (one of) the leading blockchain hubs in the world.
Zilliqa seems to already take advantage of this and recently helped launch Hg Exchange on their platform, together with financial institutions PhillipCapital, PrimePartners and Fundnel. Hg Exchange, which is now approved by the Monetary Authority of Singapore (MAS), uses smart contracts to represent digital assets. Through Hg Exchange financial institutions worldwide can use Zilliqa's safe-by-design smart contracts to enable the trading of private equities. For example, think of companies such as Grab, Airbnb, SpaceX that are not available for public trading right now. Hg Exchange will allow investors to buy shares of private companies & unicorns and capture their value before an IPO. Anquan, the main company behind Zilliqa, has also recently announced that they became a partner and shareholder in TEN31 Bank, which is a fully regulated bank allowing for tokenization of assets and is aiming to bridge the gap between conventional banking and the blockchain world. If STOs, the tokenization of assets, and equity trading will continue to increase, then Zilliqa’s public blockchain would be the ideal candidate due to its strategic positioning, partnerships, regulatory compliance and the technology that is being built on top of it.
What is also very encouraging is their focus on banking the un(der)banked. They are launching a stablecoin basket starting with XSGD. As many of you know, stablecoins are currently mostly used for trading. However, Zilliqa is actively trying to broaden the use case of stablecoins. I recommend everybody to read this text that Amrit Kumar wrote (one of the co-founders). These stablecoins will be integrated in the traditional markets and bridge the gap between the crypto world and the traditional world. This could potentially revolutionize and legitimise the crypto space if retailers and companies will for example start to use stablecoins for payments or remittances, instead of it solely being used for trading.
Zilliqa also released their DeFi strategic roadmap (dating November 2019) which seems to be aligning well with their OpFi strategy. A non-custodial DEX is coming to Zilliqa made by Switcheo which allows cross-chain trading (atomic swaps) between ETH, EOS and ZIL based tokens. They also signed a Memorandum of Understanding for a (soon to be announced) USD stablecoin. And as Zilliqa is all about regulations and being compliant, I’m speculating on it to be a regulated USD stablecoin. Furthermore, XSGD is already created and visible on block explorer and XIDR (Indonesian Stablecoin) is also coming soon via StraitsX. Here also an overview of the Tech Stack for Financial Applications from September 2019. Further quoting Amrit Kumar on this:
There are two basic building blocks in DeFi/OpFi though: 1) stablecoins as you need a non-volatile currency to get access to this market and 2) a dex to be able to trade all these financial assets. The rest are built on top of these blocks.
So far, together with our partners and community, we have worked on developing these building blocks with XSGD as a stablecoin. We are working on bringing a USD-backed stablecoin as well. We will soon have a decentralised exchange developed by Switcheo. And with HGX going live, we are also venturing into the tokenization space. More to come in the future.”
Additionally, they also have this ZILHive initiative that injects capital into projects. There have been already 6 waves of various teams working on infrastructure, innovation and research, and they are not from ASEAN or Singapore only but global: see Grantees breakdown by country. Over 60 project teams from over 20 countries have contributed to Zilliqa's ecosystem. This includes individuals and teams developing wallets, explorers, developer toolkits, smart contract testing frameworks, dapps, etc. As some of you may know, Unstoppable Domains (UD) blew up when they launched on Zilliqa. UD aims to replace cryptocurrency addresses with a human-readable name and allows for uncensorable websites. Zilliqa will probably be the only one able to handle all these transactions onchain due to ability to scale and its resulting low fees which is why the UD team launched this on Zilliqa in the first place. Furthermore, Zilliqa also has a strong emphasis on security, compliance, and privacy, which is why they partnered with companies like Elliptic, ChainSecurity (part of PwC Switzerland), and Incognito. Their sister company Aqilliz (Zilliqa spelled backwards) focuses on revolutionizing the digital advertising space and is doing interesting things like using Zilliqa to track outdoor digital ads with companies like Foodpanda.
Zilliqa is listed on nearly all major exchanges, having several different fiat-gateways and recently have been added to Binance’s margin trading and futures trading with really good volume. They also have a very impressive team with good credentials and experience. They don't just have “tech people”. They have a mix of tech people, business people, marketeers, scientists, and more. Naturally, it's good to have a mix of people with different skill sets if you work in the crypto space.
