Aeternity: Fast, private smart contracts, an oracle machine & truly decentralized mining
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Mobile Friendly – Even Mining!
A couple of years ago I spoke to Cuckoo Cycle inventor John Tromp, who kindly agreed to write an article for this blog explaining it, which you can find here: Beyond the Hashcash Proof-of-Work (there’s more to mining than hashing). This is a highly memory intensive PoW which is therefore very resistant to the development of specialized ASIC mining chips. The upshot of that, is that mining should become much more accessible to ordinary users, making it much more decentralized and avoiding the problems plaguing Bitcoin in which large miners and mining pools gain control of the network. In fact, it should even be possible to mine a cryptocurrency using Cuckoo Cycle on a mobile phone, as Tromp wrote in the article mentioned above:
“When even phones charging overnight can mine without orders of magnitude loss in efficiency, not with a mindset of profitability but of playing the lottery, the mining hardware landscape will see vast expansion, benefiting adoption as well as decentralization.”
“Blockchains are about financial logic rather than data storage.” – Aeternity Whitepaper
Anybody who has been following the recent scalability debate surrounding Bitcoin will probably be familiar with state channels, although you may not have heard the term itself. This is the same technology behind the ‘Lightning Network’, a second layer being built to ride on top of Bitcoin which many people are looking towards to solve Bitcoin’s problems with scaling up to a larger number of users.
In Aeternity, state channel technology will not only open up the possibility of handling high numbers of payments, including low cost micropayments. It also enables more scalable and more private smart contracts. This is because instead of running contracts ‘on-chain’, they are run inside payment channels between users, and only the resulting payments triggered by the smart contract are committed to the blockchain. This settlement happens when the participants decide that the contract has been concluded and close the channel between them. That means that the contract itself, while still enforced by the blockchain and its consensus algorithm, doesn’t need to be published to the public record for anybody to view, therefore enhancing privacy and reducing unnecessary burdens on the blockchain.
The ‘Oracle Machine’
“A theoretical machine that is more powerful than a Turing machine because it has answers to some questions that can’t necessarily be computed, such as “Who won football game X?” – Aeternity whitepaper
A built-in ‘oracle machine’ will allow the smart contracts running on Aeternity to access information about the real world. The ability to know what is happening outside of the closed system of the blockchain is an essential feature for many of the most exciting use cases for smart contracts. Essentially a smart contract is just a program which says ‘if X happens, then do Y with the money’. Opening up the number of possible ‘X’ events from just those things which happen on a blockchain to anything which happens in the world obviously comes with a great expansion of possibilities.
In established smart contract platform such as Ethereum, this outside information must be provided by a third party, either a trusted private entity or a decentralized system built on top of Ethereum with its own token. By incorporating the Oracle machine into the consensus mechanism itself, Aeternity is able to provide trustless decentralized Oracle services more efficiently, without the need for a third party service.
Prediction Markets & Governance by ‘Futarchy’
“The consensus mechanism can change itself” – Aeternity whitepaper
The same consensus mechanism which allows the Oracle Machine to reliably provide data about what is happening or what has happened in the outside world, can also be used to make predictions about what will happen in the future. This is called a ‘prediction market’.
In a prediction market the ‘wisdom of the crowd’ is harnessed, with users encouraged to put money on the line in proportion to how confident they are in a prediction. This kind of prediction market has been shown to outperform ‘expert’ predictions.
This native prediction market can be used to forecast the results of making changes to the Aeternity code, therefore enabling it make governance decisions and activate upgrades whilst always selecting the best path. Although the exact method that will be used for this has not yet been shared, a simple method that has been suggested to implement Futarchy (government by future events) in other projects would be to ask participants to bet on the effect a given decision would have on the value of Aeternity’s native ‘AE’ token, and then follow the path which adds the most value.
Another interesting feature is the inclusion of a decentralized identity system. This will integrate with decentralized storage solutions such as IPFS to store account information, and will allow among other things the ability to send money or engage in contracts with people using human readable usernames instead of unwieldy cryptocurrency addresses.