As you can see, the expected dates for Ethereum PoS (test & release) is somewhere in mid 2019. The exact date for Ethereum's Casper Proof Of Stake is uncertain. If you are an ETH investor or interested in investing, I suggest you read up on the events leading up to these delays. In the next section I explain transition from the Initial Ethereum Roadmap and the Updated Ethereum Roadmap with Casper Version 2.

First, let’s quickly go over what the road map was supposed to be last year. Again, I’m going to keep this simple.

As of last year, the roadmap included two major milestones: Metropolis & Serenity

Both of these milestones were efforts to move towards eventual scalability with Proof Of Stake & Sharding. 

Phase 1: Byzantine
The Byzantium update would bring privacy improvements. It took place on the Ethereum chain last year.  

Phase 2: Constantinople  
PoW/PoS Hybrid (Casper FFG) and more.  Constantinople was supposed to happen earlier this year. But all priorities were shifted to rolling out Proof Of Stake & Sharding as soon as possible.

Up until June 2018, Constantinople’s Casper FFG was still in play. However, that plan is now being dropped as well – for something more clean and efficient. This brings us to the new release-date milestone on the Ethereum Roadmap for 2018:  Casper V2

The initial plan was to transition to Proof Of Stake with Casper FFG. Casper 2.0 was to be a Smart Contract that allowed you to become a validator with a deposit of 1500 ETH. The Ethereum estimated this release date to be somewhere in 2018.

Proof Of Stake was to be implemented first and the team would roll out Sharding after. There were separate deposit pools for Sharding and Casper.  

To Summarise:

1. Casper FFG to be a Hybrid PoS and PoW chain
2. 1500 Ether deposit required to become a validator
3. Casper rolled out first, Sharding rolled out after

Due to some misleading posts and misunderstood comments, several people are confused. These are the two primary impressions that people have in regard to the Casper update:

1. Casper and Sharding will be combined and launched together.
2. Sharding will now be prioritized over Proof Of Stake

This is not true at all. And it’s important that expectations are set right.

The plan for Casper FFG requiring 1500 ETH deposits will be scrapped.  Casper V2 will be implementing a “beacon chain” – onto which Casper and Sharding will be merged (here is where people get confused).

This does not mean that Casper and Sharding will be launched on the beacon chain together. It simply means that Casper and Sharding will be implemented on the same chain.  So, Casper could come first, and Sharding be implemented much later. Or vice-versa. 

So to summarise:

1. A Beacon Chain that will be used for both: Casper & PoS validators

2. Sharding and Casper will be worked on concurrently – they are independent efforts

3. Only 32 Ether minimum staking deposits

The beacon chain was originally supposed to be used only for the Sharding implementation.

The Casper V2 Ethereum Update has been confusing a lot of people. I don’t blame you guys – the information has been all over the place. But maybe this analogy will help:

Think of the Casper and Sharding as two cars going to a family picnic. To get there, both cars have to merge onto Highway 10. We’re not sure which car will merge on first. We simply know that:

1. Both cars are headed there (Casper and Sharding are the two cars)
2. Both need the Highway to get there efficiently (Beacon chain)
3. Everyone needs to eventually get to the family picnic (scalability)

Similarly, Casper and Sharding are two independent projects – either could be completed first.This unified approach will allow for a minimum staking requirement of 32 ETH deposits.

Casper will most likely be launched first, but we can’t rule out the possibility of Sharding going faster.

Ethereum's release date for Casper FFG was scheduled for 2018. However, the new version of Casper will have a release date somewhere in 2019-2021. Yes, the rather timeline for release is vague, but there's good reason for that. Let's recap quickly:

As mentioned, the initial plan was to roll out Casper FFG as a hybrid PoS/PoW. Casper FFG would have Proof of Stake (PoS) but would not have Sharding. With the PoS release, Validators would be allowed to deposit ETH in order to stake. However, they would require to 1500 ETH in order to participate in the PoS consensus. This wasn't ideal because it would entail a lot of centralisation.

In 2018,  the need for scaling became increasingly urgent. The Ethereum team shifted all focus to the key releases that would move the needle toward scalability; namely, the PoS release and Sharding release.  Casper FFG was to be the first PoS release, but would still use the PoW chain. This release date was estimated to be somewhere in 2018. The team was to release Sharding after PoS.

Casper FFG allow Ethereum to release a PoS quicker. However, it would entail "double work". Since Ethereum would have to eventually release/migrate to a pure PoS chain. Because of this, they decided to scrap working on Casper FFG. They will now be working toward releasing Casper V2 – which will have PoS on the beacon chain as well. Since Sharding will be implemented on the beacon chain as well, it allows Ethereum to have a unified approach for their releases.

Unfortunately, this  pushes back the release date for Ethereum Casper V2 to around 2019-2020. Sharding will be released on the same beacon chain that will be used by the PoS release. This does not imply that Casper and PoS are coming together.  I would estimate it's release date to be in 2021. But there's a possibility that it may beat the PoS to the release finish-line. 

