Skycoin – Introduction

SKYCOIN
22.01.2018
THE MOST AMBITIOUS CRYPTOCURRENCY PROJECT
CHRISTIAN OTT
AUTHOR
Introduction
The cryptocurrency market has grown exponentially over the last few years. Since the beginning of 2017, the overall market cap has risen by 50 times from about 17 billion U.S. dollars to an all-time-high of 800 billion U.S. dollars on January 6th. Certainly, the movement was started by Bitcoin and it is still the most known brand in this space. However, a lot of projects have emerged that aim to improve Bitcoin and widen the scope of cryptocurrencies. While some of them are already well-known players in the market like Ethereum or Iota, it might be surprising, that the most ambitious project in the crypto space is still flying under the radar. Let me introduce you to Skycoin, the third generation of cryptocurrency.

Currency
First of all, let us look at the currency Skycoin. Its development started around 2012 with the goal to improve Bitcoin. That meant not only to eradicate the early bugs in the code of Bitcoin to ensure secure transactions, but also to create a currency that could process thousands of transactions per second without transaction fees. Additionally, they wanted Skycoin to be more environmentally friendly than Bitcoin. As you may know, the mining of Bitcoin and the confirmation of Bitcoin transactions adds up to 0.2% of the world’s electricity consumption. The realization of these goals, which included the creation of their own programming language CX, took about 5 years of development. The time spent in the development certainly paid off, take a look at how Skycoin’s transaction time performs against other payment methods:
1+ daysBank transfer1+ hoursBitcoin15+ minutesLitecoin9+ minutesEthereum10+ secondsVisa3+ secondsSkycoinEstimated Average Transaction Time
CoinHours
As you can see, Skycoin transactions are very fast and in contrast to the other mentioned payment methods, it does not require you to pay a percentage of your holdings as a fee, because Skycoin transactions are paid with CoinHours. These CoinHours are a parallel currency, that are awarded for holding Skycoin in your wallet. One Skycoin provides you with one CoinHour per hour, meaning one Skycoin produces 24 CoinHours per day. Right now, Coin Hours are only used to pay for transactions, but there are more use cases incoming. They will be used to purchase bandwidth in the Skywire network once it is launched and they could also be used to acquire items in apps. This diagram visualizes the connection between Skycoin, CoinHours and their use cases:
CoinHours
Skyledger
The revolutionary tech behind Skycoin can be used by other coins as well. The platform Skyledger includes all coins that use the Skycoin technology. This means, all these coins have very fast transactions and use the concept of CoinHours as a parallel currency. Enabling other coins to use your blockchain tech is not new however, Ethereum has done that very successfully in the past, right now nearly 20% of all coins listed on CoinMarketCap are based on the Ethereum blockchain. Unlike Ethereum though, every coin on Skyledger is provided with its own blockchain. This eradicates the problem of a bloated blockchain, which we have seen with Ethereum in the past. Every time there were one or more successful ICOs at once or a very popular app like Cryptokitties, the transaction costs for transfers of Ether and Ethereum-based tokens became very high. This will not occur to Skyledger-based coins, if there are a lot of transactions in the blockchain of a coin, other coins will not be affected. As of right now, there are already four coins based on Skyledger and there could be plenty more in the future. The current ones can be seen in the graphic below:
MDLTalent HubMetalicoinSolarBankersSPACOSkyledger
Skywire
Concerning the development put in Skycoin and the different coins launching on Skyledger, the scope of the Skycoin project is already quite high. However, in my opinion the most promising part of the Skycoin project is Skywire. Skywire is basically launching a new internet that improves the problems of the existing internet, by being fast, denying centralized censorship and allowing users to visit websites anonymously:
InternetSkywire
Let us dive a little more into detail why the advantages Skywire provides are needed. In my opinion, there are three core problems with the internet in its current form:

First of all, you receive access to the internet via an internet service provider (ISP). In order to do that, you need to set up a contract with an ISP, meaning you have to give them personal data about you and arrange payments on a regular basis. While that might not seem bad at first sight, it becomes a whole new meaning under the consideration, that your ISP can track your online behavior. They are basically able to see every website you visit. This surveillance can include up to every click you have made online during the past few years, with each one of these clicks coming along with a timestamp and the location of your device. Combining the tracked data with your personal data, it is absolutely possible for them to generate a very high-detailed personal profile about you. Skywire challenges this problem to the extent, that you do not have to set up a contract with your personal data and your bank account details to receive access. Instead, you will pay for bandwidth with CoinHours, which do not reveal the identity of the consumer. Furthermore, Skywire promises to encrypt user data, so your website visits cannot be tracked.

The second core problem is censorship. Due to the centralization of internet service providing, it is fairly easy for governments and other influential actors to censor certain content. This can happen by simply deleting the content or by redirecting you to a different source, while you are trying to access censored content. Think about it as an approach similar to phishing websites, instead of seeing a website that was censored, you are seeing a similar looking site with alternated content, which tricks you into thinking that it is the site you wanted to visit, but apparently, it is not. Skywire aims to solve this problem by using different access points and therefore being decentralized. With decentralized internet service providing, every node would have to censor specific content to make it unavailable throughout the network, which is nearly impossible with a vast number of nodes.

The third challenge we are facing with the current internet is, that it has grown historically. The underlying internet protocol routing is not the best solution available, because it lacks path control. Data could be transferred through a path, that is longer than the shortest path available, which will reduce the speed of a transmission. Skywire targets to use an approach similar to multiprotocol label switching as their networking standard, which will be faster than the current internet, because packets are forwarded based on a predefined path. Concerning the identity of network participants, identification will not be based on an IP address but a Skycoin public address.

Wrap-up
The Skycoin project seems to be the most ambitious project in the cryptocurrency space. After finishing the development of their own programming language CX, they built a currency that is fast, scalable and goes without transaction fees. With Skyledger they became a blockchain-enabler, by giving other coins the possibility to use their stand-out tech. To top all of that, they are building a new internet, which is planned to go live in 2018, that will be anonymous, fast and without censorship. In addition to that, they are actively producing hardware with the first Skywire network nodes being shipped in the upcoming weeks and a planned hardware wallet hitting the market in the future. Other goals of the project include the implementation of a cryptocurrency exchange, an instant-messaging service and their own social network (BBS). Backed by all of these assets and having these advantages as a currency, I see a possibility for Skycoin to gain a large userbase and stick around for a very long time.