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Challenging Ethereum 2.0? Competing blockchains are seizing the moment

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4 Monaten ago

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After several years in development, Ethereum 2.0 is now more tantalizingly close than ever before. Despite a shaky start with the Medalla testnet, it seems that development is still on track. Prysmatic Labs developer Raul Jordan indicated in a recent blog post that “2 to 3 months from the Medalla genesis block is still an ideal timeline.”

At this point, what are another three months? The idea of an upgrade has been floating around in some form since the platform was first launched in 2015. The time it has taken to get this far in implementing Ethereum 2.0 speaks to the fact that it’s far more challenging to change the engine in a moving vehicle than it is to build one from scratch.

Since 2015, many developers have indeed taken the opportunity to build their own engines, most often designed to overcome the same issues that ETH 2.0 is seeking to solve — and more, in some cases. While Ethereum 1.0 blazed a trail, the second version will launch in a now-thriving blockchain scene.

And it’s undoubtedly the case that competition is getting stiffer. When EOS launched in 2018, it didn’t necessarily shape up to be the Ethereum-killer everyone predicted it to be before it launched. But recently, Polkadot has been making progress, with its DOT token now second only to Ethereum in terms of market capitalization for a development-platform coin. As things stand, there is plenty more competition, so how will Ethereum 2.0 shape up against other platforms in solving some of blockchain’s most pressing problems?

Cardano vs. Ethereum 2.0

Cardano has been one of the most hotly anticipated rivals to Ethereum for some time. The platform was developed by one of the original co-founders of Ethereum, mathematician Charles Hoskinson, who left Ethereum in 2014 and subsequently founded IOHK, the company building Cardano. 

Cardano has been the subject of many headlines this year as it has launched its latest phase of implementation, known as Shelley, on its mainnet. This has introduced staking to the Cardano network, resulting in significant price action for its ADA token. However, like Ethereum 2.0, Cardano is working on a long-term implementation. Shelley is only the second phase, with three more to come, the next one ushering in smart contracts, with scaling and governance to follow. 

In contrast to Ethereum 2.0, Cardano will ultimately operate an on-chain governance model. A representative from Quantstamp, which has been auditing Cardano’s codebase during recent months, previously told Cointelegraph that he believes the project will ultimately dwarf the other major on-chain governance platform, Tezos, becoming second only to Ethereum as the smart-contract platform of choice.

Tezos vs. Ethereum 2.0

Tezos, which launched in 2018, shares a home with Ethereum, given that the foundations behind both projects chose to base themselves in Switzerland’s Crypto Valley. Tezos was developed by Arthur and Kathleen Breitman, although relations between the Breitmans and the Tezos Foundation have been notoriously fraught with infighting. 

Tezos operates on a delegated proof-of-stake consensus, which it calls “liquid proof-of-stake.” However, researchers have found that Tezos, while not achieving the same level of decentralization as Ethereum, is more decentralized than many DPoS blockchains. Most likely, this is because Tezos doesn’t impose any upper limit on the number of nodes. Tezos and Ethereum 2.0 can, therefore, certainly compete on security and throughput. The main difference between the two is, perhaps, Tezos’ on-chain governance model. 

When the Breitmans conceived of the platform, their vision was for it to be self-maintaining. Similar to what is ultimately planned for Cardano, anyone who meets the minimum staking requirements can vote on protocol upgrades that are then directly implemented once voted through. In contrast, Ethereum governance has always been an off-chain effort and will remain so for the foreseeable future. So far, it would be fair to say that neither model has proven itself inherently superior to the other.

RSK vs. Ethereum 2.0

RSK was launched in late 2017 and caused much excitement around the platform’s promise to bring smart-contract functionality to Bitcoin. Furthermore, with the capacity for many hundreds of transactions per second, it was one of the first real threats to Ethereum in terms of scalability.

RSK is also merge-mined with Bitcoin. Now encompassing up to 48% of the Bitcoin network’s total hashing power, it’s also one of the true rivals to Ethereum in terms of achieving network security through decentralization.

