A Faster, More Efficient Cryptocurrency

Design reduces by 99 percent the data users need to join the network and verify transactions.


MIT researchers have developed a new cryptocurrency that drastically reduces the data users need to join the network and verify transactions — by up to 99 percent compared to today’s popular cryptocurrencies. This means a much more scalable network.

Cryptocurrencies, such as the popular Bitcoin, are networks built on the blockchain, a financial ledger formatted in a sequence of individual blocks, each containing transaction data. These networks are decentralized, meaning there are no banks or organizations to manage funds and balances, so users join forces to store and verify the transactions.

But decentralization leads to a scalability problem. To join a cryptocurrency, new users must download and store all transaction data from hundreds of thousands of individual blocks. They must also store these data to use the service and help verify transactions. This makes the process slow or computationally impractical for some.

In a paper being presented at the Network and Distributed System Security Symposium next month, the MIT researchers introduce Vault, a cryptocurrency that lets users join the network by downloading only a fraction of the total transaction data. It also incorporates techniques that delete empty accounts that take up space, and enables verifications using only the most recent transaction data that are divided and shared across the network, minimizing an individual user’s data storage and processing requirements.

In experiments, Vault reduced the bandwidth for joining its network by 99 percent compared to Bitcoin and 90 percent compared to Ethereum, which is considered one of today’s most efficient cryptocurrencies. Importantly, Vault still ensures that all nodes validate all transactions, providing tight security equal to its existing counterparts.

“Currently there are a lot of cryptocurrencies, but they’re hitting bottlenecks related to joining the system as a new user and to storage. The broad goal here is to enable cryptocurrencies to scale well for more and more users,” says co-author Derek Leung, a graduate student in the Computer Science and Artificial Intelligence Laboratory (CSAIL).

Joining Leung on the paper are CSAIL researchers Yossi Gilad and Nickolai Zeldovich, who is also a professor in the Department of Electrical Engineering and Computer Science (EECS); and recent alumnus Adam Suhl ’18.

Vaulting over blocks

Each block in a cryptocurrency network contains a timestamp, its location in the blockchain, and fixed-length string of numbers and letters, called a “hash,” that’s basically the block’s identification. Each new block contains the hash of the previous block in the blockchain. Blocks in Vault also contain up to 10,000 transactions — or 10 megabytes of data — that must all be verified by users. The structure of the blockchain and, in particular, the chain of hashes, ensures that an adversary cannot hack the blocks without detection.

New users join cryptocurrency networks, or “bootstrap,” by downloading all past transaction data to ensure they’re secure and up to date. To join Bitcoin last year, for instance, a user would download 500,000 blocks totaling about 150 gigabytes. Users must also store all account balances to help verify new users and ensure users have enough funds to complete transactions. Storage requirements are becoming substantial, as Bitcoin expands beyond 22 million accounts.

The researchers built their system on top of a new cryptocurrency network called Algorand — invented by Silvio Micali, the Ford Professor of Engineering at MIT — that’s secure, decentralized, and more scalable than other cryptocurrencies.

With traditional cryptocurrencies, users compete to solve equations that validate blocks, with the first to solve the equations receiving funds. As the network scales, this slows down transaction processing times. Algorand uses a “proof-of-stake” concept to more efficiently verify blocks and better enable new users join. For every block, a representative verification “committee” is selected. Users with more money — or stake — in the network have higher probability of being selected. To join the network, users verify each certificate, not every transaction.

But each block holds some key information to validate the certificate immediately ahead of it, meaning new users must start with the first block in the chain, along with its certificate, and sequentially validate each one in order, which can be time-consuming. To speed things up, the researchers give each new certificate verification information based on a block a few hundred or 1,000 blocks behind it — called a “breadcrumb.” When a new user joins, they match the breadcrumb of an early block to a breadcrumb 1,000 blocks ahead. That breadcrumb can be matched to another breadcrumb 1,000 blocks ahead, and so on.

“The paper title is a pun,” Leung says. “A vault is a place where you can store money, but the blockchain also lets you ‘vault’ over blocks when joining a network. When I’m bootstrapping, I only need a block from way in the past to verify a block way in the future. I can skip over all blocks in between, which saves us a lot of bandwidth.”

Divide and discard

To reduce data storage requirements, the researchers designed Vault with a novel “sharding” scheme. The technique divides transaction data into smaller portions — or shards — that it shares across the network, so individual users only have to process small amounts of data to verify transactions.

To implement sharing in a secure way, Vault uses a well-known data structure called a binary Merkle tree. In binary trees, a single top node branches off into two “children” nodes, and those two nodes each break into two children nodes, and so on.