Marketing & Community
Zilliqa has a very strong community. If you just follow their Twitter their engagement is much higher for a coin that has approximately 80k followers. They also have been ‘coin of the day’ by LunarCrush many times. LunarCrush tracks real-time cryptocurrency value and social data. According to their data, it seems Zilliqa has a more fundamental and deeper understanding of marketing and community engagement than almost all other coins. While almost all coins have been a bit frozen in the last months, Zilliqa seems to be on its own bull run. It was somewhere in the 100s a few months ago and is currently ranked #46 on CoinGecko. Their official Telegram also has over 20k people and is very active, and their community channel which is over 7k now is more active and larger than many other official channels. Their local communities also seem to be growing.
Moreover, their community started ‘Zillacracy’ together with the Zilliqa core team ( see www.zillacracy.com ). It’s a community-run initiative where people from all over the world are now helping with marketing and development on Zilliqa. Since its launch in February 2020 they have been doing a lot and will also run their own non-custodial seed node for staking. This seed node will also allow them to start generating revenue for them to become a self sustaining entity that could potentially scale up to become a decentralized company working in parallel with the Zilliqa core team. Comparing it to all the other smart contract platforms (e.g. Cardano, EOS, Tezos etc.) they don't seem to have started a similar initiative (correct me if I’m wrong though). This suggests in my opinion that these other smart contract platforms do not fully understand how to utilize the ‘power of the community’. This is something you cannot ‘buy with money’ and gives many projects in the space a disadvantage.
Zilliqa also released two social products called SocialPay and Zeeves. SocialPay allows users to earn ZILs while tweeting with a specific hashtag. They have recently used it in partnership with the Singapore Red Cross for a marketing campaign after their initial pilot program. It seems like a very valuable social product with a good use case. I can see a lot of traditional companies entering the space through this product, which they seem to suggest will happen. Tokenizing hashtags with smart contracts to get network effect is a very smart and innovative idea.
Regarding Zeeves, this is a tipping bot for Telegram. They already have 1000s of signups and they plan to keep upgrading it for more and more people to use it (e.g. they recently have added a quiz features). They also use it during AMAs to reward people in real-time. It’s a very smart approach to grow their communities and get familiar with ZIL. I can see this becoming very big on Telegram. This tool suggests, again, that the Zilliqa team has a deeper understanding of what the crypto space and community needs and is good at finding the right innovative tools to grow and scale.
To be honest, I haven’t covered everything (i’m also reaching the character limited haha). So many updates happening lately that it's hard to keep up, such as the International Monetary Fund mentioning Zilliqa in their report, custodial and non-custodial Staking, Binance Margin, Futures, Widget, entering the Indian market, and more. The Head of Marketing Colin Miles has also released this as an overview of what is coming next. And last but not least, Vitalik Buterin has been mentioning Zilliqa lately acknowledging Zilliqa and mentioning that both projects have a lot of room to grow. There is much more info of course and a good part of it has been served to you on a silver platter. I invite you to continue researching by yourself :-) And if you have any comments or questions please post here!
It is no doubt Grayscale’s booming popularity as a mainstream investment has caused a lot of community hullabaloo lately. As such, I felt it was worth making a FAQ regarding the topic. I’m looking to update this as needed and of course am open to suggestions / adding any questions. The goal is simply to have a thread we can link to anyone with questions on Grayscaleand its products. Instead of explaining the same thing 3 times a day, shoot those posters over to this thread.My hope is that these questions are answered in a fairly simple and easy to understand manner. I think as the sub grows it will be a nice reference point for newcomers. Disclaimer: I do NOT work for Grayscale and as such am basing all these answers on information that can be found on their website / reports. (Grayscale’s official FAQ can be found here). I also do NOT have a finance degree, I do NOT have a Series 6 / 7 / 140-whatever, and I do NOT work with investment products for my day job. I have an accounting background and work within the finance world so I have the general ‘business’ knowledge to put it all together, but this is all info determined in my best faith effort as a layman. The point being is this --- it is possible I may explain something wrong or missed the technical terms, and if that occurs I am more than happy to update anything that can be proven incorrect Everything below will be in reference to ETHE but will apply to GBTC as well.If those two segregate in any way, I will note that accordingly.
ETHE is essentially a stock that intends to loosely track the price of ETH. It does so by having each ETHE be backed by a specific amount of ETH that is held on chain. Initially, the newly minted ETHE can only be purchased by institutions and accredited investors directly from Grayscale. Once a year has passed (6 months for GBTC) it can then be listed on the OTCQX Best Market exchange for secondary trading. Once listed on OTCQX, anyone investor can purchase at this point. Additional information on ETHE can be found here.
So ETHE is an ETF?
No. For technical reasons beyond my personal understandings it is not labeled an ETF. I know it all flows back to the “Securities Act Rule 144”, but due to my limited knowledge on SEC regulations I don’t want to misspeak past that. If anyone is more knowledgeable on the subject I am happy to input their answer here.
