Dubai Government-Backed Digital Currency Will Get Its Own Payment System

Dubai’s state-backed digital currency emcash will soon have its own payment system for goods, services, and other transactions.

Consumers in Dubai will soon be able to use digital currency to pay for goods, services, and utilities following a new government partnership, a press release confirms Tuesday, Oct. 9.

The deal between emcredit, a subsidiary of the Dubai Department of Economic Development, blockchain payment provider Pundi X, and its partner Ebooc Fintech & Loyalty Labs LLC will facilitate point of sale (PoS) payments in emcredit’s emcash currency.

Ebooc will provide PoS terminals for in-store payments, while Pundi X plans to roll out 100,000 units globally over the next three years, the press release notes.

Emcash is pegged to the United Arab Emirates (UAE)’s fiat currency, the dirham.

“We […] envisage consumers in Dubai being able to make real time payments using Dubai’s digital currency for all their payment needs for shopping, paying for [g]overnment fees etc,” Abdalla Al Shamsi, CEO DFP and co-founder of Ebooc commented in the press release.

Dubai continues to position itself as a blockchain innovator at state level, with multiple schemes ongoing as part of its goal of becoming a fully blockchain-powered city by 2020.

Plans to roll out emcash first surfaced in September last year, Cointelegraph reported, with full details of the payment network to follow later this financial year.

Pundi X, meanwhile, became the focus of unwanted attention in June after hackers stole 2.6 billion of its NPXS tokens from South Korean cryptocurrency exchange Coinrail. In July, Bancor announced a security breach resulting in the loss of another 300,000 Pundi X tokens.

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Deloitte Outlines Five Major Obstacles to Blockchain’s Mainstream Adoption

Deloitte has outlined five major areas where blockchain needs to develop to achieve widespread adoption.

“Big Four” audit and consulting firm Deloitte has outlined five basic areas of development for blockchain technology in order achieve widespread adoption, according to a study published September 28.

According to Deloitte, in order to be adopted by enterprises on a mass scale, blockchain technology should overcome five major obstacles – the possibility of time-consuming operations, lack of standardization, high costs and complexity blockchain applications, regulatory uncertainty, as well as the absence of collaboration between blockchain-related firms.

Identifying the area that needs the most development, Deloitte singled out the problem of possible operational delays on a distributed ledger network. The company emphasized that slow transaction speed is one of the main reasons for many players to avoid considering blockchain as a technology that can be applied in “large-scale applications.”

Another major obstacle for blockchain on the path to widespread adoption is lack of standardization. Deloitte pointed out that the lack of standardization prevents technology disruptors from interact with each other. The consulting giant cites the fact that there are over 6,500 active blockchain projects on GitHub, with most of them based on different protocols, consensuses, privacy measures, as well as written in different coding languages.

Among the remaining areas for development, Deloitte listed the necessity to reduce both costs and complexity of network operations, the importance of innovation-supporting regulation, as well as the crucial role of collaboration between blockchain-related firms.

In terms of costs and complexity of the emerging technology, Deloitte referred to major technology giants such as Amazon, IBM, and Microsoft that have reportedly delivered less complicated implementations of blockchain by using cloud technology, as well as contributed to improving the costs of operations on blockchain.

Among the most complex issues around blockchain regulation, the company highlighted the difficulty of regulating smart contracts, which do not necessarily fit into existing frameworks.

The report’s final point stresses the importance of cooperation between blockchain-related firms in order to push forward the new deployments of the technology, as well as to provide better education in the sphere. The company says the increasing number of blockchain consortia, such as R3, is a “bullish sign,” because the “value of a blockchain network increases with the number of users.”

Last month, Cointelegraph published an interview with Jeremy Gardner, founder of Blockchain Education Network and co-founder of blockchain prediction platform Augur. In the interview, the industry expert claimed that in order to achieve mass adoption, those developing in the industry must “include the people who have the most benefit” from blockchain technology – namely the world’s disenfranchised – commenting that “we haven’t done a great job doing that, yet.”

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From PoS to dBFT: A Brief Review of Consensus Protocols

Pros and cons of every major PoS challenger.

In our Expert Takes, opinion leaders from inside and outside the crypto industry express their views, share their experience and give professional advice. Expert Takes cover everything from blockchain technology and ICO funding to taxation, regulation and cryptocurrency adoption by different sectors of the economy.

If you would like to contribute an Expert Take, please email your ideas and CV to george@cointelegraph.com.

