Decred and Hard Forks

The problem of hard and soft forks have been huge issues in both the Bitcoin (Bitcoin Unlimited, USAF, Segwit) and Litecoin communities. Decred has come up with their own solution to this and may be something that other coins look to going forward. In this article I’m going to explain what a hard fork is, how the voting process works, and why it is so important for the development of a coin.

Hard and Soft Forks

Let’s start off by explaining what forks are. In simple terms, these are updates to the main protocol of a certain currency. Hard forks describe an update that causes a permanent divergence in the block chain. Both block chains may continue to run but they will not be able to send funds to each other as they are using different rules and the coins are not compatible with each other.

Soft forks, on the other hand, are backward compatible updates that allow users to mine from both original nodes or updated nodes with the new rules. If by a certain time, a consensus is reached and a certain percent of the hash rate is mining from the updated nodes, then the new rules are implemented across the protocol and miners of the original nodes will basically be wasting their time.

Why Fork and Who Gets to Decide?

So the programming team decides perhaps they want to make a substantial upgrade to the network to enable a set of features. These features might be very important features such as lightning transactions which allow immediate transfer of currency. It’s important that the community keeps on developing these features because otherwise, your coin is going to be stuck in the mud.

While the development team can propose upgrades usually what happens is that the mining community decides whether to implement these or not. The mining community acts as the accountants of the system. They process transactions and they form new blocks in the block chain. Consequently, they have the power to decide how to build the next block.

One major problem with this is that the mining community decides what the future is and not the consumers – the people who actually use currency. One small set of people decide how upgrades should be processed and the other side that actually uses it, the majority of the users, get zero say in the matter.

 

Decred to the Rescue?

With Decred, they solve this problem by having the community vote on the blocks created by the mining community. If miners start implementing different upgrades the community can vote whether they want the upgrade to go on line or not. If the created block does not follow a certain protocol, they can vote it down and even refuse payouts to miners that don’t follow what the community wants.

So this, in essence, allows the community to actually keep an eye on what’s happening with the miners. We don’t have just one power that doesn’t represent the community. Rather, we end up with the user community sort of policing what’s happening with the mining community.

People who hold the coin should have the greatest say in how the future goes forward. Decred solves both hard forks and soft forks by allowing users to vote on the issues. Issues such as segwit and lightning transactions, which have caused many controversies in the Bitcoin and Litecoin communities. Decred is already trying to implement these changes this year and they may get these technological upgrades in advance of other coins.

Ethereum Proof of Stake explained

So you might have heard that Ethereum is considering changing its distributed consensus system to something called proof of stake. Here, we will try to explain what this is as well as how it may affect you.

Ethereum logo 2014.svg

What is Proof of Stake

To truly understand proof-of-stake (PoS) it is easier if we also explain the current system being used by Ethereum, and that is proof of work (Ethereum Mining). So basically when Ethereum is transferred, miners group that up into a ledger called a block chain and to do this they have to solve a puzzle. In creating this blockchain, a lot of computational power is also used. The amount of reward you get for creating a blockchain is a transaction reward. However, this depends on how much work you ie. how fast you can calculate and solve the puzzle.

So this is all going to go away once proof of stake comes along. With proof of stake, you don’t actually solve any puzzles. You remove the puzzle solving element from the system and thus change the way the reward is distributed. So instead of proving how fast you can calculate with hashrate, you need to prove how much Ethereum you own. You do this with something called a master node. When you create a master node, you have to lock up a certain amount of Ethereum to prove that you have it and rewards are distributed according to how much proof of stake you have. One can create multiple master nodes with a lot of Ethereum inside and you’ll earn more through this method.

How does this affect me?

So that’s going to be extremely interesting for everyone. We’ve seen proof of stake currencies before. Dash is one example where 50% of the rewards is done by mining and the other 50% is done by proof of stake. And there is PIVX which is 100% proof of stake. The advantage of proof of stake is huge. One benefit is that you no longer have to do the calculations which mean you save a lot of computational power. Another one is that you actually lock up Ethereum. By locking up Ethereum you effectively create more scarcity which means the price should go up.

