Connect with us

Blockchain

The State of Crypto Interoperability. (Explained in Pictures).

Published

on

Kerman Kohli

There’s been a lot of talk about blockchain interoperability recently with the launch of Cosmos and the potential threat to the Ethereum ecosystem. This piece is going to be a deep dive on the technicalities of Cosmos and Polkadot, but will also give you the prerequisite knowledge you need to understand these protocols at a technical level (with pictures to help understand).

Firstly, it’s important to know why interoperability matters. In the existing internet, we can access and modify numerous data sets through APIs (application specific interfaces). However with blockchains, data is siloed by the chain that it exists on. So what does it mean to have interoperability?

  1. Trustlessly transfer assets between different chains
  2. Cross-chain smart contracts that can interact with each other
  3. Specialised chains that can be used by other blockchains

Before we get into the details of any particular interoperability approach, I’d like to spend some time outlining some of the basics of distributed systems in order to help us understand concepts later on. Keep in mind that blockchains are simply a set of machines all over the world coming to an agreement about what a collection of data should look like.

Distributed systems are, as the name implies, a group of computers working together to accomplish a very specific goal. An example of this goal might be to serve the same content around the world to lots of people (like keeping your Twitter newsfeed up to date). In trying to achieve this goal they have to overcome the following problems:

  1. Timing. Each computer/system will execute the same task at it’s own pace and time.
  2. Ordering. Trying to solve what happened and when with time is still very hard since clocks start “drifting” after a period of time. This makes order a complicated challenge since each system has its own account of what happened and when.
  3. Failure. Coordination between systems can fail due to a system crashing, not receiving/sending messages to other systems correctly or choosing to act maliciously (Byzantine)

Like humans, the way to solve most problems is through good communication. With computers though, this is a bit more complicated since they can communicate asynchronously or synchronously.

What does that mean?

  • Synchronous = each system has a certain amount of time allocated to them to communicate and they take turns. Think of it in-real conversations for humans.
  • Asynchronous = each system can communicate whenever they want and there’s no assumptions about when they’ll speak. Think of it as Slack for humans.

All said and done, at the end of the day a blockchain should have safety (agreement on the same output) and liveliness (chain keeps growing and functioning). If your chain has safety but not liveliness it’ll stop producing blocks. If it has liveliness but no safety it’ll produce many forks and you won’t know which one is the correct blockchain unless you have a rule (eg longest chain in Bitcoin)!

Practical Byzantine Fault Tolerance is an implementation developed by Barbara Liskov and Miguel Castro and introduced in 1999. Proof of Stake chains like Cosmos and Polkadot have elements in their design inspired from PBFT so it’s worth outlining what it is and how it works.

  1. A party will listen to numerous transactions until it can form a block of these transactions. We’ll refer to this party as a proposer, since they propose a block.
  2. Once a block has been proposed, everyone participates in a pre-vote to confirm that they heard the same block. It’s important to note that a block could be incorrect/malicious but still be valid in the pre-vote stage since everyone’s simply trying to come to consensus that they received the same data/block.
  3. Once more than ⅔ of the participants agree that they received the same block, they move to the pre-commit step. A pre-commit vote is then cast to determine whether this is a valid block and nothing malicious is going on.
  4. If more than ⅔ of the participants vote that the block is indeed valid and correct then we can successfully commit this block to the blockchain.
  5. The height of the blockchain is increased and steps 1–5 are repeated.

From what we’ve learned above, we can see that the following steps ensures that the order of blocks is known (by the height of the blockchain increasing once a commit happens), each computer can take it’s time to come to its own conclusion then communicate what result it came to (timing) and can handle failure (malicious node proposing a block or a node not being able to vote).

Enter Cosmos, founded in 2016 by Jae Kwon and Ethan Buchman and raised over $17M+ in their ICO for ATOMs. The Cosmos Hub is it’s own blockchain that connects to other zones (blockchains) and therefore allows communication between different zones. Any proof-of-work blockchain such as Bitcoin, Ethereum, ZCash or an application specific blockchain would have to be connected to a bridge-zone via the Inter Blockchain Communication framework.

