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Stellar

What is Stellar?

Stellar is a cryptocurrency platform that brings payment systems, banks and people together. The core concept behind Stellar is to move money reliably, faster and at the lowest possible costs. It is a non-profit organization that is bringing low-cost financial services to maximize the potential of individuals, and in the long run, use their technology to fight poverty.

While most of the cryptocurrencies use distributed nodes in their blockchain networks to confirm and add transactions to their ledgers, Stellar uses standard nodes, delegated nodes, and servers, all distributed evenly in their network.

There are two core components upon which Stellar is built, Lumens (XLM) and the Stellar Core and Horizontal API.

Stellar is designed as a unique cryptocurrency, primed for value addition. The concept behind Stellar is to make it one of the main payment networks in the world, thereby making it grow to the same levels that Ethereum and Bitcoin have.

Through Stellar, it is obvious that individuals, entities and the banking system can work together within the blockchain ecosystem.

Instead of competing with banks, Stellar works with them as partners. Apart from partnering with banks, Stellar also does away with the need for mining.

Mining is one of the aspects of blockchain technology that makes some ecosystems expensive. This is because of the need to own mining hardware, which makes it a preserve for those who are either rich or have some funds to spare for the same. Instead of mining, Stellar uses direct distribution and focuses on the underbanked segments of the society through a consensus model.

What is the problem that Stellar Solves?

There are several challenges that exist not just in blockchain but also in the normal banking sector that Stellar attempts to solve.

Transaction fees are prohibitive in the banking sectors in so many countries, and this is one of the main reasons why most people tend to shy away.

It gets even worse when conducting transactions across borders.

Since the introduction of blockchain technology, there has been a lot of interest from different circles. Even with all the benefits of blockchain technology, platforms like Bitcoin and Ethereum are still overpriced for most users and this prices a lot of people out of the network.

Other than the cost, using these platforms can be complicated for the average person, and this is another area where platforms like Stellar come in handy.

Simplicity is one other aspect that Stellar addresses. Most of the people who are using and have made the most use of blockchain platforms like Bitcoin and Ethereum, other than buying and hoarding their coins hoping for a better exchange rate are people who have in-depth knowledge of the workings of blockchain technology.

These are people who have the tech skills to build apps and programs and leverage them against the power and security of these two platforms. For the average investor, however, who has no knowledge of security protocols, these are complex platforms that they can barely understand.

There is also the issue of speed. It is an open secret that using Bitcoin or Ethereum is very slow. In fact, other than the slow speed, when using Bitcoin, you do not have complete certainty that your transactions will terminate.

It gets even worse when you are carrying out very big transactions. A good blockchain platform should allow you the confidence of knowing that your transactions are safe, and there is no risk of cancellation, which does not just increase the risk of fraud, but also ends up in major delays.

Energy intensity is another problem that is common with Bitcoin. Mining coins mean there has to be a spend on electricity. Spending on electricity essentially draws resources out of the blockchain ecosystem, and this goes against the primary concept of making life better through blockchain technology. Spending on electricity also means the blockchain platform becomes expensive in the long run, and the costs eventually have to be passed down to someone.

How does Stellar solve the problem?

Speed is one of the areas where Stellar is thriving. This has been a problem with most of the other blockchain platforms. Stellar can handle thousands of transactions per second. As more nodes are added to the network, the capacity to handle more transactions increases. Therefore, there is virtually no real upper bound limit for the number of transactions you can run per second on Stellar.

What this means is that when using Stellar, you can perform your transactions while enjoying the security features you would enjoy on Bitcoin, but at incredible speeds.

As part of the distributed system, Stellar has a built-in exchange (SDEX). In this exchange users can trade in assets, also at the same speed, you expect transactions.

Compared to most of the blockchain platforms, Stellar has a robust and rich development platform that is more mature than what you would find in most cryptocurrencies. Stellar has several SDKs, available in multiple languages, and the documentation that supports the SDKs is mature and thorough. 