Although the blockchain and crypto communities remain united around the ideology of blockchain and its world-changing potential, there is still one issue which proves to be as divisive as a hard fork — consensus protocols. Although proof-of-work (PoW) is still the protocol of choice for Bitcoin and many others, the debate rages over proof-of-stake (PoS), along with other emerging consensus protocols.

Proof-of-work (PoW)

The granddaddy of consensus protocols and the brainchild of Satoshi, the proof-of-work protocol involves block miners solving complex cryptographic puzzles, for which they receive rewards in the form of coins or tokens.

Pros

As the original protocol, PoW has proven its resilience against internal and external attacks.

Cons

PoW comes under fire for several reasons. It is highly energy intensive, with some estimates putting the Bitcoin network power consumption at the same level as 159 countries. Critics of Bitcoin such as Andrew Tayo have pointed out that much of this energy is wasted, as only one miner can eventually mine each block, regardless how many participate in the race to get there first.

Bitcoin is now mostly mined using ASICs, so mining is dominated by big operations such as Bitmain, which can afford the hardware needed to mine at scale. This concentrates mining power into the hands of the few, leading some in the community to call Bitcoin a centralized currency. Although some crypto tokens such as Vertcoin attempt to remain ASIC-resistant by regularly changing algorithms, it is a race to stay ahead of the ASIC manufacturers.

Adoption

Bitcoin, Litecoin, Zcash and Ethereum Classic, among others — PoW is still the most popular consensus protocol.

Proof-of-stake (PoS)

PoS

PoS was first conceived as a way of avoiding the well-known issues with PoW, such as energy consumption. In the PoS model, those holding coins can stake them on the likelihood of the next block being the correct one. If it is, they receive rewards. If someone stakes coins on a block that turns out to contain fraudulent transactions, they will be ‘fined’ the value of their stake.

Pros

PoS consumes less energy than PoW. PoS also actively penalizes dishonesty, deterring fraudulent behavior among validators.

Cons

As the validating nodes are not contributing computational power — known as the “nothing-at-stake” problem — there is an increased risk that PoS blockchains could see more forks than in PoW. Additionally, PoS favors those with the most coins, which also promotes centralization as the richer holders can stake more. For PoS coin NXT, it has been shown how one holder could steadily increase their stake to the point that they would own more than 90% of coins.

Adoption

Projects using a pure PoS algorithm are Reddcoin, Decred and NavCoin. The problems with PoW algorithms are what has led Ethereum to move away from pure PoW and adopt Casper, a PoW/PoS hybrid.

PoW vs. PoS

Due to market domination by Bitcoin and Ethereum, the debate around consensus protocols often seems to center around PoW and PoS. In fact, they share similar problems, as indicated by Jordan Earls, co-founder and lead developer at Qtum:

“The real dichotomy in the discourse of mining algorithms seems to come from the whole centralization vs. decentralization debate rather than if one should choose PoS or PoW. ASIC resistance has proven to be as stated, only resistant. This aspect has helped to incentivize the centralization of mining, leading some PoW networks to periodically change their mining algorithm in order to defeat this. In PoS networks, the case is similar, where some networks choose consensus mechanisms that have a technological limit on the number of validators, in hopes to offer greater transaction throughput.”

However, we must remember that this is not a strict dichotomy — PoW and PoS are not the only consensus models. So what are some of the other options?

Delegated PoS (dPoS)

dPoS

Delegated PoS was invented by Daniel Larimer, co-founder of Steem and CTO of EOS, which both use dPoS. Here, the network votes for ‘Witnesses,’ who reach the consensus to add the next block. Similar to the standard PoS model, the voting weight of network participants is determined by the number of network tokens they hold.

Pros

dPoS increases latency, as fewer parties to a consensus speeds up decision making. By avoiding the use of ASICs, it promotes decentralization — but with some caveats, as outlined below.  

Cons

The use of ‘Witnesses’ means that full decentralization is never achieved. Consider the difference between a full democracy — all citizens voting on all matters — and a representative democracy, where delegates are elected to speak on behalf of the electorate.

Vitalik Buterin wrote a criticism of dPOS, describing how this consensus protocol can lead to plutocracy, with influential voters forming groups that could ultimately end in a malicious attack. Larimer responded in sharp defense with his own blog post titled “The Limits of Crypto-Economic Governance”:

“Vitalik is looking for a crypto-economic blackbox that assumes you cannot rely on voting whether by stake (plutocracy) or by individual (democracy).”

