Bitcoin-The Father of Blockchain Technology
Satoshi Nakamoto introduced the world to a new form of financial technology in 2009 when he wrote the Bitcoin whitepaper. He created a peer-to-peer method of sending funds without the need for an intermediary. At the heart of the blockchain technology lies decentralization which serves a vital purpose of security in the network. Nodes or computers scattered throughout the world can store the whole blockchain and get updated as each transaction is made. Essentially, a transaction is invalid if it has not been recorded on all Bitcoin nodes all over the world. Transactions are compiled into blocks and stored on the network where they can never be changed. To mine new blocks each node has to compute very complex mathematical calculations to be able to confirm transactions. Nodes are rewarded when they confirm transactions and find new blocks.
Bitcoin's Loopholes and Weaknesses
Years passed and other developers began to find loopholes and weaknesses in Satoshi’s implementation. Some of these are:
- Mining (Proof of Work, PoW consensus algorithm) consumes a lot of energy. Miners who can solve the mathematical calculations the fastest will mine the most blocks and therefore earn the most rewards. To stay ahead of the competition, miners constantly have to upgrade their hardware by increasing the number of specialized computers which in turn increases energy consumption. To make things worse, because more computing power is added the network difficulty increases as well which makes it harder to solve the calculations.
- To overcome the hurdle of having to constantly improve their hardware, miners join their efforts in so-called mining pools to increase their computational power and therefore the chances of earning block rewards. This goes against one of the core benefits of blockchain technology: it causes centralization.
- Research showed that the biggest mining pool for Bitcoin is located in China. 81% of Bitcoin’s mining power comes from there. This is because of the relatively lower cost of electricity. If there is nationwide deregulation against Bitcoin, such as was looming over the past few months, there might be a very big problem for the network.
- The block time for Bitcoin is 10 minutes, as the network grows larger; it begins to affect the rate at which transactions are confirmed. Presently, Paypal processes transactions faster than the Bitcoin network. Scalability has remained a major challenge. Some other blockchains came later which sacrificed blockchain security for speed; the result has not been the best.
Proof of Stake
Proof of Stake (PoS) consensus algorithm came afterward with blockchains like Peercoin, Blackcoin, etc. This algorithm proposes that nodes should be able to confirm transactions and create new blocks and be rewarded according to their stake in the network. The truth is, the bigger your stake the less likely it is for you to want to cheat yourself or the network because that will most likely devalue your assets whereas with PoW you don’t need to have any coins to participate in mining. Because of this difference, 51% attacks in PoS networks are very unlikely. 51% attacks can happen if a single person or group of persons controls more than 50% of the nodes in a network. With this majority, they can nullify any transaction, double-spend, and all kinds of activities to pull the network down.
Proof of Stake also lowers the amount of energy needed to find new blocks that give areas with high energy costs the opportunity to find new blocks and get rewarded. PoS has made transaction speed faster since nodes don't have to do complex computations before they confirm transactions like in PoW.
Contact with I/O Coin
A few days ago, I heard about I/O Coin (IOC) and decided to do my own due diligence. Herein are some of my findings:
I/O started out in 2014 without an Initial Coin Offering. It was fair-launched with PoW mining and after ten days switched over to the PoS algorithm. In 2014 PoS was not so popular, so it can be said that IOC is one of the great grandpas of PoS. Since its launch, the network has maintained around 46% of coins in circulation staking. The table below gives more insight into details about the network.
I/O created DIONS (Decentralized I/O Name Server) which opened a lot of possibilities:
DIONS allows data, files and encrypted messages to be sent via the blockchain. With the I/O Coin network, you can send files as large as 1MB via the blockchain. Larger files could be broken into smaller parts and stored on multiple blocks. Here is why this is awesome: Multiple kinds of research have been done on how you can share files on the blockchain, most of which are very complex. The conclusion is that you cannot directly store files as transactions on the blockchain unless you are willing to pay a very high price for it. The only option was to save and lock the file using IPFS (Interplanetary File System), then save the hash (key) on the blockchain. This way you won't spend so much per kb of data you are saving.
But I/O Coin is making such kind of feature available directly on the blockchain. This has opened up a lot of possibilities and use cases. You can easily store private data and files on the blockchain securely without having to pay a royalty to secure it, only 0.01 IOC per kB in network fees. Game data can be stored on the I/O Coin blockchain without having to be afraid of hackers since we know that all data stored on the blockchain are permanent and out of reach of hackers. One can have IoT devices linked up with IOC blockchain so that data can be stored on and accessed from the blockchain.
Alias, AES 256 Encrypted Messaging
I/O Coin allows both public and private aliases to be created. Aliases are human-readable names linked to an address which is a lot easier to remember. Private aliases are encrypted and remain private which means that they are not visible to the whole network and therefore it is not possible to send IOC to a private alias. Instead, they can be used to store files (or any other type of data)on the network. A private Alias can also be used to transfer files securely to another user on the blockchain. Files are encrypted, sent to the receiver, and decrypted by the recipient. On the public chain, files sent only appear as encrypted transactions as other aspects are hidden from the network.
The network also allows for AES 256 encrypted messaging. Users can create their aliases using the desktop wallet and send invites to other users. To do this, you have to make your alias public. Once the recipient accepts, messaging can begin. When messages are sent, they are encrypted and sent to the other party after which the message is decrypted by the recipient. On the public chain, messages appear as encrypted transactions, the message contents are hidden.
I/O Coin allows third-party applications to use its blockchain features. This means games or any applications can use the storage on the I/O Coin Blockchain and IOC as an in-app payment method. This feature is not something we see on the blockchain every day. SwitchingBrains is a game portal that uses one such API from I/O Coin. There are limitless potentials for this kind of blockchain. For example, governments can use this service to securely send sensitive documents or files without having to spend royalties for centralized securities which can fail at any time.
The I/O Coin team is currently working on other features such as Ring Signatures that allows users to utilize multiple address systems to send and receive IOC or data. They are also working on offline transaction signing and the list of upcoming features goes on and on.
A New Algorithm
I/O is looking into adding a new consensus algorithm to its network- Chameleon Molecular Ledger. Chameleon is a totally new solution faster and more efficient than blocks system in blockchain technology. The new algorithm will work alongside the existing system.
Low-Cost PoS Staking: A good Solution to mining Inefficiency
Currently, you can stake IOC using your desktop computer or even a Raspberry Pi computer with as low as 0.00000001 IOC in your wallet. You can get 1.5 IOC as a block reward for creating new blocks. Find out more here. The vision of the I/O Coin team is to make I/O Coin available to everyone, no matter the energy cost or location. And they are right because staking I/O Coin doesn't consume too much energy.
I was personally inspired when I witnessed what one of the founders said about continents like Africa in the 2018 BTCMiami Conference. He wanted to start lighting up Africa because they are important… Watch the video here (15.30) 👇
Therefore I am planning to set up an IOC node using a Raspberry Pi with Solar panel - Inverter - Battery set up for consistent power supply. It may be a long shot but very achievable. I have started making plans and budgets, you can contact me to discuss more on that.
Visions and dreams like this will prove true decentralization for PoS mining. One of the major weaknesses of Bitcoin is that most of the miners are concentrated in a country, which is bad and in a way, it shows that it is centralized. IOC and its potential to be staked across different countries prove true decentralization.
Find out more about I/O coin
This article presents the result of my personal due diligence and is available for education and information purposes. This is not a piece of financial advice. Do your thorough due diligence and meet your financial advisor for financial advice.