With the backing of parent company IOV Labs, RSK has been making headway in a number of areas. In terms of competition to Ethereum, interoperability and an expansion into the decentralized finance space are the most notable. 

Earlier this year, RSK launched an interoperability bridge with Ethereum, enabling anyone to send tokens back and forth between the two platforms, including RSK-based stablecoins and leveraged tokens launched by developer Money on Chain. Diego Gutierrez Zaldivar, CEO of IOV Labs, believes that it’s this interoperability that’s the biggest lever for blockchain adoption, rather than a rivalry approach. He told Cointelegraph:

“We believe that Bitcoin, RSK, Ethereum, and other open blockchains will form a network of networks, the Internet of Value, that will become the financial and social infrastructure of the future. Interoperability is key to ensure blockchain technology antifragility and mass adoption.” 

Qtum vs. Ethereum 2.0

Qtum achieved a significant milestone in its roadmap this year with a successful fork to a new version of the mainnet. Similar to what Ethereum 2.0 is currently testing, Qtum runs on a PoS consensus. However, while Ethereum 2.0 staking will require a minimum stake of 32 Ether (ETH), creating a significant barrier to entry, Qtum is striving to ensure that anyone can participate in its staking program.

Most recently, Qtum launched offline staking, making it one of the only platforms that allows users to stake funds that are stored in an offline cold storage wallet. With all staking programs, the biggest rewards come from staking a larger number of tokens; however, there are no minimum staking requirements on Qtum. Jordan Earls, co-founder of Qtum told Cointelegraph:

“We see the shift to proof of stake as validating what we’ve long thought from the beginning on energy, user-friendliness, and security. In addition, we’ve unfortunately seen that the old adage that Proof of Work is inherently more secure than Proof of Stake turns out to be untrue with the increase in 51% attacks on [proof-of-work] chains such as Ethereum Classic. We think this validates our view that proof-of-stake is the future of consensus for the vast majority of non-Bitcoin chains.”

Qtum also runs on the Ethereum Virtual Machine, meaning that the project could potentially benefit from developments in Ethereum 2.0, such as sharding. However, unlike Ethereum, which is restricted to the Solidity programming language for now, developers can write their decentralized applications in a variety of more widely used languages. 

Matic Network vs. Ethereum 2.0

As a second layer for Ethereum, Matic Network offers many comparable benefits, such as ERC-20 token compatibility. However, according to the project, it comes with scalability of up to 65,000 transactions per second. The project gained early backing from Binance with a token sale on the exchange’s Launchpad platform for initial exchange offerings and from Coinbase Ventures, which was an early investor. Matic has also partnered with established projects, including Decentraland, to enable high throughput. 

So, if Ethereum 2.0 will bring better scalability to the platform, does this mean that second-layer projects such as Matic Network will no longer be required? Sandeep Nailwal, chief operations officer of Matic, doesn’t believe that Ethereum 2.0 will nail the scalability challenge in the same way that Matic has, telling Cointelegraph:

“Ethereum 2.0 doesn’t provide infinite scalability. The best-case scenario is 64 shards, with sharded chains similar to today’s Ethereum chain. Assuming a single chain improves with PoS up to 50 transactions per second, total throughput will still only offer 3200 tps.”

Nailwal believes that the simple fact of Ethereum supplying a higher throughput will drive even greater demand, creating a situation where Ethereum can never scale to the level required by its DApp activity, adding: “First layer blockchains are settlement platforms. They are not meant to support the ’business activity.’” With the craze for DeFi DApps pushing gas fees ever higher, those using second-layer platforms for features like governance votes can avoid the need to move to a competitor platform.

Tron vs. Ethereum 2.0

An early rival to Ethereum, Tron launched in 2017. Under the leadership of Justin Sun, the platform made strides with its acquisition of BitTorrent. In March 2019, Tether announced it was launching a TRC-20 version of USDT. Within six months, Tron-based USDT had grown to 12% of the total coins in circulation, due to Tron’s superior throughput compared with Ethereum. 