In Merkle trees, the top node contains a single hash, called a root hash. But the tree is constructed from the bottom, up. The tree combines each pair of children hashes along the bottom to form their parent hash. It repeats that process up the tree, assigning a parent node from each pair of children nodes, until it combines everything into the root hash. In cryptocurrencies, the top node contains a hash of a single block. Each bottom node contains a hash that signifies the balance information about one account involved in one transaction in the block. The balance hash and block hash are tied together.

To verify any one transaction, the network combines the two children nodes to get the parent node hash. It repeats that process working up the tree. If the final combined hash matches the root hash of the block, the transaction can be verified. But with traditional cryptocurrencies, users must store the entire tree structure.

With Vault, the researchers divide the Merkle tree into separate shards assigned to separate groups of users. Each user account only ever stores the balances of the accounts in its assigned shard, as well as root hashes. The trick is having all users store one layer of nodes that cuts across the entire Merkle tree. When a user needs to verify a transaction from outside of their shard, they trace a path to that common layer. From that common layer, they can determine the balance of the account outside their shard, and continue validation normally.

“Each shard of the network is responsible for storing a smaller slice of a big data structure, but this small slice allows users to verify transactions from all other parts of network,” Leung says.

Additionally, the researchers designed a novel scheme that recognizes and discards from a user’s assigned shard accounts that have had zero balances for a certain length of time. Other cryptocurrencies keep all empty accounts, which increase data storage requirements while serving no real purpose, as they don’t need verification. When users store account data in Vault, they ignore those old, empty accounts.

Author: Rob Matheson
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Tron DApp Usage Jumps 48% — More Than 1 Million Transactions Last Week

The TRON Foundation launched its TRC20 exchange this week. It is a place for people to exchange tokens issued on the TRON platform. The TRC20 exchange is located at TRX.market. The TRC10 token exchange is still on Tronscan, the primary block explorer and information service for the Tron ecosystem.

TRC20 and TRC10 tokens can be understood as Tron-native analogues to ERC-20 tokens. The TRC10 token is a user-issued token that doesn’t require the writing of a smart contract. The TRC20 token provides all the functionality and power of a smart contract-based token system. TRC20 is very similar to ERC20. All that’s needed to issue a TRC10 token is 1024 TRX, which are the equivalent of Ether in the system. TRX were trading at $0.013 USD at time of writing.

Tron has a number of decentralized applications running on it at present time, and despite the overall market downturn, usage was up, according to the foundation’s own metrics, by 48% over the last week. Usage crossed the 1 million transaction threshold in a single 24-hour period. In their blog on the subject, Tron wrote:

“This week, the 24-hour transaction number for Dapps reached 1.04M, a 48% increase compared with last week; the 24-hour trading volume hit 640M TRX, an 151% increase compared with last week. We have seen significant increases in both indexes […]”

One of the more interesting projects built on Tron is SeedIt, a decentralized platform that lets users contribute funds to content creators they most appreciate. Also Project Atlas, which incentivizes people to seed content on the BitTorrent protocol, the flagship program for which Tron acquired back in July.

Ethereum DApps Not Seeing Much Usage

If we take a look at the rankings on dAppRadar and dAppTrack, we see that Ethereum dApps overall would be in a whole new league of usage if they saw anywhere near the transaction activity that Tron dApps do. There are factors that mitigate actual Ethereum dApp usage, and one is that several sub-platforms have been built and run on Ethereum which would not contribute to direct Ethereum dApp activity.

Source: dappradar.com

Also, not all token activity is decentralized application activity – for instance, the Basic Attention Token is not exactly a decentralized application. Yet, it sees several thousand tokens transmitted per hour. Same thing with  Binance Coin (BNB), which has a volume higher than many non-token altcoins. BNB had over $15 million in volume in the last 24 hours at time of writing. Since it’s not used as a decentralized application, it doesn’t count as dApp transaction activity despite seeing a high usage.

All of which is to say we’re not insinuating that the Ethereum blockchain is currently under-used. But the data tells us that the dream of Ethereum decentralized apps has yet to be realized in the form of a “killer dApp.”

The central focus of most Ethereum developers has been scaling solutions. Second-layer scaling has been a major avenue of investment in the Ethereum world. Projects like Raiden and 0x saw massive investments, and dApps which build on these sidechains would not necessarily contribute to Ethereum mainnet’s statistics, either.

Author: P. H. Madore
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American Express: Ripple Powers Cross-Border Transactions ‘In a Matter of Seconds’

American Express is revealing the results of a pilot test of Ripple’s xCurrent solution for cross-border payments.