Larimer concluded with his view that consensus is the role of the network, and that “each community might have its own definition of ‘right and wrong,’ which can only be measured by a poll of the subjective opinions of community members.”

Adoption

dPoS is used in all of Dan Larimer’s projects — namely BitShares, Steem and EOS.

Proof-of-assignment (PoA)

Similarly to dPoS, the proof-of-assignment model establishes several trusted nodes within the network, but only those nodes store the entire ledger. By allowing other network contributors to participate without ledger storage, the proof-of-assignment model allows any network-enabled device operating on the Internet of Things (IoT) to mine tokens. Called ‘micro-mining,’ this process enables internet-connected household appliances to contribute to the computing power of a blockchain network.

Pros

By harnessing the computing power of a vaster network of machines, PoA can handle faster transaction speeds with a much-reduced energy consumption.

Cons

PoA is still in its infancy and needs to prove its resilience through the early phases until network adoption gains traction.

Adoption

Proof-of-assignment was developed by IOTW, a blockchain project aimed at bringing any internet-connected devices into the blockchain network. Fred Leung, founder and CEO of IOTW, explains:

“The end goal here, in order to create mass blockchain adoption, is to bring blockchain into every household. PoA and micro-mining will allow any connected device to mine without adding hardware cost. Common people will get the blockchain rewards and so they will learn about blockchain and cryptocurrency. PoA uses very little power, since it does not need to compute proof-of-work. Micro-mining, with witnessing protocol, will allow [a] significant less number of ledgers with the same number [of] verification nodes.”

Delegated Byzantine Fault Tolerance (dBFT)

Delegated Byzantine Fault Tolerance was developed by the NEO team to overcome the Byzantine Generals Problem. The system is comprised of nodes, delegates (who can approve the blocks), and a speaker (who proposes the next block). Various scenarios illustrate how the dBFT protocol is robust enough to protect against malicious actors within the network.

Pros

Malcolm Lerider, senior R&D manager at NEO had this to say about the dBFT protocol:

“dBFT is invented by NEO [previously called Antshares] and has proved to work well. It is a consensus algorithm developed with perfect finality, meaning that all transactions are 100 percent final after the first confirmation. The blockchain cannot fork with dBFT, and high-value chained transactions are trivial and executed much faster. It is built with regulatory and business use cases in mind.”

Cons

Vitalik makes the point that 100 percent finality is always probabilistic, at least philosophically. However, the NEO blockchain has yet to suffer any transaction reversal that contradicts its claim that its algorithm offers perfect finality.

Adoption

dBFT is used by NEO.

Blockchain, as a technology, is still very much under development. It is, therefore, a natural consequence that the issue of the ‘right’ consensus protocol is still under debate. Many of the critical considerations — such as the extent of decentralization — go to the core of the spirit of blockchain as a technology. At least for now, there is no consensus on the right consensus protocol.

Nikolai is a financial analyst and professional trader writing for Forbes, The Next Web and Investing.com. Based in Israel, he has been trading multiple markets and educating traders as a teacher and a mentor. Nikolai has extensive experience in stock market analysis, investment research and various assets such as cryptocurrencies, FX, commodities, equities and bonds.

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Casper: What Will the Upgrade Bring to the Ethereum’s Network?

New friendly protocol to solve the problems of scalability and high transactions costs in Ethereum network. The upgrade means more decentralization, functionality and competitiveness to the system.

On May 8, developers released a planned improvement to Ethereum’s network – a new version of the code of Casper. Hybrid Casper Friendly Finality Gadget was introduced to move network away from mining-related problems, as “excessive energy consumption, issues with equal access to mining hardware, mining pool centralization, and an emerging market of ASICs”, the ultimate goal being to move the network from a PoW to a PoS system.

Let’s see what is known about “possibly the most significant” change to the network to date, according to Ethereum News.

Energy consumption and commissions

While 2017 was exciting due to the exponential price speculation of cryptocurrencies, it emerged that neither Bitcoin nor Ether in their present form would be able to become a fully fledged alternative to fiat currencies because of their very low transaction speeds.

An additional concern was the high amount of energy required to mine leading cryptocurrencies. Therefore, it should come as no surprise that among journalists and analysts, the latest trend has been comparing mining costs to the rate of the energy consumption in each country to determine where mining would be most profitable.