Getting into the architectural details, Cosmos Hub uses Tendermint as it’s consensus algorithm (inspired by PBFT) created by Jae Kwon in 2014. What this means is that each voting stage (pre-vote & pre-commit) has a fixed amount of time for everyone to vote before it moves on to the next stage. After a block has been finalised, there’s no going back. This means you can have instant mobile & internet-of-things payments since as soon as the transaction is in a block it’s finalised. Since no confirmations are required this is called having “fast finality”.

ATOMs held by users can be used to become validators in the system or to delegate ATOMs to a validator instead. The Cosmos blockchain will have 100 validators to begin with and plan to increase the limit via a governance parameter in the future. Only those with reasonable power in the network will be able to participate in the security of the network.

To make all of this less theoretical, I’ll outline a set of steps to possibly to convert ETH to BTC. — everyone’s favourite example.

  1. A trusted intermediary zone will be created for Ethereum and there will be set of validators who will be responsible for relaying messages from the Ethereum bridge-zone to the Cosmos Hub.
  2. Since both Ethereum and Bitcoin are probabilistic (there is a chance the current chain isn’t the correct one), the validators need to wait for a certain number of confirmations to ensure the transaction actually went through.
  3. Once the validators are certain the transaction is final they’ll initiate a transaction from their zone to the Cosmos Hub that they did indeed receive the Ether. The hub will then create a form of Wrapped Cosmos Ether that it’ll hold. Every other Cosmos zone will now be aware there’s new Wrapped Cosmos Ether in the system.
  4. Assuming an exchange rate was determined beforehand, the Wrapped Cosmos Ether will be exchanged for Wrapped Cosmos Bitcoin. This Wrapped Cosmos Bitcoin is then sent to the trusted intermediary Bitcoin zone and sent to the specified address on the actual Bitcoin chain.

There’s a few assumptions/things to be aware of with this model:

  • The Cosmos Hub needs to ensure the balances of the Wrapped Cosmos assets are correctly incremented and decremented. While this is a potential downside, the Cosmos team has designed the system in a way that anyone can create their own hub. Essentially Cosmos will be a network of Hubs and Zones run by different groups.
  • Each Zone has to be trusted that they’re relaying the correct messages about assets being sent/received. Senders also need to trust the validators set will correctly relay their messages and not steal their assets.

Polkadot is founded by Gavin Wood, a cofounder and former CTO of Ethereum and president of the Web3 Foundation. Polkadot raised over 145M+ late 2017 selling the native currency DOT during a crowdsale. If Cosmos resembles an open network of hubs and zones, Polkadot is a single “relay chain” which offers numerous benefits to chains, called “parachains” (short for parallelizable chains), that join it.

A couple key aspects Polkadot aims to innovate are:

  • Each parachain gain pooled security from the validator set of the relay chain. Once a chain has connected to the Polkadot network by becoming a parachain it is secured with the same level of security as the whole Polkadot network. In Cosmos, each new chain needs its own validator set and has to bootstrap its own security.
  • Parachains can interact with other parachains using trust-fee interchain communication. Users who want to communicate across chains do not need to trust every chain they transmit messages to, but just the singular security of the whole Polkadot network. Again, this is different from how Cosmos works where a user would need to trust the source chain, the routing chains, and the destination chain with each of their separate validator sets.

Polkadot’s consensus mechanism consists of two components: GRANDPA and BABE. GRANDPA is a finality gadget which draws on some ideas behind the GHOST fork choice rule (like Ethereum’s Casper) and BABE is a block production mechanism similar to Cardano’s Ouroboros. The introduction of a finality gadget allows for portions of the chain to be “finalized” and provably never be reverted. Separating the finality gadget from the block production allows for the slower finality gadget to work in a different process from the generation of new blocks in the chain. This means that the actual production of blocks can scale unlike in the PBFT-bound Cosmos Tendermint algorithm.

