Skycoin is a project with a lot of ambition. It isn’t just a cryptocurrency that wishes to compete against Bitcoin. It has a bigger aim is to reinvent the internet in a cryptocurrency driven world by completely decentralising it. The platform is powered by the native Skycoin to perform differing functions that contribute to the overall network.
The first part of the Skycoin ecosystem is Skywire. This part of the ecosystem functions as an Internet Service Provider (ISP). Skywire is private, meaning you can’t be tracked as you browse the internet. In short, it’s a Virtual Private Network (VPN). Rather than paying for an ISP that continually tracks everything you do online, the Skywire community has access to internet services that put its privacy first.
As Skywire progresses, it will develop into a wireless mesh network (WMN) in which users can earn both Skycoin and Coin Hours. Users can do this by running hardware nodes that offer bandwidth and storage to the network. Skywire users also dictate the decisions made. The network operates on a ‘Web-of-Trust’ system where malicious nodes can be exiled from the network. Collective agreement from the community must be reached for a node to be exiled.
The Skyminer hardware acts as a custom VPN server that powers the Skywire network. Skyminer hardware is built with a Linux server alongside an integrated router and networking capabilities.
The hardware is built so that if one part of it is compromised, other services on the same machine can’t be. Nodes operating on this network receive an incentive. Users can receive the incentive, Skycoin, by helping build the network.
In Skyminer, nodes are isolated which means each service can operate independently of attacks on peripheral services. The Skyminer hardware provides access to the internet, giving it a second layer of private browsing.
The total coin supply is 100 million and they cannot be destroyed nor created. Skycoin is distributed on an open basis. The more tokens that are made available to the public, the slower it will be distributed. In effect, this gives power to the community instead of miners or traders.
75% of the coin supply is locked until the first 25 million tokens have been distributed. For every year after the first 25% is available, only 5% of the remaining tokens will become available. This rate is written into Skycoin’s code.
Bitcoin relies on a system known as ‘Proof-of-Work’ (PoW) whereas Ethereum relies on ‘Proof-of-Stake’ (PoS). A PoW system involves computers performing intensive processing tasks and rewarded with newly minted cryptocurrencies. A PoS is slightly different as it prioritises people who hold the biggest stake (wealth).
Skycoin does not rely on either system. Instead, it works with the Obelisk consensus method. The Obelisk method is an algorithm in which nodes agree based on a ‘Web-of-Trust’ (WoT) consensus. Influence is spread across the network which ultimately creates the WoT.
Obelisk requires zero mining, is immune to 51% a attack and transactions can be completed in seconds. Each node in the network connects to a list of other nodes that it views as ‘trustworthy.’ The nodes are ranked by the amount of connections they have with other nodes. In a sense, they are ranked by popularity and this is how their ‘trustworthiness’ is assessed. Each node has its own public blockchain that serves as a public broadcasting channel. They are identified by the public key, but only nodes connected to it will know the IP address.
This does not necessarily come without issues. Because nodes need to ‘trust’ each other, the balance of power can tip toward centralised or decentralised dependent on how the nodes are ranked.
The algorithm was designed to be fully scalable and computationally inexpensive. This in turn allows the algorithm and to run on budget hardware.
Obelisk can even withstand coordinated attacks by an organisation of malicious nodes. This is because the algorithm is non-iterative, converges quickly and can run on a spare network – even a mesh one. Since Obelisk functions on a WoT basis, a 51% attack cannot happen since there can be no consolidation of centralised power.
There is no specific fees attached to transactions, at least not monetary ones. Skycoin does not want to charge transaction costs since ultimately it drives up the cost of the network. Instead, the transaction costs are covered by Coin Hours. Coin Hours are awarded to users based on how many hours that have held a Skycoin token. Skyminers are paid in Coin Hours for providing services and security to the network.
What to know more about the importance of decentralisation? Read this definitive guide.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.