However, Tron’s scalability comes at a cost, given that the platform is based on a delegated proof-of-stake consensus. In 2019, co-founder Lucien Chen announced he was leaving the project due to the “pseudo-decentralized” nature of Tron, which he believed was counterproductive to the company’s mission to “decentralize the web.” In contrast, Ethereum 2.0 will launch with over 16,000 validators on the Beacon Chain, according to ConsenSys. 

Elrond vs. Ethereum 2.0

Elrond is one of Ethereum’s newer competitors, having launched its mainnet in July. In terms of scalability, Ethereum 2.0 will have a hard job keeping up, as the project achieved 260,000 transactions per second on its testnet, thanks to its adaptive state sharding mechanism. 

According to Daniel Serb, head of business development at Elrond, the platform’s approach to sharding is comparable with Ethereum 2.0. Both platforms partition the network nodes, transactions and state of the blockchain to achieve high throughput. However, Elrond starts with a fixed number of shards that can process 15,000 transactions per second. However, the protocol allows for the number of shards to increase dynamically, depending on traffic. In contrast, the number of shards on Ethereum is fixed at 64. Developers may find that building on Elrond is more rewarding in the long term in comparison with Ethereum, as Serb told Cointelegraph: 

“One of the most attractive features of Elrond is that smart contract authors get 30% of the gas utilized by their contract as royalties, without the caller having to pay more. Elrond smart contracts are upgradeable, which will definitely make life easier for any project’s lifecycle.”

Algorand vs. Ethereum 2.0

Algorand, the brainchild of Turing Award winner and Massachusetts Institute of Technology professor Silvio Micali, launched in 2019. The project claims to be the first to use a “pure proof-of-stake” consensus that ensures network security by making it impossible for the owners of a small fraction of its ALGO tokens to cause any harm.

Perhaps the biggest area in which Algorand can rival Ethereum 2.0 is in development on the platform. Two of the biggest stablecoins issuers, Tether and USD Coin, operate on Algorand. In April, Props Project, a decentralized network of apps, migrated from a private blockchain to Algorand.

Algorand’s head of product, Paul Riegle, recently told Cointelegraph that the project has been sizing up the DeFi space with its latest upgrades, with one of the most intriguing being “rekeying.” Currently, multisignature wallets can be a headache to manage if users want to change an authorized private key holder. Rekeying would allow users to move from a single key to a multisignature to a smart-contract-governed address with a built-in spending policy. Within the DeFi space, this kind of development could make things much easier for DApp operators that take custody of user funds.

Cosmos vs. Ethereum 2.0

Cosmos launched in 2019, causing a stir in the blockchain space as one of the first platforms offering blockchain interoperability. Cosmos was developed by Tendermint, a development company appointed by the nonprofit Interchain Foundation to build a cross-blockchain ecosystem.

With interoperability proving to be a big focus area for blockchain in 2020, Cosmos could be seen as having an edge over Ethereum 2.0. But there’s a unifying theme that unites interoperable blockchain projects: Interoperability is a rising tide lifting all ships. Billy Rennekamp, grants manager at the Interchain Foundation, told Cointelegraph how interoperability benefits Ethereum 2.0 as much as any other platform: 

“The ultimate vision is that there should be a large and diverse ecosystem of blockchains, including Ethereum 2.0 that remain composable via Inter-Blockchain Communication (IBC) and together form an Internet of Blockchains, or Interchain. If Eth2.0 utilizes IBC for their cross-shard communication, they will be able to use it for cross-chain communication as well.”

Cosmos also offers scalability through Tendermint’s Byzantine fault tolerance consensus. According to Ethan Buchman, co-founder of Cosmos and CEO of Informal Systems, the classic BFT is arguably the most straightforward and flexible approach to reaching consensus. He told Cointelegraph: “Tendermint’s design decouples the BFT consensus engine from the Proof of Stake economics, allowing more experimentation in the economic details. In contrast, the ETH2.0 consensus is tightly integrated with the rest of the ETH2.0 stack.” 