In the Polkadot ecosystem, you have the following parties:

  • Collators — Produce the blocks for parachains and pass the information to the validators to verify.
  • Nominator — Allocates their capital to validators to participate in the staking mechanism.
  • Validator — Require a high bond requirement because they are responsible for actually sealing the new blocks of the relay chain. Their crucial roles include:
  • Authoring new blocks.
  • Finalizing the relay chain through participation in GRANDPA.
  • Validating parachain blocks by ensuring the transactions which occurred are correct and that the cross-chain messages have been processed.
  • Fishermen — Bounty hunters who “go fishing” for malicious actors by watching the other nodes of the network.

A good way to think about Polkadot is as an interconnected system that will connect to other chains it will want to communicate with through bridges. All parachains and the relay chain operate as one, unified system. A parachain can incorporate custom logic and will be responsible for handling its own state transitions while receiving and posting messages to other chains. Parachains will be able to communicate with other parachains by listening to each other, unlike Cosmos where everything must be routed through the Hub.

Polkadot’s architecture is elegant for the core design assumptions it had made. This starts off with the fact that parachain passively read information from bridge-contracts, rather than relying on bridge-contracts sending messages to other parachains. Each parachain is treated no different to any other parachain. This means Polkadot’s interchain communication framework is truly trustless, since parachains are acting in the interest of the relay chain rather than any specific parachain they’re validating. Furthermore, validators are re-assigned to another parachain at intervals and at random.

Let’s take an example that might be more relatable, how would it work if you wanted to convert currencies from one parachain to another? Let’s take the popular example of converting ETH to BTC.

Collators for the Ethereum parachain would pass block headers to validators in their parachain. The validators would then sign and publish the relevant transactions in the Ethereum bridge smart contract in a format that can be recognised and communicated with the parachain zone. Any ETH sent would be held by a Polkadot validator set, which would also provide DOTs as collateral for invalid transactions. The Ethereum parachain would in turn communicate with the Bitcoin parachain, which would release BTC to the specified address through the validator set governing that particular parachain. Design decisions are still being finalised, but the idea around their cross chain communication is that it’ll be trustless.

One thing to be aware of is that Polkadot’s parachain mechanism will allocate parachain slots via permissionless on-chain auctions. These auctions would involve locking up DOTs for some amount of time to keep the parachain connected to the Polkadot network. Governance will be able to step in and fix the situation in the case of urgent situations where the parachains contains a critical bug or serves some malicious purpose. Polkadot will be governed by an on-chain governance mechanism as it believes it’s the best way to govern crypto-networks.

As Gavin Wood stated for this article, “I believe any blockchains that do not introduce on-chain governance, including providing a viable mechanism to issue upgrades, will ultimately poison themselves through toxic populism. I do not believe “off-chain processes”, “on-chain signalling” and “rough consensus” provide a sufficient means to allow the real stakeholders in chain’s ecosystem to effectively govern and drive a chain to long term success. I also believe that it’s essentially impossible to retrofit governance.”

A lot of the core problems for interoperability seem to be solved at a high level, however the execution is still far behind. Cosmos launched in March 2019, but has only got the Cosmos Hub up and running. Their next steps are to finalise how the Inter-Blockchain Communication framework will work. Polkadot is set to launch end of 2019 with just the relay chain being live.

Overall, I’m extremely excited for both Cosmos and Polkadot to launch. What’ll be interesting to see is the developer adoption and the political struggles of each chain and how they play out. Application specific chains are a pipe dream at this point in time since not only is the basic infrastructure far from being completed, but developers will need to think about the resources and people they’ll need behind them to be connected and have sufficient security.

Will it even be a relevant trade-off? It’s hard to say. Maybe Ethereum’s off-chain governance is the very thing that allows it to thrive despite it’s slower roadmap execution since it allows true permissionless innovation with the guarantees of a highly secured chain.

