Skycoin

SKYCOIN
29.03.2018
THE CURRENCY OF THE SKYCOIN ECOSYSTEM
CHRISTIAN OTT
AUTHOR
Introduction
While the Skycoin project today covers multiple areas such as a platform for other tokens or a decentralized internet, the currency Skycoin was the first piece of the puzzle. Motivated by the goal to create a currency that improves Bitcoin, the team went on to develop much more.1 During the past six years, they developed a currency that is fast, scalable, has zero transaction fees and rewards holders with a parallel currency, all while being environmentally friendly. Concisely, Skycoin unites major features of other cryptocurrencies and is therefore definitely worth a closer look.

Basis of Skycoin
Creating something unique and innovative is highly challenging. It involves the different stages of planning, researching, strategically designing and implementing a product, often followed by a tremendous amount of time spent on testing and refining. It is a series of constant incremental innovation with changes evolving each day, and the creation of Skycoin was no different.2 Starting from 2012 on, the development team implemented several different versions of their software. This process included some fundamental changes, that made them start from scratch again multiple times, until they had developed an extendable, future-proof foundation for Skycoin.3,4 This foundation includes readable and non-bloated code,5,6 as well as a high security of storing and transacting the coins,7 which both evolved from years of testing and refinement. While these are all implementations, that were made in the back-end of Skycoin, a lot of development was done in the front-end as well, including an intuitive wallet, a stand-alone blockchain explorer and a huge amount of informatory technical blog posts.
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Smallest Unit
So, let us look at the coin itself, starting with the smallest unit. Skycoin supports up to 6 decimal places, because the team stated that 6 digits after the decimal point would be the most human readable.8 Currently, the coin is restricted to 3 decimal places to prevent spam in the network.9 Like Satoshi in Bitcoin and Wei in Ether, the smallest unit of a Skycoin has its own name, it is called Droplet (0.000001 SKY).10
SKYCOIN0.000001DROPLETONE
Distribution of Skycoin
Looking at the grander scheme, a total of 25 million Skycoin are available for distribution right now.11 Approximately ten million will be distributed via ICO and OTC sales,12 while five million might be used to reward contributors to the project.13 Another ten million will be used to incentivize bandwidth providers in the Skywire network.14 Due to the team preferring a long-term distribution, just 7.7 million Skycoin were put into circulation in three years since the first public offering in April/May 2015.15 If we assume, that 3.6 million Skycoin will be distributed per year from now on, we will reach the mark of 25 million Skycoin at the end of 2022. After that mark is reached, 5 million Skycoin would be unlocked per year,16 until a maximum of 100 million is reached.17 A possible distribution plan could look like this:18
DISTRIBUTIONESTIMATED2017202220377m25m100m
Coin Hours
In case you gathered some of the 7.7 million Skycoin in circulation, there is an incentive to hold them in your wallet rather than at an exchange. Each wallet address with a certain amount of Skycoin is automatically awarded a parallel currency called Coin Hours, with each Skycoin receiving one Coin Hour per hour.19 These Coin Hours are mainly used to pay transaction fees but will have several other use cases in the future. As soon as they are independently transferable, they could be used to purchase bandwidth in the Skywire network or to buy in-app items in games like KittyCash.20
COIN HOURSUSE CASESIN-APP BUYSTRANSACTIONSKYWIRE
Transactions
With the help of Coin Hours, Skycoin transfers do not require you to pay a percentage of your Skycoin holdings as a fee.21 Furthermore, Skycoin transactions are not only free, they are fast as well. The Skycoin network can execute 300 transactions per second,22 which means that transfers are processed very quickly. The developers behind Skycoin also aim to make transactions more private with a future implementation of the CoinJoin protocol, that mixes multiple outputs from different wallets in a single transaction.23,24 The privacy of transactions will even further increase, once users will start to execute transactions over Skywire, without their internet service provider being able to track their online movement.25 Speaking about the consensus, Skycoin currently uses a masternode developer checkpoint system. However, this will change in the future, as the development team aims to implement Obelisk, which is their consensus algorithm for a truly decentralized cryptocurrency.26
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Wrap-up
On top of an efficient, secure and extendable foundation, the Skycoin project implemented a coin with major features, that can absolutely compete with other cryptocurrencies. Skycoin transactions are not only fast and free, with the parallel currency Coin Hours, there is also an incentive to hold Skycoin for a longer time period. Future plans of further developing Skycoin include the introduction of CoinJoin as a privacy protocol, enabling Coin Hours to be transferred independently and the implementation of Obelisk as the new consensus algorithm.