Pic

Image source: Powercompare.co.uk

To date, developers of leading cryptocurrencies have failed to solve the issues related to scalability. In particular, Ethereum scales poorly despite a huge number of miners. Hypothetically, it may seem that as more people mine the cryptocurrency, the more transactions the network can handle. The reality is that as all these miners simultaneously try to process one block, the complexity of production increases and the network bandwidth remains the same. This means that even if the number of miners grows a thousand times, one block will still be produced in ten seconds and the cost of electricity would noticeably increase.

A direct consequence of poor scalability is high commissions. Miners choose transactions with a higher commission, as they are hunting for a greater reward. This leads to thousands of low commission transactions which accumulate and await processing for several days to infinity, turning the blockchain into a universe of unprocessed requests – not to mention small payments which are impossible to process.

Moreover, in recent months a fundamentally new problem has emerged. The arrival of super powerful ASIC miners in the market has become a serious threat for decentralized networks, as they increase the chances that one of the mining pools will occupy a significant share of the hash and make the network centralized.

Ethereum archipelago

Attempts to solve these problems led to an epidemic of Bitcoin hard forks aimed at creating a “new Bitcoin” with higher transaction speed. They were followed by a wave of forks among the most popular cryptocurrencies, such as Ethereum, Monero, and Litecoin. This movement was assigned the name of “ASIC resistance” and has started to gather more and more supporters as the threat of ASIC mining dominance becomes more real.

So far, one of the reasonable approaches to solving this avalanche of problems was demonstrated by the Ethereum team, who decided to create a protocol combining the parameters of two algorithms – Proof-Of-Stake (PoS) and Proof-Of-Work (PoW).

This new protocol is called Casper – Friendly Finality Gadget (FFG) and it completely changes the principles of creating and distributing Ethereum blocks, while reducing the overall complexity of the whole blockchain.

Ethereum developers are sure that the root of all the problems faced by leading cryptocurrencies is the principle of PoW:

“Although effective in coming to a decentralized consensus, PoW consumes an incredible amount of energy, has no economic finality, and has no effective strategy in resisting cartels.”

Furthermore, the performance of the blockchain operating on the PoW algorithm is limited and can hardly provide several dozen transactions per second.

Cryptocurrencies Transaction

Image source: HowMuch

For these reasons, the Ethereum team plans to move from the PoW to the PoS algorithm. The difference between the two is that in the PoW case, users buy real computers that consume energy and calculate blocks at a rate proportional to costs. The subject of purchase in the PoS case is virtual coins inside the system, which are then converted into virtual computers calculating blocks. Under this approach, the probability of signing a block depends not on the processing power, but on the number of coins on the account of a user-validator. If the validator decides to participate in the confirmation of transactions, their funds are frozen with each confirmed block rewarded.

Proof of work

The Casper protocol would become an intermediate step in the transition from PoW to PoS, combining the possibilities of both principles:

“Through the use of Ether deposits, slashing conditions, and a modified fork choice, FFG allows the underlying PoW blockchain to be finalized. As network security is greatly shifted from PoW to PoS, PoW block rewards are reduced.”

Sharding

In addition to the PoS algorithm introduced in Casper, there is another technological novelty being developed – sharding. The idea is that the nodes store only part of the distributed registry, and the underlying mathematics would ensure the system’s transparency and accountability in such a way that each node could rely on the information of others.

The founder of the Ethereum network, Vitalik Buterin, compared the elements of the sharding with islands belonging to the same archipelago:

“Imagine that Ethereum has been split into thousands of islands. Each island can do its own thing. Each of the islands has its own unique features and everyone belonging on that island, i.e. the accounts, can interact with each other and they can freely indulge in all its features. If they want to contact with other islands, they will have to use some sort of protocol.”

In other words, Ethereum’s main chain will be divided into separate chains, or shards, that associated with each other and the main block. The purpose of shards is to provide parallel processing of transactions. Each node can process its shard separately, while together nodes can work in parallel, increasing the network’s bandwidth and transaction speed by several times. At the same time, the task of scalability is solved.

Miners and validators: rescue rangers

The verification of transactions inside each shard will be performed by validators who are the main marshals of the Casper system along with the miners. The validators will ensure the legitimacy of operations with coins and act as a kind of escrow in the system, confirming transactions with their deposit. It should work the following way – if the validator has found a block that, in their opinion, should be included in blockchain, they will be able to approve it by placing a part of the deposit on this block. In the event that this block is added to blockchain, the validator will receive a reward proportional to the share that they invested. Otherwise, if they approve an incorrect or malicious block, they will lose their deposit.