At the Wings of Change Europe conference in Madrid, Amex general manager of corporate payments Carlos Carriedo said Ripple’s technology has the potential to dramatically improve the sluggish status quo of international payments.

“We did a pilot. We did a test, partnering with Santander locally, and with Ripple to just do cross-border transactions.

Cross-border transactions continue to be complex and slow. And in a matter of seconds, through this test, our clients were able to transfer funds in a very transparent and seamless way, from one part of the world, to the other one.”

According to Carriedo, American Express sees a lot of potential in blockchain technology as a whole, and continues to invest in the technology.

“Blockchain is absolutely an option we’re looking at. Just to give you a sense, we have invested in a fintech lab based on blockchain technology, just to understand how to leverage this better…

So more to come. There’s still a lot of things that need to get addressed with blockchain as a technology. But it’s very promising.”

Back in November of 2017, American Express and Santander announced a partnership with Ripple to increase the speed of non-card transactions between the US and UK. Both Amex and Santander say they’re open to expanding the partnership worldwide, based on the results.

Author: Daily Hodl Staff
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What cryptocurrency could mean for your business

Interest in cryptocurrency among consumers, businesses and everyday investors skyrocketed in 2017 as the price of Bitcoin rose from under $1,000 per coin to nearly $20,000 over the course of 12 months. Of course, today the price has leveled off to a degree, and a host of new blockchain-based currencieshave been launched and continue to be developed, some with very specific transactional and investment goals, including the promotion of social causes.

As cryptocurrencies evolve and their number expands, online retailers both large and small in the U.S. and globally are left to evaluate whether they should jump onboard this semi-regulated digital train, and if so, how.

At the same time, other kinds of organizations, from financial management businesses to non-profit fundraising groups, are examining the best way to integrate cryptocurrency use into their operational strategies. Individual investors, as well as businesses aiming to invest their assets, are also taking a closer look.

How can you determine if your company should embrace this new frontier? Perhaps the best way to start is by examining how cryptocurrency might impact your business’s bottom line. Here is a closer look at some key areas where digital currencies offer potential benefits and risks.

Reduced transaction fees

If your company is contemplating accepting cryptocurrencies (either one particular currency or multiple forms) in exchange for your products or services, one potential bottom line benefit is that there will generally be no direct processing fees. Unlike with credit card transactions, where banks serve as intermediaries and charge a fee, cryptocurrencies are decentralized, which means that transactions have no third-party involvement.

Coins and tokens are not developed or controlled by a single authority, like fiat money that is issued by a sovereign government, but instead work directly through blockchain technology. If you are a merchant selling online, you will, however, likely be charged a small flat fee for your merchant wallet account or accounts, like BitPay or CoinPayments, which allow you to accept certain cryptocurrencies.

Faster payment

Cryptocurrency transactions happen almost immediately, unlike credit card payments that may take days to clear. As a result, you will have access to the coin payments in minutes. Sales are also final, which means that charges cannot be negated after the fact. All of this translates into more financial security for your business.

Improved customer access

With more consumers and business customers showing interest in cryptocurrency, offering coin payment options may increase your audience of buyers. Certainly, because digital currency is non-governmental, it is by definition international, which means that your business could see an increase in global clientele, especially as use grows. Cryptocurrency of course has no exchange rates or fees across borders, and so is theoretically the perfect way to conduct global business.

Currently, fewer B2B organizations, including professional service companies, and more B2C businesses are accepting or paying with cryptocurrency, but this trend is likely to change as the marketplace evolves. Ultimately, by simply accepting cryptocurrency payments, you may boost your bottom line as you attract new customers.

Volatility in value

Cryptocurrencies are notoriously volatile, which makes them attractive to investors seeking high reward through elevated risk, but also potentially dangerous for businesses that accept them as payment. Imagine if a customer pays you in Bitcoin, and then after the transaction the value crashes – which it has been known to do across the hundreds of coins now used.

For many merchants, the volatility issue is muted by the fact that merchant wallet accounts offer immediate conversion to fiat money. Unless a crash occurs within the confines a few seconds between a payment being made and accepted, most companies are protected from volatility. For this reason, most do in fact choose to automatically convert payments to fiat. Companies that keep payments and revenue in the form of cryptocurrency are essentially taking the risk that comes with coin investment.

Lack of regulation

Cryptocurrency is still relatively new, and as a result, governments around the world have issued limited, and differing regulations. Some nations, especially the small country of Lichtenstein, have aggressively moved to embrace and promote cryptocurrency with financial incentives designed to build stability and regulatory assurance for those that use and invest in coin.