Ardor vs. Ethereum 2.0

Ardor launched in early 2018 and was one of the first platforms to pioneer a multichain architecture running on a proof-of-stake consensus. Ardor runs on a parent and child chain structure, which offers improved throughput compared with a linear blockchain like Bitcoin or Ethereum. This structure can be compared to Ethereum 2.0’s sharding mechanism, where Ethereum’s Beacon Chain will have sharded chains operating as substructures in parallel with one another.

However, Ardor launched with another critical feature built in that is often overlooked by blockchain core developers: Ardor child-chain operators can issue their own native tokens, which are compatible with the parent chain. Lior Yaffe, co-founder and managing director of Jelurida — which operates Ardor and Nxt — told Cointelegraph that: “Ardor’s child chain bundling system enables an application developer to sponsor the transaction fees for its users, and optionally create a hybrid application of permissioned shard secured by a permissionless public chain,” adding that both features are available on the mainnet. Meanwhile, Yaffe remains skeptical about the Ethereum 2.0 implementation timeline: “How and when Ethereum 2.0 will be ready is anyone’s guess.”

No “one blockchain to rule them all”? 

So far, while all of these platforms have evident merits, none has yet managed to topple Ethereum in terms of adoption. However, given that the full Ethereum 2.0 implementation could still be at least a year or two away, things could still change.

However, even if Ethereum manages to retain its crown, developments in interoperability and scalability mean there’s every reason to believe that these platforms could survive in the long term.



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Blockchain

Bringing carbon emissions reporting into the new age via blockchain

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Dezember 29, 2020

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Blockchain for supply chain management is one of the most practical business applications for large, multi-party sectors seeking trust and transparency across daily operations. As such, the mining and metals sector has now started to leverage blockchain technology to effectively track carbon emissions across complex, global supply chains. 

This month, the World Economic Forum launched a proof-of-concept to trace carbon emissions across the supply chains of seven mining and metals firms. Known as the Mining and Metals Blockchain Initiative, or MMBI, this is a collaboration between the WEF and industry companies including Anglo American, Antofagasta Minerals, Eurasian Resources Group, Glencore, Klöckner & Co., Minsur, and Tata Steel.

Jörgen Sandström, head of the WEF’s Mining and Metals Industry, told Cointelegraph that the distributed nature of blockchain technology makes it the perfect solution for companies within the sector looking to trace carbon emissions:

“Forward-thinking organizations in the mining and metals space are starting to understand the disruptive potential of blockchain to solve pain points, while also recognizing that the industry-wide collaboration around blockchain is necessary.”

According to Sandström, many blockchain projects intended to support responsible sourcing have been bilateral, resulting in a fractured system. However, this new initiative from the WEF is driven entirely by the mining and metals industry and aims to demonstrate blockchain’s full potential to track carbon emissions across the entire value chain.

While vast, the current proof-of-concept is focused on tracing carbon emissions in the copper value chain, Sandström shared. He also explained that a private blockchain network powered by Dutch blockchain development company Kryha is being leveraged to track greenhouse gas emissions from the mine to the smelter and all the way to the original equipment manufacturer. Sandström mentioned that the platform’s vision is to create a carbon emissions blueprint for all essential metals, demonstrating mine-to-market-and-back via recycling.

To put things in perspective, according to a recent report from McKinsey & Company, mining is currently responsible for 4% to 7% of greenhouse gas emissions globally. The document states that Scope 1 and Scope 2 CO2 emissions from the sector (those incurred through mining operations and power consumption) amount to 1%, while fugitive-methane emissions from coal mining are estimated at 3% to 6%. Additionally, 28% of global emissions is considered Scope 3, or indirect emissions, including the combustion of coal.

Unfortunately, the mining industry has been slow to meet emission-reduction goals. The document notes that current targets published by mining companies range from 0% to 30% by 2030 — well below the goals laid out in the Paris Agreement. Moreover, the COVID-19 crisis has exacerbated the sector’s unwillingness to change. A blog post from Big Four firm Ernest & Young shows that decarbonization and a green agenda will be one of the biggest business opportunities for mining and metals companies in 2021, as these have become prominent issues in the wake of the pandemic. Sandström added:

“The industry needs to respond to the increasing demands of minerals and materials while responding to increasing demands by consumers, shareholders and regulators for a higher degree of sustainability and traceability of the products.”

