It’s not surprising that thousands of tokens have surfaced over the past few years. For one thing, billions of dollars have been pouring into blockchain projects and cryptocurrencies. Of course, everyone wants a piece of that pie—and fast. And it’s not an unattainable feat. It’s not really that hard to create a new token—one can follow quick tutorials on making tokens on Ethereum. For many, it has become more of a race by marketing than one founded on technological superiority. In fact, we have seen many instances where promoting a token supersedes actual development.
Another workaround many use is by creating a copy or a “fork” of an already existing blockchain. This shortcut has effectively enabled many cryptocurrency camps to get started automatically somewhere in the middle of the race, instead of at ground zero.
Fork, tweak, release. Voila. You have your own.
At least one blockchain platform, however, is taking a longer road in the race. That is—their strategy to get ahead in the race is precisely the opposite—they are building everything from scratch. This seems counterintuitive, considering how fast and aggressively the rest of the space is playing the game.
But for æternity Blockchain, the only way to attain what every blockchain platform is shooting for—massive scaling, is to nip the problems of blockchains at the root. According to æternity, the scaling problems that plague even the biggest blockchain names in the industry are rooted at their very core protocols.
And that’s where solutions must begin.
Correcting Blockchains: a Solution From Scratch
Ulf Wiger is an Erlang veteran who has spent over 30 years building different technologies and is currently working on the æternity platform. æternity’s developer teams—comprised of many Erlang and programming legends (including Erlang co-creator Robert Virding), have been doing intensive development and tests on State Channel technology.
“At æternity, we’re reasonably farther along if you compare it to other projects that use State Channels,” Wiger says. “You have some projects trying to develop State Channels that are just payment channels.”
“æternity, on the other hand, can also support contracts running on the channel which is very useful for when you have games and applications where the rules are embodied in a contract. Interaction on the channel is then governed by the contracts you decide to use. There are also many competing alternatives that are running on Ethereum. But the Ethereum protocol itself doesn’t know anything about State Channels. So, you have to implement a separate contract on Ethereum that dictates the State Channel logic,” he explains.
“One problem with running solutions to implement features that the blockchain knows nothing about is that there is more for the user to trust. If you’re using a particular State Channel implementation on Ethereum, that’s going to require its own contract and its own complex logic, and its own way of handling disputes that may not look like other State Channel projects on Ethereum.”
Wiger goes on to explain how they were able to solve this in æternity.
“Our solution has been to make the æternity blockchain actually understand State Channels.”
“We have a defined protocol and a defined set of transaction types that you use in order to set things up and to deposit funds or execute contracts. We think that’s clearer, and people could implement different types of State Channel implementations possibly on top of the æternity blockchain.”
He then points out one very vital thing that could ultimately propel the æternity platform into rapid mainstream use. Interoperability has been one of the limitations of blockchain applications, and he says that æternity’s protocol, having been reengineered with massive scaling for businesses in mind, has been designed to make this possible in the future.
“They would all use the same semantics when they go to the chain, so then they could potentially be interoperable.”
Coffee Cards, Nano—not Micro, Payments, and Linear Scalability: State Channels Explained
To understand why many development teams are pursuing State Channels as a scaling solution, we asked Wiger about its benefits.
“The best uses would be for those who need to do a lot of small transactions, and don’t want to pay a fee for every single transaction. I’m not even talking about micro-transactions but nano-transactions,” Wiger laughs. “Another thing is if you want to do transactions with immediate confirmation. Currently, when you transfer coins through the blockchain, you usually want to wait a while to know that the transaction actually made it onto the chain. In Bitcoin, you want to wait about half an hour or more to know for sure that the transaction actually made it.”
“In æternity, since we’re using bitcoin NG and micro blocks, you can get at least some confirmation that the transaction was approved by a miner by seeing it in one micro-block, which could take just a few seconds. Although of course, to make sure that the transaction stays on the chain, you will have to wait a bit longer, as it may actually get kicked out of that chain and then reappear in a later micro-block. But at least you know that some miner felt that it was okay to pick it up. So, it is some kind of confirmation, but typically you would wait a number of key blocks as you know, for example, in bitcoin, you want to wait half an hour to know for sure that the transaction actually made it.”
To make this easier to grasp, Wiger makes a familiar analogy.
“State Channels are kind of like your coffee shop card.”