So hopefully, it’s going to happen sometime this year. To do so, the people in charge of Ethereum have to make sure the code is ready and stable. And they also have to make sure they have the support of the miners. That’s going to be an interesting thing to see in the coming months because if the miners don’t support this move then what can happen is that it might break up Ethereum again just like last year.

But there are mechanisms to help along this process. Ethereum actually has kind of a ‘time bomb’ that would blow up if the switch is not made. The switch has always been planned and it’s in a sense been hard coded to happen sometime so that’s kind of interesting to see how this will progress.

Miners also do not need to worry they will be without a job. There are other currencies that can be mined with the current hardware. For example, if you use AMD GPUs, you can start mining Zcash which is also extremely profitable right now. So I do see this as being very exciting for everyone.

What is Ripple and XRP

Ripple has grown explosively over the past few weeks. In fact today it grew almost 35%. it is one of the biggest gaining currency of the day and I want to share with you guys what Ripple is.

 

Ripple company logo 2015.png

Protocol vs. Currency

So lets start off with one confusing factors. So I must make a distinction between Ripple the transaction protocol (which is used between banks and other businesses) and the ripple issued currency, XRP. When you see Ripple making gains its actually the XRP, the currency that is issued by Ripple, that is gaining. And this is actually quite different from the network protocol or Ripple protocol. Both share the same name and I’m sure this has definitely confused a lot of investors.

Ripple Protocol

So lets start off with the transaction network known as Ripple. So the Ripple protocol is based on technology that’s similar to blockchain but not completely the same. It doesn’t require any mining and its based on a consensus network instead of being consumer-facing which is what Bitcoin is. Basically, it’s for the everyday person.

Ripple is exclusively used by big institutions such as banks. The whole idea of Ripple is to allow banks to transfer any sort of asset, be it currency, USD, Euro, gold, or any other asset such as airmiles. You can transfer that between other institutions near instantaneously. This rivals systems such as swift. So if you ever bought Bitcoin with bank transfer you will know how painful that is. You have to contact your bank and send the transaction to a swift bank code account and this might take up to two to three days and theres a lot of transaction fees involved for both the sender and the receiver. Ripple is set to revolutionise this by providing near instantaneous, sub-second transactions for institutions such as banks. It’s already been adopted by quite a few big banks and

XRP – Currency of the Ripple Network

So now that I explained what is the Ripple transaction protocol, let’s move on to Ripple XRP. XRP is actually issued by Ripple Labs and is a form of cryptocurrency that can be traded and it’s not “mined”. So there is a finite number of ripples and that amount is actually issued by the company behind Ripple called Ripple Labs. Currently, it is freely tradable on numerous exchanges such as Poloniex.

XRP by itself has no underlying related assets or values eg. Its not tied to USD or gold. Rather, it can be used to act as an intermediate currency in institutions. It has one huge advantage in that transaction costs are very, very low (unlike Bitcoin, which is now reaching 1.5 usd in transaction fees).

Concerns about Ripple

So moving on, XRP is currently only issued out at less than 40% of its total. The remaining amount (minus the 20% retained by the creators of Ripple) is held by Ripple Labs to distribute whenever and however they so wish. This is actually kind of interesting because unlike a lot of decentralized currencies, Ripple Labs plays a huge part in distributing XRP. Ripple Labs is actually a company and this is very different from Bitcoin, where Bitcoin is fully decentralized and doesn’t have a central controlling authority. Ripple Labs is registered in many countries and it could be sued and held under police custody. This is again very different from other technologies.

 

So that’s a little information regarding the Ripple protocol and XRP. I’m sure this may be a little bit confusing for some people and since the technology and the currency share the same name it could be misunderstood. I hope this clarifies a little for you about what Ripple protocol is and what XRP is.