How to Actually Participate in a Blockchain Network (and be Rewarded for it!)

metahash

Many popular blockchains of the current generations have problems with centralization, scalability, and unfairness regarding reward distribution. Bitcoin is dominated by Chinese mining pools, Ethereum becomes congested every time a popular ICO or dApp gets launched, and EOS is too centralized, allowing its block producers to do whatever they want with the network. To cut it short, every major blockchain has a flaw. In the long run it is possible that someday all flaws will be fixed, but currently, those who want to use any of the aforementioned blockchains stumble upon these restrictions. So why do they exist in the first place and how can we overcome them?

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Thanks to the Howtotoken Agency experts for the information and comments provided for this topic.

Decentralization trilemma: what to choose?

According to Vitalik Buterin, every blockchain can achieve only two out of three particular traits at any one time: scalability, decentralization, and security. There are three major consensus models, three different algorithms of agreement between nodes in a blockchain network, and so far only two models have been employed. These employed models are:

  1. Proof-of-Work – Currently used for Bitcoin, Ethereum, and countless other cryptocurrencies. This combines security and decentralization, but it can’t scale because its security relies on hardware resources and the whole network must process one transaction at the time. The transaction is considered final when all nodes have agreed on it. The scalability for PoW means dividing the processing of transactions and the resources between these nodes, thus decreasing security. When you divide a network to X sectors, it’s X times easier to overtake the processing of one of many transactions and insert a faulty one, thus corrupting the whole blockchain. That’s why PoW scalability is currently impossible.
  2. Delegated Proof-of-Stake – This one can scale successfully, but it’s not decentralized, and its naming clearly indicates why. The only important resource in a dPoS network is tokens, which mean votes. All network participants who own native tokens should vote for delegates, the main operators of the network, nodes, and processing transactions. Various networks have a different number of delegates, but it’s a finite number anyways. Lisk has 101 delegates, NEO has 13 nodes, and EOS has 21. The necessity to reach a consensus between a small number of nodes speeds up the process of block producing, that’s why dPoS blockchains are fast. But we just can’t call them decentralized.

These are the two consensus models, each one with its own weakness. Are these the only flaws? Nope, we’re just getting started.

Bitcoin, the kingdom of ASICs.

Anyone who’s familiar with crypto probably knows what an ASIC is – a special chip for mining. Bitcoin’s mining pools dominate the network, having 81% of all resources, and most of them use ASICs. There are three consequences to this:

  1. An ordinary user can’t vote on changes and has no financial resources to compete with giant mining farms.
  2. An ordinary user doesn’t have any motivation to enter this space because he/she knows that they have no chance at getting the mining reward. All rewards go to miners who find blocks and the chance of finding the block is highly dependant on hash power (the amount of power produced by the miner’s hardware), and it also requires some luck to find it. So most network participants have no chance of receiving any coins, even if they endlessly mine blocks.
  3. It’s centralized. Most of the mining power is located in China. The combined hash power of the three large mining pools – BTC.com, AntPool and ConnectBTC – owned by one company, Bitmain, is near 51%, which makes the network vulnerable to the well-known 51% attack.

mining poolsOf course, Bitmain (who recently filed for an IPO) doesn’t want to attack the network, because a successful attack would mean the failure of Bitcoin, but a decentralized network shouldn’t place its trust on any given entity or it’s no better than a banking system, right? Anyway, that doesn’t stop it from dictating its will upon the whole network; for example, mining an outdated type of block that are generated faster by their own hardware than the regular blocks. Is this decentralization?

Ethereum, the kingdom of slow kitties.

Ethereum should be a decentralized smart contracts platform for a myriads of applications that are uncontrolled by any entity, but the truth is that the platform simply can’t handle it. It gets congested every time any significant application, such as CryptoKitties, attracts many users or every time a major ICO is conducted.

ethereum

That is the bottleneck problem of all PoW systems. Bitcoin also has it, but it’s used rather as a store of value, digital gold, so it doesn’t need to have overwhelming transaction speeds. Ethereum is a platform that fails to be a fast platform. It’s currently working on solutions to scale, but it will scale only by 2020. It might not be a problem for developers, and statistics say that Ethereum ecosystem gains 50,000 new developers per month, but it’s impossible to actually use it now at such slow speeds.

EOS, the Kingdom of block producers.

EOS is also a smart contracts platform. It’s a lot faster than its competitors – it has already shown its ability to process 1,200 transactions per second, so it might seem like a convenient platform for developers.

