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Inside the blockchain developer’s mind: Koinos approaches testnet

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Cointelegraph is following the development of an entirely new blockchain from inception to mainnet and beyond through its series, Inside the Blockchain Developer’s Mind. In Part Four, Andrew Levine of Koinos Group discusses some of the challenges the team has faced since identifying the key issues they intend to solve.

Earlier in this series I outlined three of the “crises” that are holding back blockchain adoption; upgradeability, scalability, and governance.

In this post I will summarize the solutions we’ve developed to these problems, which we will be showcasing in the upcoming Koinos testnet planned for the second quarter of 2021.

Since that series Koinos Group has successfully launched a token, KOIN, as a proof of work mineable token on Ethereum. By using proof of work to distribute the initial token supply we were able make the token accessible to early adopters and forgo an ICO.

Assessing the ICO model

ICOs and similar token sale tools, while not without their use cases, have created their own crisis within the space by misaligning incentives before development even begins. The issue is not with the ICO as a tool, but what happens when a team is financially rewarded before they have even shipped a product.

While so many projects have followed in the footsteps of Bitcoin, it’s surprising how few have replicated arguably the most successful aspect of its launch; a token distribution exclusively through proof of work.

The benefit of this approach is that it ensures with algorithmic certainty that the people behind the blockchain have no advantage in acquiring the token. In short, everyone, no matter who they are, has to make a financial sacrifice in order to acquire that token and the scale of that sacrifice is determined by some neutral third party. In the case of proof of work, that neutral third party is the manufacturer of hardware.

For Koinos Group, that means we had to spend money to acquire our token just like everyone else. In fact, because we have to spend most of our time developing the product, we are even at a disadvantage relative to professional miners. So we have to keep working to add value to the protocol if we’d like to get a return on our investment.

Proof of work algorithms are not without their problems, but we mitigated those in a few ways.

  • First, the mainnet will be governed by a totally different consensus algorithm that won’t be proof of work or proof of stake, so any attempt to develop an ASIC would be a waste of resources.
  • Second, we made the algorithm GPU resistant.
  • Third, we released this token long before releasing our mainnet. In fact, we released the token long before we had even completed development of our framework. Without a functional product, this token becomes a way for people who believe in our team and who share our vision for a fee-less smart contract platform to acquire the token at a reasonable cost.

Rapid rate of improvement

Part of what makes this launch strategy work is the innovative property set of Koinos. We built Koinos totally from scratch, not around any single feature like transactions per second or sharding, but with the goal of creating a blockchain that would improve at a much more rapid rate than any other blockchain out there.

In our experience developing the Steem blockchain, the need to execute hard forks was the single biggest factor holding back progress. If we wanted to eliminate that bottleneck, we reasoned, moving as much of the system code as possible into smart contracts that could be upgraded in-band would do the trick.

That’s why the Koinos blockchain framework contains only the most basic blockchain features (called “thunks”) like contract input/input, getting parameters, and writing to the database. All of the more complex features that people are more familiar with (consensus algorithm, accounts, resource management, governance, etc.) have been moved into modular WASM smart contracts running in the virtual machine that can be upgraded without a hard fork.

Because all behaviors are now coded in distinct “modules” that can be individually “upgraded” we call this feature modular upgradeability.

As a result of modular upgradeability, any behavior can be added to the blockchain without a hard fork because individual upgrades can be distributed in blocks and transactions that are pushed to the network much like an operating system patch, but with the added benefit of an on-chain record of the entire upgrade path.

By moving nearly all of the system code of the blockchain to smart contract modules that can be upgraded without a hard fork we have made Koinos into a blockchain that derives its strength not from the features it is born with, but based on its ability to rapidly acquire new and better features faster than anything else out there.

This is why we call Koinos the first blockchain capable of evolution.

Microservices

Modular upgradeability was just the first major technical innovation that we developed to make Koinos less monolithic and an order of magnitude more upgradeable. Just like there is code that does not need to be implemented natively (in the blockchain itself) but that can be implemented as smart contracts (most of it in fact), there is plenty of code that does not need to be implemented either natively or as smart contracts and can instead be implemented as microservices.

Microservice architectures have many benefits which is why this has become the industry standard for modern software development, but one major benefit is scalability because individual services can be scaled up without having to scale up the entire system. This can dramatically reduce the cost of running a network while improving both the speed and quality of improvements to that network. As a result of historical accidents, blockchain stacks appear to be the last to adopt this new standard as Koinos will be the first blockchain built on a microservice architecture.

This creates amazing new opportunities for developers who will be able to build application specific microservices for Koinos that will help them run their nodes, and their applications, more efficiently; and as a consequence deliver better user experiences. Best of all, this will make Koinos node operation more accessible, thereby improving decentralization, and enabling the network as a whole to run more efficiently so that developers and their end-users can get more out of their decentralized applications.

Multi-language support

Another benefit of a microservice architecture is that individual microservices (basically small programs) can be written in the best (fastest, most secure, best libraries, etc.) programming language for the job, a capability we also wanted to offer for smart contract developers. But in order to take advantage of this trait we needed to develop a way for these small programs written in different languages to “talk” to one another in a way that conformed to the unique needs of a decentralized network. To solve this problem we created a cross-language serialization framework named Koinos Types.