Through the SDEX, you can transfer currencies across international borders.

For example, for you to transact money between banks, the banks must use a communication network that either works or is accepted in their country, like SWIFT, or they might have to use a courier service. For this to work, the banks must have a trust line with one another and accept the respective currencies.

This process involves a lot of fees and transaction delays. Delays in the banking system are often attributed to a lot of things, including the presence of intermediaries. On the SDEX, however, the banks will trade in multiple currencies between themselves directly, doing away with costly intermediaries.

This system uses lumens, native assets on the Stellar network, or a means of value transfer. Lumens are important because they can be used to bridge transfers, especially when there are no active buyers or sellers on the exchange in the currency selected at that moment. Therefore, lumens are an intermediate currency that both banks trust and can be used to transfer value between the assets.

What makes Stellar better than the competitors?

The Stellar network has an automatic cryptocurrency exchange. This makes it easier for users to make transactions across borders. What this means is that users are able to exchange fiat currency and cryptocurrency at the same time. To do this, the user defines the desired output.

Stellar is not built around mining. Mining is an expensive feature in blockchain technology. Besides, the problem with mining is the uncertainty in the market especially when the network runs out of mineable tokens.

Most altcoins currently struggle to generate confidence in their ecosystems. However, this is one area where Stellar is already winning. With brands like Deloitte and IBM coming on board, this is the confidence boost that Stellar needs, and sets it a cut above the rest. More than 30 banks all over the world are already using Stellar which makes it a ripe investment opportunity.

IBM created a market for carbon credits, which use the Stellar Lumens and are used on the Stellar blockchain. With this, they were able to encourage the partner banks to adopt not just the Stellar technology, but also their tokens in carrying out international transactions. What Stellar has managed to do, therefore, is to offer the flexibility and good features that are unique to Ethereum and Bitcoin respectively.

Here’s a brief comparison between Stellar and some of the major blockchain networks. While other blockchains will take between 15 minutes and one hour to confirm transactions, Stellar does it in 3 – 5 seconds. On average, you will spend anywhere from $0.3 to around $5.45 on every transaction on other networks. On the other hand, $0.01 pays for 300,000 transactions on Stellar, which makes it virtually free.

Other networks use Prof of Work consensus, performing less than 10 transactions per second. Stellar uses the Stellar Consensus Protocol (SCP) and can handle thousands of transactions per second.

Just like Bitcoin, Stellar is a decentralized blockchain. However, it goes a step further and allows users to carry out transactions faster, cheaper, and in a reliable manner. Stellar users can also create their own decentralized apps. Coupled with the fact that this highly scalable blockchain can handle more transactions per second than Bitcoin, there certainly is no letting up.

How can Stellar be categorized?

Stellar is a remittance cryptocurrency. It is a platform where banks, payment systems, and people are brought together to enable them to move money faster and at the least possible cost.

This is something that has been a challenge in the past, especially for those who are considered unbanked or underbanked in the society. Through Stellar, it is possible to bring the world and benefits of banking to a population that had previously been marginalized.

What is Stellar’s vision on Security?

Lumens are used in the Stellar blockchain as an intermediary currency and a transfer of value between transacting parties. However, lumens also have a secondary role in the blockchain, as a security feature. Lumens are used as an anti-spam feature on the network.

Any transaction that is carried out on the lumen network attracts a small fee. In so doing, Stellar mitigates Denial of Service (DoS) attacks by limiting the number of fake transactions that might be used to flood the system.

Simplicity

The security concept in Stellar is all about simplicity. In fact, the simplicity around the transaction model used in Stellar is built with the promise of as few problems as possible. This helps to make the transactions on Stellar more secure, especially for applications that do not need the generality of smart contracts.

Atomic Multi-operation

Stellar uses an atomic multi-operation for all transactions, and this translates to code that can be fully audited. This also does away with the risk of uncertainty and reduces the prospect of attacks from frauds who would want to exploit any vulnerabilities in the ecosystem.