But overall, a general lack of regulations, including here in the U.S, can mean uncertainty for business that deal in cryptocurrency, including uncertainty about what kinds of taxes and investment limitations may be imposed in the future.

Taxation and accounting challenges

Companies that accept or invest in cryptocurrency will need to make the effort to understand the changing regulatory environment, and will also need to factor in the tax and accounting tasks that will be required of them.

In 2014, the IRS released IRS Notice 2014-21, which declared that for U.S. income tax purposes, a cryptocurrency is property and not a currency. Depending on the facts, that means the character of the cryptocurrency could be business property, investment property, or other property. Therefore, the general U.S. tax principles that apply to any property transaction should be applied to exchanges of cryptocurrencies.

Cryptocurrencies held for investment and sold for a gain are subject to short-term or long-term capital gains tax. Conversely, those investment-held cryptocurrencies sold for a loss are able to utilize a capital loss. The IRS notice does not, however, resolve all issues related to reporting requirements or taxation. Some of the unresolved issues include foreign account reporting, cryptocurrency as “like-kind” exchanges, and taxation of crypto-forks.

To keep track of the complex and evolving regulatory environment, and to understand the full range of financial implications of using, accepting or investing in cryptocurrency, you would be well-advised to start by talking to your financial and tax advisors today.

Author: Tony Argiz and Erick Wendelken
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Cryptocurrency Prices Are Down, But Transaction Numbers Are Up

Recent cryptocurrency price declines have attracted the attention of mainstream media outlets.

Many attribute the price declines to tax selloffs, exchange hacks, ICOs, and negative regulation developments. Some have proclaimed this to be the beginning of the end, while others, such as Brian Kelly, have called Bitcoin and cryptocurrencies “not dead”. Kelly says that the USD exchange price of cryptocurrencies are entering bear market territory, but that it is also important to keep things in “perspective”. To prove his point, he rhetorically asked, “Do you know where we were a year ago?” To which he answered, “$2,500.” Brian Kelly was eluding to the fact that even though cryptocurrency prices are down over a few months, they are actually significantly up year over year.

Kelly also had a positive outlook on the regulation developments even though it has caused the USD exchange price to drop significantly. Kelly said, “They’re cleaning up the system. They’re making sure it’s more robust. Making sure it’s better for people”.

Transactions matter more than price

All the news outlets significantly focusing on the fiat exchange price seem to overlook that the goal of cryptocurrency is to be a peer-to-peer digital currency and payments system free from centralized authorities. This goal means that the fiat exchange prices does not matter that much for cryptocurrencies. Even if the price for one whole cryptocurrency is nominally large in fiat exchange rates, a diverse income demographic can still use cryptocurrencies to buy and sell everyday items since most cryptocurrencies are divisible into very small amounts, such as one Satoshi (a hundredth of a millionth BTC). This everyday usability for large and small purchases does rely on transaction fees and confirmation times remaining low. Thus, it is the number of transactions per day that matters more than the price to successfully and sustainable accomplish the goal of becoming a peer-to-peer digital currency and payments system.

The transactions per day is a better indication than price of how much cryptocurrency is actual being used by people in everyday life rather than just for speculation. The number of transactions matter since actually using a currency is what gives it value and stability as a currency. Transactions per day displays how consumers are handling that coin’s transaction fees, confirmation times, security, and merchant adoption. More transactions per day is an indication that a cryptocurrency has solid fundamentals that consumers can trust to use in everyday life for cheap and fast peer-to-peer transactions, while less transactions per day indicates the opposite.



The number of Dash transactions are increasing

A few days ago, the number of Dash transactions per day had increased to over 35,000 transactions, which had exceeded the transactions count per day of both Litecoin and Monero, combined. This occurrence makes sense, intuitively, since Dash has been focusing on everyday adoption around the world. Dash has been so appealing to so many people because it has been able to consistently maintain low transaction fees, fast confirmation times, and security. This makes Dash appealing to both consumers and merchants relative to traditional currencies and payment methods that are unstable due to monetary and fiscal policy or charge exorbitant fees. Dash also sets itself apart from other cryptocurrencies that have seen spikes in their transaction fees and confirmation times, which has made those cryptocurrencies less reliable than Dash.

Dash is experiencing rapid adoption around the world due to its treasury system that has allowed for professional and experienced development and outreach around the world. Dash is now seeing the rewards of that incentivized structure and hard work through an increasing number of transactions. This brings Dash one step closer to accomplishing the goal of cryptocurrency to be a decentralized peer-to-peer currency and payment network.

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Author: Justin Szilard
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