The flip side to this argument is that all crypto networks will bootstrap their security on another chain, such as Ethereum, and then graduate to their own chain once they can guarantee the security of it through its existing community. A good example would be MakerDAO, they’d have enough resources to create their own chain and get enough political backing to be part of Polkadot’s para-chain. If for some reason it can’t get enough backing to be a part of the para-chain, it could establish a bridge zone on Cosmos and bootstrap their own security. Polkadot plans to provide bridge-slots for chains that are unable to provide pooled security but still give message passing down the line.

I think these are the kinds of nuanced questions that we as a community need to be asking rather than looking at chains as a zero-sum game. I’m personally excited for where all this leads us to and am receptive to your feedback on this piece. Reach out to me on Twitter @kermankohli.

Special thanks to Gavin Wood (Web3 Foundation), Logan Saether (Web3 Foundation), Billy Rennekamp (Cosmos), Chjango Unchained (Cosmos) for their contributions with ensuring the technical accuracy of the article.

Source: https://tokeneconomy.co/the-state-of-crypto-interoperability-explained-in-pictures-654cfe4cc167?source=rss—-fbbd350c08fc—4

Blockchain

Indian government cautious about crypto-adoption, CBDC is a possibility

Published

on

Indian traders and exchanges might be bullish about the crypto market, but the Indian  government doesn’t seem keen on rushing into the scene. At least, not until studying its homegrown fintech industry and the anti-Bitcoin protests in El Salvador.

Tracking global news

Indian finance minister Nirmala Sitharaman in a recent interview with Hindustan Times explained why the country seemed to be falling behind when it came to crypto adoption.

Though she admitted, El Salvador wasn’t “the best example,” Sitharaman said,

“You’d think common people don’t care about digital currency; but the public took to the streets against the move. It’s not a question of literacy or understanding – it’s also a question of to what extent this is a transparent currency; is it going to be a currency available for everyone?”

Sitharaman referred to CBDCs as a “legitimate” cryptocurrency and admitted there could be a “possibility,” in hat regard. She noted that India held the “strength of the technology” and acknowledged the need to formulate a Cabinet note. However, Sitharaman wondered if India was ready to follow El Salvador’s way.

Facts on the ground

Though accessibility is a pressing concern, more Indians have discovered crypto than perhaps expected.

Nischal Shetty, CEO of the Indian crypto exchange WazirX – a subsidiary of Binance Holdings – has stated that WazirX sign-ups from India’s tier-two and tier-three cities overtook those from tier-one cities this year. Even so, sign-ups from tier-one cities themselves saw a 2,375% rise. Furthermore, WazirX added one million users in April 2021 alone.

Adding to this, the cost of electricity and Internet data in India are relatively cheaper, which could boost both crypto trading and mining in the future. However, at the last count, there was only one Bitcoin ATM in the whole country.

As per data by Useful Tulips, which combined data from Paxful and LocalBitcoins, India saw transfers worth around $4,502,369 in the last two weeks.

Could anti-Bitcoin protests happen in India?

There is evidence to support both sides. India has a strong history of mass protests, with the farmers’ protests against the government’s agricultural laws being one such example. The 2016 demonetization of part of the country’s paper currency still haunts many, and Internet penetration is yet to cross 50%.

However, India also has the largest diaspora in the world, with approximately 18 million people living outside the country. Crypto innovation could lead to hundreds of millions of dollars being saved on remittance charges as money is sent across borders.

But for the time being, it seems India’s urban residents are more bullish about crypto than its government.

Where to Invest?

Subscribe to our newsletter

PlatoAi. Web3 Reimagined. Data Intelligence Amplified.

Click here to access.

Source: https://ambcrypto.com/indian-government-cautious-about-crypto-adoption-cbdc-is-a-possibility

Continue Reading

Blockchain

A Deep Dive Into The Bitcoin Wallets Of U.S Congress Members, And Why Bitcoiners Are Strongly Against Them

Published

on

A Deep Dive Into The Bitcoin Wallets Of U.S Congress Members, And Why Bitcoiners Are Strongly Against Them

Advertisement &  & 

Key takeaways

  • U.S. Congress’ split disposition towards cryptocurrencies raises concerns among market participants.
  • Bitcoin proponent, James Loop goes digging into the financial disclosures of Congress members.
  • His findings revealed only three Congress members have ever disclosed that they hold Bitcoin.