Freezing Accounts

Stellar users have the freedom to freeze their coins should they suspect an anomaly in their accounts. This is a good thing because it makes it easier to recover accounts without having to rely on validators to execute an irregular change of state to help such users recover their accounts.

Choosing Nodes

Another genius security feature in Stellar is that the users have the choice of choosing the nodes that they can use to validate their transactions. This is a good option, especially in the case where there might be an element of malice from some of the validators in the ecosystem. It is also a safe option in case the assets in question cannot be double-redeemed. Case in point, an example of precious stones like gold. If this was being exchanged on Bitcoin or Ethereum, it is possible that one of the validators might create confusion and risk double-redemption. However, in Stellar, the owners can select pre-select validators, especially those who have a version of their token they deem legitimate.

Examples of Stellar use cases/applications

There are two main benefits that you enjoy when using Stellar, the chance to gain new customers, and reducing your transaction costs.

Cost of transaction

Through Stellar, entities spend less on micropayments. By reducing the cost of micro-transactions, they are able to offer incremental payment plans to their customers. This is a model that has been effected by Deloitte, one of the largest financial consulting firms in the world.

In 4 weeks since joining Stellar, Deloitte had reduced their transaction costs by 40%, with transactions resolving in 5 seconds. For a fraction of a cent, you can send money between countries so fast, and the remittances attract very low costs especially when transacting between different currencies.

Mobile money transfers have also benefitted from Stellar, making the platforms interoperable. This allows customers to send and receive mobile money from different service providers. The low cost of transaction has also made Stellar a viable option for NGOs and other entities involved in social enterprises and projects, by effecting social change through low-cost financial services.

Resources

https://www.stellar.org/papers/stellar-consensus-protocol.pdf

https://www.stellar.org/faq/

https://www.stellar.org/blog/

https://www.stellar.org/

 

 

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Zcash

What is Zcash?

Zcash (ZEC) is a privacy-focused cryptocurrency that was introduced in 2016. It is an implementation of a decentralized anonymous payment scheme known as Zerocash.

Zcash was initially launched as Zerocash back in 2014. Zcash implements the code of Bitcoin Core while borrowing the privacy-focused features of Zerocash. It is the first open-source and permissionless cryptocurrency that can fully protect the identity of the sender, recipient and even hide the amount transferred using zero-knowledge cryptography.

Zcash also has some of the properties of Bitcoin. For example, the total number of coins in the case of Zcash and Bitcoin is the same – 21 million units. 10% of the coins that are mined in the first four years are shared between the develops, investors and a non-profit foundation as a “founder’s reward”.

With the Zerocash protocol in place, users can pay each other directly in a much more efficient manner where the cryptocurrency protocol hides both the origin and amount of the payment.

At the time of writing this article, Zcash was trading at 179.07 USD. This is not much, but Zcash has a promising future. Recently, Zcash has partnered with JP Morgan. They plan to integrate the Zcash technology into the JP Morgan Quorum blockchain.

If this happens, then this will be the first time a zero-knowledge cryptography system is being integrated with an enterprise blockchain system. This will be a significant achievement for the Zcash Team.

Mining Zcash

Zcash uses Equihash as a proof of work algorithm. Equihash does not run on AISC system and requires traditional computing resources. One can use a simple desktop PC. Mining with GPU is more rewarding.

With Equihash, high memory is required. So, computers with a little amount of memory cannot effectively mine Zcash. One can mine Zcash in two ways. One is to join a pool of miners and mine in the clouds. The other way is to mine using a CPU or GPU. Because of Equihash, it cannot be mined on AISC systems.

What is the problem that Zcash Solves?

One of the biggest strengths of Zcash is the optional privacy feature. The USP of Zcash, it’s privacy, is not mandatory. One can choose to either make an auditable transaction or keep it private. This is something called “Selective disclosure”.