Another task of validators is to create checkpoints every fifty blocks. This will ensure the completion of the blockchain and significantly increase the security of the network, since it excludes the possibility of returning transactions before the checkpoint. According to Ethereum developer Vlad Zamfir, economically any manipulation or an attempt to attack will be of no interest for validators:

“It’s as though your ASIC farm burned down if you participated in a 51 percent attack.”

The minimum deposit size the validator can make for confirmation is set at 1500 ETH which is a significant enough amount to lose and the more reason to think twice before taking part in any manipulation schemes.

The developers also provided a solution to the scalability problem which has been a critical condition for the further development of the network and Ethereum’s ability to compete with more advanced blockchain systems like Graphene.

The increase in processing speed has been reached by developers by means of participation of smaller amount of nodes and delegation of the major work to light clients. Therefore the transaction processing speed will be much higher than on a separate computer, and at the same time the entire network will be able to work on a large number of conventional laptops, while maintaining full decentralization.

Additionally, the network’s security is significantly shifted from the complexity of PoW to the completeness of PoS with the reward given to both validators and miners. At the same time, the reward for the miners for the production of ethers will decrease fivefold – from the current 3 ETH to 0.6 ETH. This will make the coin less attractive for ASIC miners and will reduce the risks of network centralization.

Validators will also become the recipients of rewards, however, in a smaller amount. Their total award is to be only 0.82 ETH per block, which is almost four times lower than the current amount. In the future, according to Vitalik Buterin, Ethereum developers will completely get rid of the PoW algorithm, leaving the reward only for validators in the amount of 0.22 ETH per block:

“Come up with an estimate for the annual rewards given out by the full Casper and sharding mechanisms. Currently, an expected value is 10 mln ETH staking at 5 percent interest, which is 500,000 ETH per year – approximately 0.22 ETH per block.”

At the same time, the efficiency of the network will increase significantly for two reasons. First of them is behind the PoS algorithm consensus which to be provided without mining, reducing energy costs and ensuring the necessary emission of ETH. Secondly, the generation time of the block will be reduced to a minimum, since it is easier to check who owns the largest share rather than to find out which of the miners has the greatest computing power.

Latest news

At the Edcon conference in early May 2018, the creator of Ethereum Vitalik Buterin reported new details about the “friendly ghost”. In particular, Casper, in addition to the reward system of validators, will provide a system of penalties. The main principle of the new reward system is the following – the greater the stake is, the lower the interest rate. For example, the owner of 2.5 mln ETH will receive an annual fee of 10 percent, and the owner of 10 mln ETH – only 5 percent.

Table

Image source: HowMuch

The amount of penalties will depend on the severity of the validators’ faults and can reach 100 percent. In particular, the validators will be subject to fines in case of frequent absence from the network. The emergence of problems with the shard or disk on which the wallet is located will be punished with a fine of 2 percent of the deposit amount. For a group of validators whose shards are simultaneously out of order, penalties will be much higher and measured in double digits. At the same time Buterin notes that the main problem of this approach will be the risk of hacker attacks, because in this case, collective penalties can leave validators without any deposits.

The last news related to the “friendly ghost” came on May 8, when one of Ethereum developers Denny Ryan published the first version of Casper’s updated code on GitHub:

“v0.1.0 marks us more clearly tagging releases to help clients and external auditors more easily track the contract and changes.”

He also added that client developers can now start writing and testing software in their own languages.

What can we expect from Casper?

The launch of the Casper FFG is planned for the summer – autumn of 2018. Since the system will be incompatible with previous versions of Ethereum software, the update will be implemented through a hard fork.

As a scalability solution, Casper remains an important blockchain upgrade and solution for both developers and ordinary users. The Ethereum foundation spent three years to apply all the accumulated experience in making the network decentralized, efficient and competitive industry improving in the long run.

With the bandwidth increased, more transactions are expected to be processed at higher speeds, which means that big companies will be able to build complex structures and develop ecosystems based on the network. A loyal enthusiastic community behind the platform will help to contribute to its development and improve its functionality.

There is still a lot of work to be done on how a new reward system will work in practice and how validators will manage the protocols, but one thing is obvious – Casper is getting closer.

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