How long has ETHE existed?
ETHE was formed 12/14/2017. GBTC was formed 9/25/2013.
How is ETHE created?
The trust will issue shares to “Authorized Participants” in groups of 100 shares (called baskets). Authorized Participants are the only persons that may place orders to create these baskets and they do it on behalf of the investor. Source: Creation and Redemption of Shares section on page 39 of the “Grayscale Ethereum Trust Annual Report (2019)” – Located Here Note – The way their reports word this makes it sound like there is an army of authorizers doing the dirty work, but in reality there is only one Authorized Participant. At this moment the “Genesis” company is the sole Authorized Participant. Genesis is owned by the “Digital Currency Group, Inc.” which is the parent company of Grayscale as well. (And to really go down the rabbit hole it looks like DCG is the parent company of CoinDesk and is “backing 150+ companies across 30 countries, including Coinbase, Ripple, and Chainalysis.”) Source: Digital Currency Group, Inc. informational section on page 77 of the “Grayscale Bitcoin Trust (BTC) Form 10-K (2019)” – Located Here Source: Barry E. Silbert informational section on page 75 of the “Grayscale Bitcoin Trust (BTC) Form 10-K (2019)” – Located Here
How does Grayscale acquire the ETH to collateralize the ETHE product?
An Investor may acquire ETHE by paying in cash or exchanging ETH already owned.
Cash: The investor pays the subscription amount in cash and the Authorized Participant will use that cash to purchase ETH.
ETH: The investor transfers the ETH to the Authorized Participant, which will contribute the ETH in-kind to the Trust.
Source: Creation and Redemption of Shares section on page 40 of the “Grayscale Ethereum Trust Annual Report (2019)” – Located Here
Where does Grayscale store their ETH? Does it have a specific wallet address we can follow?
ETH is stored with Coinbase Custody Trust Company, LLC. I am unaware of any specific address or set of addresses that can be used to verify the ETH is actually there. As an aside - I would actually love to see if anyone knows more about this as it’s something that’s sort of peaked my interest after being asked about it… I find it doubtful we can find that however. Source: Part C. Business Information, Item 8, subsection A. on page 16 of the “Grayscale Ethereum Trust Annual Report (2019)” – Located Here
Can ETHE be redeemed for ETH?
No, currently there is no way to give your shares of ETHE back to Grayscale to receive ETH back. The only method of getting back into ETH would be to sell your ETHE to someone else and then use those proceeds to buy ETH yourself. Source: Redemption Procedures on page 41 of the “Grayscale Ethereum Trust Annual Report (2019)” – Located Here
Why are they not redeeming shares?
I think the report summarizes it best:
Redemptions of Shares are currently not permitted and the Trust is unable to redeem Shares. Subject to receipt of regulatory approval from the SEC and approval by the Sponsor in its sole discretion, the Trust may in the future operate a redemption program. Because the Trust does not believe that the SEC would, at this time, entertain an application for the waiver of rules needed in order to operate an ongoing redemption program, the Trust currently has no intention of seeking regulatory approval from the SEC to operate an ongoing redemption program.
Source: Redemption Procedures on page 41 of the “Grayscale Ethereum Trust Annual Report (2019)” – Located Here
What is the fee structure?
ETHE has an annual fee of 2.5%. GBTC has an annual fee of 2.0%. Fees are paid by selling the underlying ETH / BTC collateralizing the asset. Source: ETHE’s informational page on Grayscale’s website - Located Here Source: Description of Trust on page 31 & 32 of the “Grayscale Ethereum Trust Annual Report (2019)” – Located Here
What is the ratio of ETH to ETHE?
At the time of posting (6/19/2020) each ETHE share is backed by .09391605 ETH. Each share of GBTC is backed by .00096038 BTC. ETHE & GBTC’s specific information page on Grayscale’s website updates the ratio daily – Located Here For a full historical look at this ratio, it can be found on the Grayscale home page on the upper right side if you go to Tax Documents > 2019 Tax Documents > Grayscale Ethereum Trust 2019 Tax Letter.
Why is the ratio not 1:1? Why is it always decreasing?
While I cannot say for certain why the initial distribution was not a 1:1 backing, it is more than likely to keep the price down and allow more investors a chance to purchase ETHE / GBTC. As noted above, fees are paid by selling off the ETH collateralizing ETHE. So this number will always be trending downward as time goes on. Source: Description of Trust on page 32 of the “Grayscale Ethereum Trust Annual Report (2019)” – Located Here
I keep hearing about how this is locked supply… explain?