The privacy in case of Zcash is auditable. It provides users with two types of addresses – shielded and transparent. Shielded addresses are marked with an ‘s’ whereas the transparent addresses are marked with a ‘t’. Most transactions on Zcash are transparent in nature. Transparent transactions have a much lower transaction fee.

The number of shielded addresses is very few – near 1% of the total Zcash addresses. This indicates that most of the users do not even use the privacy features.

Zooko Wilcox, the founder once pointed out the majority of the coins have passed through shielded addresses at some point. A proof of shield transaction now takes around a minute to be done.

Transactions between transparent addresses are completely transparent. This is similar to how the Bitcoin public ledger operates. In case of the shielded addresses, no details are revealed. So, it is completely up to the user which address they will use.

Another important property of Zcash is fungibility. This means that all the coins are equal in Zcash. Each unit of Zcash can be exchanged mutually without any value alteration.

Since the private nature of the transaction masks the origin of the coins, one cannot discriminate against them based on their history. This means that if a coin was previously associated with an undesirable account or with any undesirable activity, the coin can be blacklisted. It is something that happens in the case of Bitcoins.

However, as Zcash is fungible, all the ZEC units have the same value in spite of their history. So, no coins in the Zcash environment can be blacklisted based on the history, given the coin was received from a shielded address.

Zcash, hence, operates quite like paper money. One would never judge a dollar bill based on its history as there is no history that is attached to the paper currency when transactions occur.

Finally, what makes Zcash even more appealing is the low transaction fee. Back in December 2017, when the value of Bitcoin peaked, it had a transaction fee of $50 per transaction. The peak value of the Zcash transaction fee was recorded on April 2018, where the average transaction fee was $0.0059 according to BitInfoCharts. Hence, it is quite a formidable competitor to Bitcoin.

How does ZCash Solve the problem?

To implement the privacy features, Zcash uses something called Zero-knowledge cryptography.

According to the documentation of Zcash, it is known as zk-SNARK. It stands for zero-knowledge Succinct Non-interactive Argument of Knowledge.

The zk-SNARK mechanism allows you to prove that certain information is true without actually revealing the information itself. This means that if you send money to an address, then without disclosing the address or the amount you have sent, the decentralized mining process can verify the transaction.

Now, to prove that a transaction is valid without revealing any details about the transaction, the zk-SNARK mechanism works as follows:

  •     The sum of the input values and the output values are equal.
  •     The control of the private keys is proved by the sender. This shows that the sender has authority over the funds.
  •     The signature of the transaction is then cryptographically linked to the sender’s private keys. This proves that the one who has the private keys, that is the sender, can only create such a transaction signature

This is a high-level description of the process, but it shows that no details regarding the sender’s address or the amount sent are not involved in the mining process. Moreover, Zcash also allows a user to prove that the user has enough ZEC to actually perform a transaction. This is known as the proof of unspent transaction outputs or UTXOs.

Now, besides the private key, a public key also required in any asymmetric encryption process. Initially, Zcash began with an event that is known as the “parameter sharing ceremony”. The target of this ceremony was to generate a public key.

For this, six key individuals at different geographic locations were chosen to generate a part of the public key, called the “shard”, after which they have to delete their shard. The system ensures that if only one person purged their data, the master key cannot be further compromised. Till date, five of the six key holders are publicly named whereas the sixth holder decided to remain anonymous.

The only way it is possible for this system to fail is if all the six key holders conspire to not delete their shards and be dishonest. This would completely compromise the Zcash system.

Zcash also implements the Equihash proof of work protocol that is used by many other cryptocurrencies. Equihash provides a bunch of advantages over the SHA256 protocol that is used by Bitcoin. Equihash has a very efficient verification algorithm that even allows mobile devices to verify the transactions.