The United States is a key base for innovation and adoption in the cryptocurrency industry. According to data from Crunchbase, there are at least 1,135 organizations founded in the U.S. that provide various cryptocurrency-related services.

Despite the broad adoption of the asset class by the country’s citizens, the government is still divided on opinions about the growing cryptocurrency industry. This can be seen in the U.S. Congress where members of Congress are split between those who support and those who do not support Bitcoin, the most prominent cryptocurrency.

This polarised disposition of Congress has been a pain point for Bitcoiners. Bitcoin market participants have pointed out several issues that emanate from the fact that there are still members of Congress who have not shown themselves to fully understand Bitcoin.

The sentiment is that Congress members who do not fully understand the asset, having not used it, should not be responsible for making laws about it. Additionally, market participants also think it will be a conflict of interest if members of Congress who oppose Bitcoin are found to be holding Bitcoin or if those who support it do not own any. 

Advertisement &  & 

Jameson Lopp, the co-founder, and chief technology officer of Casa – a leading provider of Bitcoin self custody solutions, has gone digging into the United States Senate Financial Disclosures portal. The investigation was carried out to identify Congress members who have declared holdings of cryptocurrencies, and Bitcoin in particular, in their portfolios. 

His findings paint a dismal picture as the majority of the members of Congress who have been vocal in supporting Bitcoin have not held the asset at all according to their financial disclosures for the year ending 2020.

According to his findings, only 3 Congress members have disclosed that they own Bitcoin. The now-retired Representative Bob Goodlatte of Virginia was the first Congressman to disclose the ownership of Bitcoin, doing so in 2017 even before laws were passed to make disclosure mandatory. According to his disclosure, he owned between $1,000 and $15,000 of Bitcoin at the time.

Among currently seated Congress members, only Senators Cynthia Lummis and Pat Toomey have reported Bitcoin holdings in their portfolios in 2020. Senator  Lummis reported owning $100,000 – $250,000 of bitcoin in 2020 making up between 0.6% and 2.75% of her net worth. Similarly, Senator Pat Toomey reported purchasing $1,001 – $15,000 of GBTC in June 2021. The GBTC investment is between 0.01% and 0.7% of his net worth.

The sleuth however concedes that he did not have the time and resources to go through the financial disclosures of all 535 congressional members. Nonetheless, it is telling that of the ones he checked, even members of caucuses in Congress that are affiliated to cryptocurrency and members that have drafted bills that will provide clarity for the industry do not hold Bitcoin or other cryptocurrencies as their financial disclosures show.

PlatoAi. Web3 Reimagined. Data Intelligence Amplified.

Click here to access.

Source: https://zycrypto.com/a-deep-dive-into-the-bitcoin-wallets-of-u-s-congress-members-and-why-bitcoiners-are-strongly-against-them/

Continue Reading

Blockchain

China Again? — Why The Crypto Market Lost Over $300 Billion In Hours And What To Expect

Published

on

China Reemphasizes It's Not Yet Done With Clamping Down On Bitcoin

Advertisement &  & 

Key takeaways:

  • Crypto-market records over s$1 billion worth of Crypto liquidations in hours. 
  • Liquidated long positions significantly surpass shorts.
  • Fundamental factors pose serious threat to the market, but the road to recovery is near.

The crypto market has been hit with yet another massive liquidation. Within the last 24hrs, a whopping $1.03 billion worth of long and short positions have been liquidated, as reported by the aggregate derivative exchange platform ByBt.

When traders are long on a particular asset, they are simply gaining exposure to the cryptocurrency in question, in hopes that prices will surge significantly at a later time. It appears that a lot of investors were bullish on crypto for the most part, as long positions were significantly higher than shorts. Precisely $946.10 million worth of crypto was liquidated, while $6.56 million short positions were liquidated.