Related Posts:
1. Ethereum ​Casper V2: All You Need To Know
2. Ethereum Sharding Explained Simply

Three times this week I was asked the following question:

“Why are the prices still low when the fundamentals seem so strong?”

Fortunately, there’s a two-worded answer:  Animal Spirits 

It’s not a simple answer – not by a long shot. But it is, indeed, a short answer that encompasses the intricacies of greed, fear and human behaviour.

To understand this, let’s first question if prices are really low? Or are we simply benchmarking prices at their all time high  –  prices that were guided by the animal spirits of crypto investors.

John Maynard Keynes, a famous economist, used the term “Animal Spirits” to describe the irrational decisions investors make in an uncertain environment.

But today the phrase “Animal Spirits” seems to be used primarily in environments of high confidence.  Confidence & optimism, however, aren’t the only byproducts of Animal Spirits. Fear & pessimism play an equal share in the phenomenon.

Should it not then make sense that irrational confidence be followed by equally irrational fear? Optimism that drove prices to exuberant highs should follow with a similar anxiety that would drive prices to irrational lows. For if it does not follow, eventually at least, then perhaps the optimism was not irrational after all. In a way, this explains the driving mechanism of “bubbles” (and also why it’s claimed impossible to forecast)

Nobel Laureate winner Robert Shiller defines a ‘speculative bubble’ in his book ‘Irrational Exuberance’ as follows:

Interestingly, Robert Shiller makes sure to emphasise that “speculative bubbles” don’t simply burst and disappear. Rather, they tend to inflate and deflate in accordance to the accepted narrative.

A viral epidemic can reappear if a new environmental factor reignites the contagion rate.

Similarly, a deflated speculative bubble can “re-inflate” if a new narrative is strong enough to ignite the animal spirits of investors.

Ah, but this poses yet another tricky question for the crypto space.  Have we already “re-inflated”? After all, prices did surge to an all-time-high of $1000 before deflating to $200.

Have we already re-inflated?!

Is it possible that we see another epidemic spark the animal spirits to a point irrational confidence?

A strong argument can be made in favour of another speculative bubble – a larger one. In his definition of a “speculative bubble”, Shiller goes on to explain what follows the price increase in a speculative bubble:

The crypto market allowed for a new class of investors to be first entrants. They consisted mostly of people who were young & technologically sophisticated. But they were by no means the “large class of investors”. Those are yet to come in mass.

Already we hear  reports of new & larger entrants into the market. Will their success draw the envy of other institutions? And will that, in turn, lead to an environment of overconfident gambling and exuberance that we have seen in the past?

Only time will tell. But one thing is certain, never before have we seen events play out at this rapid of a pace. Ahh, what a time to be alive.

Radix DLT is beginning to garner increasing attention in the crypto-space. Radix rose from an obscure and exotic "coin" in 2017 to one of the most discussed technologies in 2018. Every week, I receive several questions on Radix’s Scalability & Sharding or on their Tempo Consensus Method.  But one of the more common questions goes something like this:

"Hey, what are your thoughts on the Radix Coin ? "​

It recently dawned upon me that while I’ve discussed Radix’s infrastructure, I haven’t really delved into the “Radix Coin”.  While Radix does indeed sport a crypto coin, it is so much more than that. Radix DLT is a fully fledged distributed ledger technology platform. The platform will feature decentralised applications, mass scalability, and of course, the Radix Coin as well – 'RDX'.

In this post, however, we focus our discussion on the Radix Coin (RDX) and its purpose in revolutionizing the digital economy. If you’re interested in the Radix  DLT Infrastructure – mainly its Consensus and Sharding approach, then you can read the following introductory & simple explanations:

• Radix Sharding  – Explained Simply
• Radix Tempo Consensus Algo – An Easy Analogy

The following sections will discuss how the Radix Coin will serve and benefit from the Radix DLT infrastructure.

The Radix Coin will be the token used on the Radix DLT platform to fuel various operations. However, the coin and the platform have special features that make the dynamic rather interesting. The Radix coin will be a relatively stable coin. Notice the word "relatively" – this is key. Several people mistaken the Radix Coin to be a stable coin. This can lead to confusion – especially for interested investors. 

Radix DLT designed the RDX token so as to have low-volatility. In that vein, the Radix Coin will initially be pegged against the US Dollar where 1 Radix Coin will be equivalent to $1 USD. However, after a certain period, the price of the Radix coin will float free.  Low-volatility and relative stability will be maintained by increasing the supply of the coins. 

“Wait, what the… what do you mean by ‘increasing’ supply of the coins? “

Don’t worry – we’re not talking about ‘Supply inflation’ here. Radix DLT will be using an algorithmic model that will monitor demand and accordingly increase as well as decrease the total supply of the Radix Coin at regular periods. The low volatility of the Radix Coin will help facilitate mass adoption. And the flexible supply should satisfy investor needs as well.

In the following sections, we will discuss how investors and merchants both benefit from this flexible supply system.

Upon first hearing “stable coin”, cryptocurrency investors are immediately skeptical. After all, why invest in something if it’s going to be stable in value? This is an understandable concern since we’re conditioned to the volatility of cryptocurrencies. The Radix Coin, however, functions sort of like a Bond with a variable interest rate.  The value of each Radix Coin may not rise and fall substantially. But the investor will receive more RDX at regular intervals which should increase his total amount of RDX.