Infographics
I attached all graphics contained in this article together to a single image, which you are more than welcome to share, to spread the word about Skycoin. Download them here:

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Sources – Basis
1
“Skycoin started out just improving the Bitcoin blockchain and building Bitcoin into a mature technology that would be usable because Bitcoin still has a lot of rough edges. Over time, the project just expanded and expanded.”
Synth; YouTube; Coin interview with Skycoin; 30.10.2017
2
“When the Skycoin project started, we took the best tools available and began there. I believed the project was going to be finite, that we would fix Bitcoin, change the hashing function and a few things and the launch. That turned into: – Writing a new cryptography library – New consensus algorithm – New programming language (golang instead of C++) – New deterministic wallet generation function – New bipartite transaction graph structure instead of a multigraph – Local webwallet – New blocksync algorithms – New networking primitives – etc…”
Skycoin; Skycoin Blog; Development Update #63; 01.04.2015
3
“So we came in and we ended up spending the next six years rewriting the whole thing from scratch like three times.”
Synth; YouTube; Coin interview with Skycoin; 30.10.2017
4
“Cryptosystems for Geographic Time Scales: Future Proofing Skycoin … Future Proofing Skycoin: Salted Hashes at Network Level … Future Proofing Skycoin: Rolling State Hashes at Blockchain level … Future Proofing Skycoin: Cryptography For Geographic Timescales … Future Proofing Skycoin: Attacks on the Address Generation”
Skycoin; Skycoin Blog; Development Update #43; 09.12.2014
5
“Bitcoin is 53356 lines of C++, 15847 lines of C/C++ headers. 15,000 lines of bash scripts. Skycoin is 14,210 lines of Golang. At peak Skycoin was over 80,000 lines, but has become more elegant over time.”
Skycoin; Skycoin Blog; Development Update #57; 04.02.2015
6
“… so Skycoin’s main blockchain is only two thousand lines of code. There is no scripting language and nobody even thirty years from now could come in and say, “We need to add a feature to this and try to take over.” There is nothing to add. This is done. We have not changed it in four years and it is not going to change for the next one hundred and fifty years.”
Synth; YouTube; Coin Interview with Skycoin 02; 11.12.2017
7
“We are using golang so there are no buffer overflow attacks or way that remote party can take over the client and steal your wallet. The worse than can do is crash the client, but cannot loot the wallet remotely. Bitcoin is using C++ and OpenSSL and was affected by the HeartBleed bug. It was possible to buffer overflow Bitcoin through the OpenSSL library and possibly steal wallets through the merchant protocol. Skycoin was implemented with almost no dependencies. There are no 3rd party libraries in Skycoin that can be exploited. The only 3rd party library we are using is for encryption and we fuzzed the library for days and put in strict constraints on the data allowed to pass into the library. The program is designed to crash, rather than accept the invalid input that could lead to leaking the private keys. Even if attacked, we do not know of any way that the client can be used to exfiltrate the wallet or private keys over the network.”
Skycoin; Skycoin Blog; Ask the developers #5; 10.04.2014
Sources – Smallest Unit
8
“6 decimal places. Skycoin has 6 (not 8 like Bitcoin). 9 would be too many (difficult to count) and 6 digits before . and 6 digits about the decimal was the most human readable.”