As noted above, there is currently no redemption program for converting your ETHE back into ETH. This means that once an ETHE is issued, it will remain in circulation until a redemption program is formed --- something that doesn’t seem to be too urgent for the SEC or Grayscale at the moment. Tiny amounts will naturally be removed due to fees, but the bulk of the asset is in there for good. Knowing that ETHE cannot be taken back and destroyed at this time, the ETH collateralizing it will not be removed from the wallet for the foreseeable future. While it is not fully locked in the sense of say a totally lost key, it is not coming out any time soon. Per their annual statement:
The Trust’s ETH will be transferred out of the ETH Account only in the following circumstances: (i) transferred to pay the Sponsor’s Fee or any Additional Trust Expenses, (ii) distributed in connection with the redemption of Baskets (subject to the Trust’s obtaining regulatory approval from the SEC to operate an ongoing redemption program and the consent of the Sponsor), (iii) sold on an as-needed basis to pay Additional Trust Expenses or (iv) sold on behalf of the Trust in the event the Trust terminates and liquidates its assets or as otherwise required by law or regulation.
Source: Description of Trust on page 31 of the “Grayscale Ethereum Trust Annual Report (2019)” – Located Here
Grayscale now owns a huge chunk of both ETH and BTC’s supply… should we be worried about manipulation, a sell off to crash the market crash, a staking cartel?
First, it’s important to remember Grayscale is a lot more akin to an exchange then say an investment firm. Grayscale is working on behalf of its investors to create this product for investor control. Grayscale doesn’t ‘control’ the ETH it holds any more then Coinbase ‘controls’ the ETH in its hot wallet. (Note: There are likely some varying levels of control, but specific to this topic Grayscale cannot simply sell [legally, at least] the ETH by their own decision in the same manner Coinbase wouldn't be able to either.) That said, there shouldn’t be any worry in the short to medium time-frame. As noted above, Grayscale can’t really remove ETH other than for fees or termination of the product. At 2.5% a year, fees are noise in terms of volume. Grayscale seems to be the fastest growing product in the crypto space at the moment and termination of the product seems unlikely. IF redemptions were to happen tomorrow, it’s extremely unlikely we would see a mass exodus out of the product to redeem for ETH. And even if there was incentive to get back to ETH, the premium makes it so that it would be much more cost effective to just sell your ETHE on the secondary market and buy ETH yourself. Remember, any redemption is up to the investors and NOT something Grayscale has direct control over.
Yes, but what about [insert criminal act here]…
Alright, yes. Technically nothing is stopping Grayscale from selling all the ETH / BTC and running off to the Bahamas (Hawaii?). BUT there is no real reason for them to do so. Barry is an extremely public figure and it won’t be easy for him to get away with that. Grayscale’s Bitcoin Trust creates SEC reports weekly / bi-weekly and I’m sure given the sentiment towards crypto is being watched carefully. Plus, Grayscale is making tons of consistent revenue and thus has little to no incentive to give that up for a quick buck.
That’s a lot of ‘happy little feels’ Bob, is there even an independent audit or is this Tether 2.0?
Actually yes, an independent auditor report can be found in their annual reports. It is clearly aimed more towards the financial side and I doubt the auditors are crypto savants, but it is at least one extra set of eyes. Auditors are Friedman LLP – Auditor since 2015. Source: Independent Auditor Report starting on page 116 (of the PDF itself) of the “Grayscale Ethereum Trust Annual Report (2019)” – Located Here As mentioned by user TheCrpytosAndBloods (In Comments Below), a fun fact:
The company’s auditors Friedman LLP were also coincidentally TetheBitfinex’s auditors until They controversially parted ways in 2018 when the Tether controversy was at its height. I am not suggesting for one moment that there is anything shady about DCG - I just find it interesting it’s the same auditor.
“Grayscale sounds kind of lame” / “Not your keys not your crypto!” / “Why is anyone buying this, it sounds like a scam?”
Welp, for starters this honestly is not really a product aimed at the people likely to be reading this post. To each their own, but do remember just because something provides no value to you doesn’t mean it can’t provide value to someone else. That said some of the advertised benefits are as follows:
Access to trading within a tax advantaged retirement account
Institutions can easily and safely get exposure to crypto in a more legal-friendly manner
Ease of use for those who are not very technologically savvy
Ease of access for someone who doesn’t want to set up a Coinbase account
Perceived trust in institutional platforms over something like Coinbase or Kraken
Degen traders who just want access to the volatility ETHE provides that have no interest in crypto beyond that
So for example, I can set up an IRA at a brokerage account that has $0 trading fees. Then I can trade GBTC and ETHE all day without having to worry about tracking my taxes. All with the relative safety something like E-Trade provides over Binance. As for how it benefits the everyday ETH holder? I think the supply lock is a positive. I also think this product exposes the Ethereum ecosystem to people who otherwise wouldn’t know about it.