Liquidations usually take place in the crypto market when a trader’s leveraged position is forcefully sealed by an exchange when the trader’s initial margin is partially or totally lost. Futures and margin trading is usually where liquidation is common.

Many market pundits have warned against over-leverage, which they point to as the case of repeated liquidation. However, despite cryptocurrencies being high-risk due to the intense volatility, leveraging provides an opportunity for investors to generate significant profit. For this reason, liquidations are imminent.

Advertisement &  & 

On a larger spectrum, the question at hand is how the market will be affected going forward. Although no one can accurately predict, recent events hint that the dip could go even deeper, no thanks to fundamental factors like the ongoing Evergrande crisis.

“The Hong Kong stock market plummeted, triggering a decline in global markets and cryptocurrencies. The main reason is Evergrande, China’s largest real estate company with nearly 2 trillion debts.” wrote Chinese journalist Colin Wu.

Thus far, leading assets like Bitcoin, Ether, Solana, Cardano, and many others have dropped in price value and are, at this time, still going downwards. Bitcoin has plummeted to $42,928. While losing more than 7% in value today. Ether, XRP, SOL, DOGE, and Cardano are likewise seeing an extensive decline.

In response to the dip, analysts have responded to their previous sentiments on Bitcoin especially, saying that the expected floor price for this month remains at $42,000 and that a bounce will follow a while later. Altcoin analysts are also keeping their fingers crossed to see how the next 24hrs play out before predicting the market’s trajectory.

PlatoAi. Web3 Reimagined. Data Intelligence Amplified.

Click here to access.

Source: https://zycrypto.com/china-again-why-the-crypto-market-lost-over-300-billion-in-hours-and-what-to-expect/

Continue Reading
Blockchain3 days ago

Over 40 days after Ethereum’s EIP-1559, here’s where it stands

News5 days ago

Gods Unchained and Guild of Guardians Layer 2 Solution Immutable Raises $60 Million

Blockchain4 days ago

Cardano Sees an Influx in Smart Contracts ! But There’s a Twist

Blockchain5 days ago

If Shiba Inu is a ‘shitcoin,’ why are exchanges still listing it

Uncategorized3 days ago

NBA 2K22 Limitless Spot-Up and Chef Badges Explained

Blockchain5 days ago

Ethereum, NEO, Dogecoin Price Analysis: 16 September

Blockchain3 days ago

After Targeting BlockFi, State Regulators Now Set Their Eyes On Celsius

Uncategorized5 days ago

Laos Green-Lights Cryptocurrency Trials

Uncategorized5 days ago

DeFi comes to Cardano (ADA) as EMURGO announces ‘Astarter’

Uncategorized3 days ago

Best Dribble Pull-Up in NBA 2K22: Which to Use

Uncategorized3 days ago

What is The Old Gym in NBA 2K22 Next Gen?

Blockchain5 days ago

Bitdefender Releases Tool To Decrypt Files Affected by REvil/Sodinokibi Ransomware

Uncategorized3 days ago

NFTs Are the Building Blocks of the Metaverse — Here’s How It’s Being Built

Uncategorized3 days ago

Shiba Inu (SHIB) Rises to Range High

Blockchain3 days ago

EY Taps Polygon Network to Improve Enterprise Clients’ Experience 

Blockchain2 days ago

Flux Pools autoriza o pagamento de ativos paralelos em mais de 300K Flux!

Uncategorized5 days ago

Tether Claims to Hold no Commercial Paper From Struggling Evergrande

Blockchain3 days ago

Matic Price to hit $1.75 in the next leg up! Launch on Bitfinex to be the Catalyst?

Uncategorized4 days ago

The Head of Diem wants you to trust Facebook, but is he fighting a losing battle?

News3 days ago

XRP Lawsuit: Here’s Why Experts Think Ripple Could Win the Case Against SEC

Trending