This means that you can even use smartphones to mine Zcash. Moreover, unlike SHA256, Equihash is resistant to AISC mining. This ensures that Zcash is not mined only by those who can afford to buy AISC devices. This improves the distribution of Zcash and democratizes the cryptocurrency.

Equihash requires a lot more memory than SHA-256. It might seem like a bad idea, but this prevents larger organizations to build specialized systems that will outperform the devices of individual miners. To make a system with a lot of memory, the required investment may not be a rational choice for many organizations. However, individuals, on a small scale, can run Equihash effectively and mine Zcash.

What makes ZCash better than its competitors?

Zcash is a Bitcoin fork which makes Bitcoin the biggest competitor of Zcash. Moreover, even though Zcash is advertised as a privacy-focused cryptocurrency, only a small fraction of the users actually use the privacy features.

This makes Bitcoin and Zcash quite similar. Moreover, they also have similar properties – both are open source, both have the same number of maximum units, both are minable.

What sets Bitcoin apart is the SHA256 proof of work algorithm and the public ledger. Bitcoin has a public ledger where all the transactions are recorded. The sender, the receiver and even the amount transferred are recorded in the ledger. In the case of Zcash, this is optional.

However, Bitcoin recently forked into Bitcoin Private that also uses zk-SNARKS to produce a cryptocurrency that is quite similar to Zcash. However, the private transactions of Zcash are more computationally intensive. In the case of Bitcoin private, it is not the case.

Another big competitor is Monero. Even though both are touted as privacy-focused, there are some major differences between them. First of all, in Monero, privacy is not an option.

Monero enforces users to use ring confidential transactions (ringCTs) and stealth addresses. Even though what is achieved is the same as using shielded addresses in Zcash, but the mechanism is completely different.

Other competitors that can compete with Zcash are Dash, Verge and DeepOnion. All of these are considered as private cryptocurrencies.

How can Zcash be categorized?

Zcash is categorized as a private cryptocurrency, even though privacy is an optional feature and the majority of the user base performs transactions publicly.

Zcash and Security?

Zcash is quite secure and moreover, Equihash enables a higher degree of decentralization. With Zcash, you are in complete control of your funds. No one else, the banks or the governments can tell you what to do with the money that you have.

According to the Zcash team, if Bitcoin is like HTTP for the internet, then Zcash is like HTTPS.

Zcash is open source. It provides users with more transparency. They can freely securitize the very construct of the cryptocurrency system. With users being active in the development process, it is easier to find bugs, backdoors or any other security vulnerabilities.

A distributed system also ensures that no one can intercept your transactions. Moreover, events like double spends are also impossible – you cannot make the same transaction twice by mistake. Each transaction is irreversible. This means that once you have sent someone money, you cannot get that back. So, you need to make sure that you always enter the right address.

However, there has been a lot of controversy regarding the security mechanisms of Zcash, particularly regarding zk-SNARK. According to many experts, zk-SNARK is hugely untested and will take a lot of time to be adopted by other platforms.

Moreover, the ceremony that was used to generate the public key is also often frowned upon as there is no certain way to know that all the keyholders have destroyed their part of the key.

Examples of Zcash’s use cases and applications

With all the regulatory pressure faced by the cryptocurrency systems, it is quite important to have private cryptocurrencies in the market. Private cryptocurrencies operate like real paper money. When you buy using cash in real life, no record is kept of what you purchased with which paper currencies. No history is attached with the paper notes.

One of the biggest use of such private currencies is in repressed political regimes. In regions such as Venezuela and Zimbabwe, a surge of private cryptocurrency usage has been recorded as their economies have degraded. The added obfuscation helps maintain individual privacy.

However, Zcash has selective privacy, which means that it can also operate elsewhere and be regulated by the government where transparency is the primary requirement.

However, this can also have an adverse effect on the value of the currency. The market for privacy in cryptocurrency is still not well known, but it is becoming quite evident that in the future, privacy will be a key selling point for many cryptocurrencies. This makes Zcash future-proof.