Why is there a premium? Why is ETHE’s premium so insanely high compared to GBTC’s premium?
There are a handful of theories of why a premium exists at all, some even mentioned in the annual report. The short list is as follows:
ETHE is NOT redeeming shares and as such doesn’t have an effective arbitrage mechanism
ETHE has a 1 year wait to be sold on the secondary market, again negating the ability to effectively arbitrage the premium
People may simply be willing to pay a premium for the benefits stated above.
Why is ETHE’s so much higher the GBTC’s? Again, a few thoughts:
ETHE hasn’t been around as long, so there is less secondary market supply to go around
ETHE was listed at an insanely high premium to begin with
ETHE might simply be more popular at the moment
Could just be sheer stupidity (investors think ETHE is a 1:1 ratio not 1:11)
Are there any other differences between ETHE and GBTC?
I touched on a few of the smaller differences, but one of the more interesting changes is GBTC is now a “SEC reporting company” as of January 2020. Which again goes beyond my scope of knowledge so I won’t comment on it too much… but the net result is GBTC is now putting out weekly / bi-weekly 8-K’s and annual 10-K’s. This means you can track GBTC that much easier at the moment as well as there is an extra layer of validity to the product IMO.
I’m looking for some statistics on ETHE… such as who is buying, how much is bought, etc?
There is a great Q1 2020 report I recommend you give a read that has a lot of cool graphs and data on the product. It’s a little GBTC centric, but there is some ETHE data as well. It can be found here hidden within the 8-K filings.Q1 2020 is the 4/16/2020 8-K filing. For those more into a GAAP style report see the 2019 annual 10-K of the same location.
Is Grayscale only just for BTC and ETH?
No, there are other products as well. In terms of a secondary market product, ETCG is the Ethereum Classic version of ETHE. Fun Fact – ETCG was actually put out to the secondary market first. It also has a 3% fee tied to it where 1% of it goes to some type of ETC development fund. In terms of institutional and accredited investors, there are a few ‘fan favorites’ such as Bitcoin Cash, Litcoin, Stellar, XRP, and Zcash. Something called Horizion (Backed by ZEN I guess? Idk to be honest what that is…). And a diversified Mutual Fund type fund that has a little bit of all of those. None of these products are available on the secondary market.
Are there alternatives to Grayscale?
I know they exist, but I don’t follow them. I’ll leave this as a “to be edited” section and will add as others comment on what they know. Per user Over-analyser (in comments below):
As asked by pegcity - Okay so I was under the impression you can just give them your own ETH and get ETHE, but do you get 11 ETHE per ETH or do you get the market value of ETH in USD worth of ETHE?
I have always understood that the ETHE issued directly through Grayscale is issued without the premium. As in, if I were to trade 1 ETH for ETHE I would get 11, not say only 2 or 3 because the secondary market premium is so high. And if I were paying cash only I would be paying the price to buy 1 ETH to get my 11 ETHE. Per page 39 of their annual statement, it reads as follows:
The Trust will issue Shares to Authorized Participants from time to time, but only in one or more Baskets (with a Basket being a block of 100 Shares). The Trust will not issue fractions of a Basket. The creation (and, should the Trust commence a redemption program, redemption) of Baskets will be made only in exchange for the delivery to the Trust, or the distribution by the Trust, of the number of whole and fractional ETH represented by each Basket being created (or, should the Trust commence a redemption program, redeemed), which is determined by dividing (x) the number of ETH owned by the Trust at 4:00 p.m., New York time, on the trade date of a creation or redemption order, after deducting the number of ETH representing the U.S. dollar value of accrued but unpaid fees and expenses of the Trust (converted using the ETH Index Price at such time, and carried to the eighth decimal place), by (y) the number of Shares outstanding at such time (with the quotient so obtained calculated to one one-hundred-millionth of one ETH (i.e., carried to the eighth decimal place)), and multiplying such quotient by 100 (the “Basket ETH Amount”). All questions as to the calculation of the Basket ETH Amount will be conclusively determined by the Sponsor and will be final and binding on all persons interested in the Trust. The Basket ETH Amount multiplied by the number of Baskets being created or redeemed is the “Total Basket ETH Amount.” The number of ETH represented by a Share will gradually decrease over time as the Trust’s ETH are used to pay the Trust’s expenses. Each Share represented approximately 0.0950 ETH and 0.0974 ETH as of December 31, 2019 and 2018, respectively.
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