Synth; Telegram; Skycoin main channel; 03.12.2017
9
“the coinhours and artificial decimal limits are in place to minimize basic DDOS attacks like mempool”
Steve [Sky Dev]; Telegram; Skycoin main channel; 08.03.2018
10
“The smallest skycoin (called a droplet) is 0.000001”
Steve [Sky Dev]; Telegram; Skycoin main channel; 14.10.2017
Sources – Distribution of Skycoin
11
“75 million coins (75%) are timelocked (hardcoded in skycoin.go scroll down to bottom) and 25 million coins are currently unlocked.”
Skycoin; Skycoin Blog; Understanding the Skycoin Supply & Distribution; 25.01.2018
12
“We will set the total cap of the OTC sale to bring Skycoin’s distributed percentage to be between 10% and 15%. Currently, Skycoin is at 6%. The remainder is reserved for the Skywire network subsidy, until we hit the 25% timelock cap and enter a maximum 5% per year distribution.”
Skycoin; Skycoin Blog; Skycoin Distribution Plan; 09.10.2017
13
“If you come in and you do a VPN app or videosharing app or a messaging app on Skycoin, we might give you half a million dollars of Skycoin. We fund our developers. We invested in a lot of different development teams and we distributed the coins to the people that are doing the work and promoting it. If you are doing a meetup, we will give you Skycoin. If you are doing T-Shirt designs, we will give you Skycoin. If you help with translations, we have a bounty program. So, we are busy distributing the coins to people moving the project forward.”
Synth; YouTube; AMA hosted by Crypto Brahma; 11.03.2018
14
“We have 10 million skycoin allocater for coinhour buybacks over a few years to bootstrap the skycoin to coinhours market.”
Synth; Telegram; Skycoin main channel; 25.11.2017
15
“2500 Skycoin per Bitcoin. Which is about $0.10 / Skycoin. Bitcoin to USD is too volatile so just set it to that. … I think we started getting bitmessage requests for IPO in about two months ago and are just sending out coins now. … There are about fifty people in the IPO so far. The average amount is $2000. About half the coins in the allotment are already accounted for. Very good so far.”
skycoin; Bitcointalk; [SKY] Skycoin Launch Announcement; 18.04.2015
16
“The Skycoin distribution is timelocked. This means that, of the undistributed Skycoin, 25% are immediately distributable. The remainder cannot be distributed until the first 25% have been distributed. Once the first 25% have been distributed, an additional 5% is unlocked for distribution. For each subsequent year thereafter, an additional 5% is unlocked for distribution. This gives Skycoin a 14 year distribution timeline, after the first 25% is distributed. We may extend the unlocking process to take up to 25 years, but we will never shorten the timelocking schedule. There is no requirement that the yearly 5% be distributed. The unlock only enables that amount to be distributed. The locked Skycoin are allocated for expansion of the Skywire Network via targeted network subsidies and for bounties for platform development.”
Skycoin; Skycoin Blog; [SKY] Skycoin Distribution Plan; 09.10.2017
17
“So there’s one hundred million total and the reason that number was chosen was that one million coins is exactly 1% of Skycoin.”
Synth; YouTube; Coin interview with Skycoin; 30.10.2017
18
“So, how could a concrete distribution plan look like? We saw, that it took 3 years to distribute 7 million Skycoin. Let us assume, that 3.6 million Skycoin will be distributed per year from now on, which is already a high amount compared to the distribution in the past. This would mean, that it would take until the end of 2022, until the immediately available 25 million Skycoin are distributed. After that mark would be reached, 5 million Skycoin would be unlocked per year. If, for the next 14 years, each of these Skycoin would be distributed in the same year, the whole amount of 100 million Skycoin would be in circulation at the end of 2037.”
Christian Ott; christianott.co; Distribution of Skycoin; 24.03.2018
Sources – Coin Hours
19
“Holding Skycoin in a Sky wallet automatically generates Coin Hours at a rate of 1 Coin Hour per Skycoin per hour.”