“You do the work upfront to establish a session with another party and then you wait for the confirmations to know that the State Channel is up. But once it’s up, you can do very rapid transactions because essentially you just propose a transaction, you sign it, and then as soon as it’s co signed by the other party, you’re done. That’s it.”
Delving deeper into the potential of State Channels as a mainstream, scalable solution, he addresses another primary criterion for business use cases. The end-goal for blockchain networks is not just about speed and scale, but cost. Wiger asserts that, although not free, æternity’s State Channels approach can keep fees at a minimum.
“The Virtual State Channel routing service is probably going to want to take some percentage, but their job is going to be pretty easy. It’s just co-signing the work that would otherwise have gone to the chain. And they would probably take a small fee for that. But everything we do in our channel is still going to be as fast and as cheap as on a normal channel. We are also working on making performance as predictable as normal channels as possible,” he adds.
“One other promise of state channels that since you go off-chain, you have a one-to-one connection, and it’s fast. It doesn’t really stress the chain until you want to do one of these things: deposit more coins, top up your channel, withdraw coins, or close up the channel. But you could have the channel open forever and just do very, very quick transactions back and forth. And it wouldn’t cost you anything,” he explains.
“You don’t pay the fees on the transactions and you don’t load the blockchain. So, this is a promising solution to scale blockchain-related use tremendously.”
“You can have hundreds or more active channels on one blockchain node and then you can have thousands of blockchain nodes on the system. And as long as they don’t go to the chain that often, then it’s not really a problem. So then you could have tens of thousands of active channels going. and they’re kind of tied to the chain, but they don’t have to go to it all the time. So, then that’s a way of scaling up and that’s the big promise,” Wiger says.
But while all of these are very encouraging, Wiger admits that there are still some challenges, and a lot of work to be done.
“We have these promises of State Channels for years and there has been a tremendous amount of research on it and it sounds like a great idea. However, implementing it is a very serious challenge,” he narrates. So where exactly are the challenges?
“It mostly has to do with the disputes because it’s still a no-trust system,” he says.
Meeting The World Halfway
“I think we’re perhaps a little bit more inspired by how things are done in telecoms and in the data world where we focus on the communication protocol,” he explains. “I think that’s the way to go, instead of focusing very much on the math and the fancy crypto, so to speak. It’s one thing that you have to know it to build a blockchain, but it may make intended users feel stupid.”
Building an analogy on this, Wiger says, “I understand that an enormous amount of fancy tech goes into an airplane, but when I board one, I just want to trust that it doesn’t crash and burn—not how this is achieved.”
“Most people are probably not going to understand the subtleties of the particular crypto algorithms you use to make your channel safe,” he explains. To make things as simple as possible for the layman, Wiger summarizes the cryptography aspect of æternity that people have to understand.
“We use signing. This is essentially the only crypto part that you have to understand with our channels—it’s that every transaction is co-signed by both parties.”
Beyond the computer science jargon, he states another big challenge—and opportunity for those looking from the other side of the fence—for æternity.
“Right now, what’s holding us back is that we don’t really have that many nice demo applications. It would be great if we have a nice coffee shop app demo or something that works. We also need to have a wallet that understands State Channels. And we’re not there yet,” he says. He adds that these missing links are essentially open opportunities waiting for takers.
“Hopefully, as we begin to reach out and expand our community, more developers and businesses would come in and take the opportunity to become first-movers within the platform. We’re eager to meet like-minded developers and entrepreneurs, which is also why we are launching æternity Universe in September,” he adds.
æternity Universe, the first of what would be æternity’s annual assembly, hopes to attract even more tech builders into the platform. A quick look into what’s potentially in it for interested entrepreneurs and developers—apart from first-mover advantage, reveals quite some tempting perks: up to $100,000 for seed-stage start-ups; up to 1 million Swiss francs (over $1 million) in grants from the æternity crypto foundation.
Although those are quite attractive figures, those who know enough about blockchains know better than to jump in recklessly. It’s a very complex field, which is also why æternity and similar blockchain platforms are also on a mission to educate developers and entrepreneurs about their solutions. User experience—for developers and tech builders, have also been a target area for improvement.
“We have been continuously making efforts to make smart contract programming easier and safer,” he says. Wiger suggests a reasonable starting point. “We have tutorials online for those who want to check it out. They’re free—in fact, those who finish get $100 in AE tokens (æternity’s native token),” he adds.