Why blockchain?

While it’s clear that the mining and metals industry needs to reduce carbon emissions to meet sustainability standards and other goals, blockchain is arguably a solution that can deliver just that in comparison to other technologies.

This concept was outlined in detail in an NS Energy op-ed written by Joan Collell, a business strategy leader and the chief commercial officer at FlexiDAO, an energy technology software provider. He explained that Scope 1, 2 and 3 emission supply chains must all be measured accurately, requiring a high level of integration and coordination between multiple supply chain networks. He added:

“Different entities have to share the necessary data for the sustainability certification of products and to guarantee their traceability. This is an essential step, since everything that can be quantified is no longer a risk, but it becomes a management problem.”

According to Collel, data sharing has two main purposes: to provide transparency and traceability. Meanwhile, the main feature of a blockchain network is to provide transparency and traceability across multiple participants. On this, Collel noted: “The distributed ledger of blockchain can register in real time the consumption data of different entities across different locations and calculate the carbon intensity of that consumption.”

Collel also noted that a digital certificate outlining the amount of energy transferred can then be produced, showing exactly where and when emissions were produced. Ultimately, blockchain can provide trust, traceability and auditability across mining and metals supply chains, thus helping reduce carbon emissions.

Data challenges may hamper productivity

While blockchain may appear as the ideal solution for tracing carbon emissions across mining and metals supply chains, data challenges must be taken into consideration.

Sal Ternullo, co-lead for U.S. Cryptoasset Services at KPMG, told Cointelegraph that capturing data cryptographically across the entire value chain will indeed transform the ability to accurately measure the carbon intensity of different metals. “It’s all about the accuracy of source, the resulting data and the intrinsic value that can be verified end to end,” he said. However, Ternullo pointed out that data capture and validation are the hardest parts of this equation:

“Where, when, how (source-cadence-process) are issues that organizations are still grappling with. There are a number of blockchain protocols and solutions that can be configured to meet this use case but the challenge of data capture and validation is often not considered to the extent that it should be.”

According to Ternullo, the sector’s lack of clear standards on how emissions should be tracked further compounds these challenges. He mentioned that while some organizations have doubled down on the Sustainability Accounting Standards Board’s capture and reporting standard, there are several other standards that must be evaluated before an organization can proceed with automation, technology and analytical components that would make these processes transparent to both shareholders and consumers.

To his point, Sandström mentioned that the current proof-of-concept focused on tracing carbon emissions in the copper value chain demonstrates that participants can collaborate and test practical solutions to sustainability issues that cannot be resolved by individual companies. At the same time, Sandström stated that the WEF is sensitive to how data is treated and shared: “Having an industry approach enables us to focus on practical and finding viable ways to deliver on our vision.”

An industry approach is also helpful, with Ternullo explaining that an organization’s operating models for culture and technology must be aligned to ensure success. This is the case with all enterprise blockchain projects that require data sharing and new ways of collaboration, which may very well be easier to overcome when performed from an industry perspective.



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The new ‘Bank of England’ is ‘no bank at all’

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Dezember 29, 2020

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As one of the first countries to industrialize in the 1760s, Britain’s manufacturing revolution instigated one of the greatest practical and ubiquitous changes in human history. But even more extraordinary than the cultural shift itself, is the fact that Britain’s industrialization remained way ahead of potential competition for decades. Only in the early 1900s did historians come to grips with the issues of causation. Max Weber’s pithy answer, “the Protestant work ethic,” pointed to Puritan seriousness, diligence, fiscal prudence and hard work. Others point to the establishment of the Bank of England in 1694 as a foundation for financial stability.

In contrast, continental Europe lurched from one national debt crisis to another, then threw itself headlong into the Napoleonic wars. Unsurprisingly, it was not until after 1815 that industrialization took place on the European mainland, where it was spearheaded by the new country of Belgium.

250 years later, another revolution has begun with the launch of Bitcoin (BTC), but this one is more commercial in nature than industrial. Though the full impact has yet to play out, the parallels between these two historical events are already striking.