Skycoin; Medium; Skycoin Coin Hours; 18.03.2018
20
“Coin Hours aren’t just for maintaining zero transaction fees on the network, they will also be used to purchase services, buy bandwidth on Skywire, play games, and more. Because they will be transactable in various use cases, Coin Hours will also have a monetary value that is set by the market.”
Skycoin; Medium; Skycoin Coin Hours; 18.03.2018
Sources – Transactions
21
“Unlike Bitcoin or Ethereum, Skycoin users do not need to give away part of their balance as incentive for miners to process their transaction.”
Skycoin; Medium; Skycoin Coin Hours; 18.03.2018
22
“We can right now do 300 transactions per second, easily. There are three limitations. The first is bandwidth, … the second is storing all your transactions … and the third one is signature verification. We could do 100,000 transactions per second on Skycoin, but we can’t verify the signatures fast enough, because the CPUs are not fast enough.”
Synth; YouTube; AMA hosted by Crypto Brahma; 11.03.2018
23
“A CoinJoin transaction is a transaction that mixes multiple outputs, from different wallets in a single transaction. – Even a modest rate of coin mixing through CoinJoin (5% of transaction volume) introduces enough diffusion into network to severely frustrate association of specific addresses to individual wallets or users from public data. Especially for high volume services that end up processing most of the transactions on the network. – If the third party CoinJoin server is trusted, this has the same level of privacy as ZeroCoin and quantum zero knowledge proof schemes, but with a much simpler protocol. In Bitcoin, you can tell CoinJoin transactions apart from normal transactions. in Skycoin, there is no difference between a normal transaction and a CoinJoin transaction. The protocol is simple: – you send inputs and outputs to a 3rd party CoinJoin server – they take inputs/outputs from multiple users, randomize order, send back transaction – each user signs their outputs and sends signature back to the server – the server injects the transaction into the network.”
Skycoin; Skycoin Blog; Development Update #62; 26.03.2015
24
“This will be implemented when there is enough free manpower to do so. Most of the development team is clamped up by the upcoming Skywire testnet”
K. | Systems Integrator | Skycoin; Telegram; Skycoin main channel; 04.03.2018
25
“once coinjoin is implemented and network is running over skywire; then its higher level than zcash. The skycoin coinjoin is next level. – you can encrypt a transaction and send it to third party over Skymessanger to decrypt (only he can read it) and you can even use ephermeral encryption (generating a new public key that is only use once, to encrypt a single piece of data). This means zero information leakage on the network. – then you can mix in multiple transactions from multiple wallets in the same transaction. Gmaxwells coinjoin. This is samething as zerocoin but uses a third party and is fifty times simplier than zcoin and no overhead.”
Synth; Telegram; Skycoin main channel; 02.12.2017
26
“We have done several simulations. There are several peer reviewed academic research papers published about it. There are open source simulations in the github repo. The exchanges are worried about us enabling the full consensus algorithm without enough testing. We have to do a lot of testing before we turn everything on. Currently the exchanges forced us to use a masternode dev check-point system. Over time, we are going to make extensive changes to the node and keep minting on the checkpoint system, while rolling out everything. Then after extensive testing, will roll out everything in stages. The testing of the new features and stages, needs to be done on a smaller coin (other Skyledger coins) before being rolled out to Skycoin. Skycoin’s market cap is too large and we have to be cautious about bugs and not rolling out new code before its tested. The dev check-point system is a compromise that allows us to test new consensus algorithms, while protecting the exchanges. If the exchanges lose money from a bug and lose $200,000 in Skycoin then we have to pay them for the lose basicly. The exchanges are all short-staffed because of massive user base growth. They are taking weeks sometimes to upgrade the Skycoin node version, after we release a new version. We have to carefully coordinate our release and upgrade schedules to minimize exchange downtimes.”
Synth; Skycoin subreddit; Part 2 of our first Skycoin Official AMA with Synth; 06.03.2018

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