Koinos Types is like the Rosetta Stone for blockchain data structures. It allows programs written in different languages to talk to one another in a simple and unified way by giving them access to the same objects (the “building blocks” of modern programming languages). Koinos Types allows for the interpretation of Koinos (i.e. blockchain) data structures in practically any programming language which will be extremely useful for the development of blockchain-related microservices, clients, and smart contracts.

Koinos Types solves a number of problems. It helps us add multi-language support to Koinos more generally (including for smart contracts), it enables microservices to communicate with one another, and it makes it far easier to develop and update client-libraries. While modular upgradeability and the microservices architecture alone make Koinos far more upgradeable than any other blockchain, Koinos Types takes that upgradeability to another level. That’s why we were so excited to make Koinos Types the first piece of Koinos that we open sourced.

As you can see, ensuring that Koinos can improve at a more rapid rate than any other blockchain isn’t about any one feature.

  • It’s about getting the incentives right from the beginning.
  • It’s about ensuring that the blockchain has modular upgradeability.
  • It’s about modularizing the very architecture itself as microservices.
  • And it’s about making sure that developers operating at every level of the stack (not just smart contracts) are able to use the programming languages they already know and love.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Andrew Levine is the CEO of Koinos Group, where he and the former development team behind the Steem blockchain build blockchain-based solutions that empower people to take ownership and control over their digital selves. Their foundational product is Koinos, a high-performance blockchain built on an entirely new framework architected to give developers the features they need in order to deliver the user experiences necessary to spread blockchain adoption to the masses.



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Blockchain

Centralized stablecoins may be doomed

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Over the last couple of years, we have seen a lot of interest from central banks and governments in the stablecoin market. The reason behind it lies in the development of central bank digital currencies, or CBDCs.

The idea of issuing a digital alternative to cash is a great motivator for central banks. It allows them to gain more control over the transition and processing of cashless transactions, which are currently overseen indirectly through private payment processors and banks.

Related: Did CBDCs affect the crypto space in 2020, and what’s next in 2021? Experts answer

There have been a number of pilot CBDC projects and initiatives already launched by several central banks, and more are about to come. It is important to note, however, that CBDC has nothing to do with cryptocurrency or known stablecoins in the crypto community — they are not intended to be heavily used in trading; some of them will not be even traded for crypto. CBDCs are a mere digital alternative to cash, fully controlled by central banks.

Related: Central bank digital currencies are dead in the water

CBDCs and stablecoins

A reasonable question arises: If CBDCs and centralized stablecoins solve different market needs, why can’t they coexist? In principle, they could, but at a very high price for the latter.

When it comes to exercising control over money in any form, central banks are quite strict and straightforward — if you want a piece of it, you need to be heavily regulated. As central banks enter into the digital currency world, they will apply the same principles to any existing market participant.

A great example of this approach can be found in a bill introduced to the U.S. Congress in late November 2020, called the Stablecoin Classification and Regulation Act of 2020. According to the bill:

  • A stablecoin can only be issued by an insured depository institution that is a member of the Federal Reserve System.
  • In order to issue stablecoins or provide any stablecoin-related services, a written approval from the appropriate federal banking agency and the Federal Reserve System is required.

In summary, the bill is intended to apply banking regulations to centralized stablecoin issuers, which could have a huge impact on stablecoins currently present on the market. Some of them are not regulated at all, while others are. However, they are not as strong as the bill suggests.

Without going into specifics of each particular jurisdiction or the future of singular legislative initiatives, it is quite clear that a similar approach could be undertaken by regulators outside the United States.

Are decentralized stablecoins set to replace the old ones?

It is also clear that the modern cryptocurrency industry cannot be imagined without stablecoins, and the potential disappearance of centralized stablecoins, as of now, could have an irreversible impact on the market. However, this impact could be mitigated by the transfer of liquidity into decentralized stablecoins, which can represent a competitive alternative and, at the same time, fall out of the scope of the central banks’ regulations.

The main issue with decentralized stablecoins has a conceptual nature — the absence of an issuer automatically leads to the absence of stability, guarantees, legal responsibilities and governance. Currently, there are a huge number of decentralized protocols looking to solve this issue by delegating governance to the community, and ensuring full transparency and control over collateral, which is represented by cryptocurrency or other stablecoins.

Related: You can’t talk about blockchain and not bring up CBDCs and stablecoins

Despite solving part of the issue, the above leaves the stability problem in the air. Using cryptocurrency as collateral is the most obvious solution for decentralized protocols in terms of transparency, but at the same time, it can be hardly competitive with the U.S. dollar-pegged stablecoins in terms of stability (yes, DAI, we are looking at you now).

So, it appears that a perfect solution might be a community-managed decentralized stablecoin, connected with real-world assets of stable value — currency, debt obligations or others. The emergence of such solutions could have a significant impact on the current stablecoin industry, providing traders with a stable and transparent alternative to currently existing centralized stablecoins, which are on the verge of elimination under the pressure of regulators and central banks.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Artem Tolkachev is the founder and CEO of Tokenomica. Since 2011, he has been an intellectual property and information technology lawyer and entrepreneur. In 2016, Artem founded and headed Deloitte CIS Blockchain Lab. As part of that initiative, he led a range of innovative projects involving the implementation of enterprise blockchain solutions, tokenization of real-world assets, tax and legal structuring of security token offerings, development of cryptocurrency, and blockchain legislation.