Sadly, it provokes a lot of controversial talk due to its governance model. EOS uses the dPoS consensus model, which we analyzed earlier, and it practically gives unlimited power in the network to its so-called “Block Producers,” the 21 nodes with the highest vote counts. So far, EOS delegates have been caught forming a cartel and violating the EOS constitution by freezing 27 user accounts without asking anyone. So users have some rights here, but their votes are effectively useless. More than 50% of the tokens are controlled by only a few addresses that can choose delegates by their own will. Over time, block producers will pocket more and more tokens, i.e. more votes. These problems emerged right from its launch and some people already claim that EOS won’t even last for the next five years.

I guess you could say that every blockchain solution is horrible and there’s no practical solution for any of these problems, right? Not at all! Bitcoin, Ethereum, EOS developers, all of them work hard on upgrading their systems, and eventually they might achieve their goals of decentralization, scalability, and security all in one. But wait, at the beginning of the article we talked about three major consensus models, right? Well, here it goes…

Proof-of-Stake

What is the main difference between Proof-of-Stake and Delegated Proof-of-Stake? There are no delegates in a pure PoS system. That means that every user can participate in decision making. Owning tokens means having the right to vote, but not delegating it. So the more users who have tokens there are, the more decentralized the network is.

proof of stake

Also, the replacement of the hardware-dependent mining by forging with staked coins allows for the creation of new algorithms for network validation, for example, to divide the whole network into many little groups, known as shards, and allow forgers inside each group to validate transactions that are distributed randomly between groups. This concept is called sharding. Every hour, all validators can be reshuffled between shards, so it’s nearly impossible to organize an attack since all malicious actors must be in the same shard to perform it.

The Ethereum team is currently working on developing this solution, but is there any other existing blockchain network out there that already has a functioning PoS consensus system that can be used right now? Yes, and it’s called #MetaHash.

Blockchain 4.0

#MetaHash is a decentralized smart contracts platform that tries to achieve all three goals of the decentralization trilemma: to be scalable, secure, and decentralized. It has several interesting features that can become an elegant solution to all presented problems:

  1. To be as decentralized as possible, #MetaHash is allowing everyone to start a node, thus letting as many users as possible become validators. The reward distribution system lets every user who stakes a coin get his/her reward from transaction fees. It’s not based on luck; everyone gets fairly rewarded.
  2. In order to be secure, the system divides all nodes randomly, assigning each one to five different roles. That drastically increases the security of the blockchain, requiring having more than 51% of all resources to perform a successful attack. With #MetaHash, an attacker would have to gain more than 67% to land an attack. But even if one of the nodes becomes malicious and gains more than 67% of votes, it won’t become a threat to the validity of the blockchain. #MetaHash block producers are responsible only for data synchronization, and they are not the final validators. After the block is produced, it’s verified on other layers by other nodes that have different roles. A faulty block gets declined. So, to have 67% on every layer there would have to be 90% of corrupted nodes in the whole network, so the concept of a 51% attack simply doesn’t work with #MetaHash.
  3. And the last problem – being fast and scalable is also being solved by PoS consensus, or as it is now being called  in #MetaHash, multi-PoS. The network is able to achieve 50,000 tx/s, cutting down the time of validation to 3 seconds. That’s achieved by allowing many users to create one block simultaneously and the approval for it is nearly instantaneous. That makes the blockchain very fast.

Overall, it’s a project that is oriented towards users, not towards commercial mining enterprises. It encourages everyone to participate, to stake tokens, validate transactions, and to share unused computational resources and storage space for dApps, earning rewards in the process.

How to participate:

  1. You can download the #MetaGate wallet on the official site by clicking on the corresponding button.
  2. It will redirect you to the download site where you can choose the version for your operational system and download it.
  3. Run the installation, choose the folder to install the wallet, and accept the user agreement.
  4. After the installation is complete, you can finally run the wallet.
  5. Read the terms and agree with everything to continue.
  6. Now you can successfully use the wallet.
  7. Open the #MetaWallet tab and create your wallet by entering a name and password.
  8. Once you have some #MetaHashCoins in your address, you are ready to forge! All you have to do is stake them and leave the wallet open on your computer.

cryptowallet

As we can see, this process is pretty easy and it doesn’t require users to buy mining equipment for thousands of dollars. It’s also a surefire way to earn, as it is not relying on pure luck. The manufacturer of dream cars for many crypto investors, Lamborghini, teamed up with #MetaHash, so the project appears to be legitimate. Maybe it’s time to give it a try? You can check their Telegram channel for quick updates on their news and development!

All materials on this site are for informational purposes only. None of the material should be interpreted as investment advice.

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