Bitcoin may not match the obviousness of industrialization, but the underlying pragmatics touch on the very foundations of the non-barter economy. Like the establishment of the Bank of England, the creation of the cryptocurrency infrastructure has been prompted by ongoing and worsening threats to financial stability: systemic fault-lines created by macroeconomic challenges stemming from the 2008 financial crisis.

If you can’t beat ‘em, join ‘em…right?

Where a central bank once anchored financial enlightenment, it now plays the role of antagonist. For those who could “connect the dots” in 2008, there was the realization that central banks no longer existed as guardians and protectors of national currencies, but rather as tools for creating politicized market distortions, abandoning their duty to preserve wealth in favor of creating the conditions for limitless, cheap government debt. While many of the underlying intentions were benign, the process inherently worked to punish savers and reward reckless debt.

Meanwhile, it has steadily taken time for the potential of digital assets to reach their potential and approach something like critical mass, though thankfully full acceptance shouldn’t take as long as Britain’s industrial revolution. Over the past 12 years, cryptocurrencies have moved from unknown to novel to significant, growing interest. As a result, profound changes are underway, affecting the mechanics by which investors, the investment industry, wealth managers and even the commercial banking sector are engaging with cryptocurrencies.

This interest has accelerated as we enter into a period of deep economic uncertainty and growing awareness that structural soundness is shifting away from traditional investment options. Not only that, this growing financial innovation and public interest has largely occurred outside of the central banks’ control, if not outright antagonism led by the banks’ regulatory arms in government.

Now, many central banks are trying to join a game they’ve tried almost every way of beating, with digital currencies that adopt the glowing sheen of crypto innovation, but which also eschew the underlying innovations and philosophy that made those innovations so popular to begin with.

Follow or get out of the way

The popularity of cryptocurrency has largely been due to its protean fungibility — it has been whatever the independent financial community has needed it to be, from digital currency to speculative financial instruments to smart contracts that can power smart financial technology.

However hard central banks might try to co-opt the hype of cryptocurrency, cryptocurrency succeeding will mark the fundamental end of critical aspects of the central banking monopoly by offering a more competitive vehicle for facilitating commercial transactions and providing a more stable medium to store monetized assets. Cryptocurrencies actually offer real returns on “cash” deposits, something that the fiat banking system has long since abandoned. Most of all, cryptocurrencies reveal the fictitious nature of fiat currencies as a principle.

Cryptocurrencies as an ecosystem will increasingly constrain, redirect and set the parameters for government macroeconomic policies. Certainly, sound alternatives to fiat currencies will drive the latter to the periphery of commercial life, concomitantly reducing the number of tools the nation-state has at its disposal to regulate or respond to changing economic conditions. Above all, this means that government financial engagement can no longer be a rule unto itself. It will have to engage by the same principles as everyone else. A level playing field here has dramatic implications.

Against the backdrop of the essential limits of fiat currencies, current geo- and macroeconomic policies and a new emerging world order, cryptocurrencies offer vast potential as an efficiency facilitating frictionless commerce and investment, a medium of stability against uncertainty and inflation, increased security in value transfer and wealth management, optimum autonomy in an increasingly intrusive climate, and “cash” asset preservation/growth in a world of negative interest rates.

The edifice that supports the concept of a “global reserve currency” is also weakening. This will reduce political influence over global finance, as well as nations’ abilities to run a long-term balance of payments deficits, current account deficits and borrow at little or no interest. Indeed, given current trends, changes in trading mechanics may speedily evolve to the point that such “reserve currencies” no longer have a function at all. And cryptocurrency success will hasten the end of the U.S. dollar monopoly in global commerce.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

James Gillingham is the CEO and a co-founder of Finxflo. James is engaged in developing and implementing strategic plans and company policies, maintaining an open dialogue with stakeholders and driving organizational success. He is an expert in managing and executing high-level strategic objectives with more than 13 years’ experience in building, developing and expanding multinational organizations. His deep knowledge of financial markets, digital currencies and fintech has played a pivotal role in his success to date.