For example, let’s say John has  2000 RDX. At the time, each RDX is valued at around $1.10.

• No. of RDX: 2000   
• Value of each RDX:  $1.10
• Total Value: $2200

In the coming months/years, the demand for the Radix Coin skyrockets! Now, each of John’s RDX will not increase drastically in value. Instead, the total number of RDX he has will increase.  His total Radix Coins will increase to 6000 RDX and each RDX will be worth $1.15 (Remember – the Radix Coin will be relatively stable.)

• No. of RDX: 6000  
• Value of each RDX:  $1.15
• Total Value: $6900

Note: This is just an example – as details on the calculations have yet to be released.

On the flip side – if the demand for the Radix Coin reduces, the platform has mechanisms in place that will perform a token-burn process to reduce the total supply of the Radix Coin. Again, details on how this process is yet to be revealed. We will all have to wait for the economic white paper that should be released closer to their mainnet launch.

However, we can rest assured that investors don’t have to worry about their investments being “stale”.

One of the biggest reasons the Radix Coin features relative stability is to facilitate mass adoption. Without stability, mass adoption across the world will be near impossible.

As things stand, the general public find it troublesome to hold cryptocurrencies for anything other than a speculative investment. You may hear increasingly more reports of merchants accepting cryptocurrencies as a form of payment. However, most of these merchants are immediately converting their cryptocurrency back into regular FIAT.  Why? Well, simply because merchants need to be able to rely on their revenue holding value in the months that follow. Cryptocurrencies are far too volatile to offer the level of reliability that merchants need in order to run an efficient and sustaining business.

Similarly, regular consumers will only hold a fraction of their purchasing power in cryptocurrencies for similar reasons. With the current state of the market, it’s a serious gamble to rely solely on your holdings of cryptocurrencies to pay your rent or mortgage. The Radix coin will safeguard against violent price swings using an elastic-supply. This will allow merchants and consumers to hold their Radix Coins with reduced risk.

Scalability has been one of the biggest limitations of current blockchain solutions. Most DLT consensus models have to make the tradeoff between throughput and decentralization. Radix, however, achieves high throughput, security and decentralization using a unique approach to Sharding along with their Consensus Method – Tempo .   The Radix DLT platform ensures that every single device can be part of the network and use the Radix Coin to transact with high speed across the globe.

With "Stable Coins", like the Radix Coin, being the latest talk of the town, its no surprise that investors and enthusiasts alike are blazing with questions on how to seize opportunity on this relatively new crypto class.

The concept of price stability around the radix coin will be primarily based on elastic supply. Depending on the demand of RDX, there will either be a coin issuance to each RDX holder, or a coin burn. While much of the economic structure behind the Radix coin is yet to be unveiled, their scaling solution - Radix Sharding & Tempo Consensus – has been fully implemented and tested. 

Follow up Reads:
1. Radix Sharding  – Explained Simply
2. Radix Tempo Consensus Algo – An Easy Analogy
3. Radix DLT – The Future of Crypto?

There’s been a great deal of confusion in regard to Ethereum’s new approach to Casper. Part of the confusion stems from the updated timeline for Ethereum’s PoS (proof of stake). And the other part of the confusion stems from this new “Beacon Chain” thingy.  Yes, I said ‘thingy’.

So, in this post I’m going to try to break things down in an easy manner for you guys. What exactly is the Beacon chain? And what role does it play in Proof Of Stake and Sharding

As usual, I’ll keep it simple – and avoid the unnecessary details.

Before we go any further, allow me to break down the structure of Ethereum’s Casper V2.  There will be three chains that we are concerned with:

1. The Ethereum PoW Chain
2. The Beacon Chain
3. The Sharding Chain(s).

All three of which will be linked together in Casper V2.

This is the chain that Ethereum is currently using. It’s using the traditional Proof Of Work (PoW) consensus method. In Ethereum’s Proof Of Work chain, miners currently validate blocks by running the PoW Cryptographic Puzzle.

However, Ethereum will be using Proof Of Stake in Casper. Miners will have to transition to the Proof of Stake chain if they want to keep validating blocks for the Ethereum Network.  To do so, they will have to deposit 32 Ether into the Beacon Chain. Once they do that, they will become Validators on the Beacon Chain.

Important:  Miners are not the only ones who can become validators. Anyone can deposit 32 Ether from the Ethereum PoW Chain to the Beacon chain to become a validator

Alright, so the Beacon Chain is where all the confusion stems from. But it’s actually quite simple. The Beacon Chain serves two primary roles

1. The main Proof Of Stake chain

2. The base layer of the Sharding solution

   
   

To Simplify: The Beacon Chain will link to the Shard Chains and “signal” which blocks from the Shards should be added onto the main chain. The main chain will be validated & finalized using Proof Of Stake. The main chain also resides on the Beacon Chain. The Beacon Chain will also play a crucial role with the Shard Chains. It links up to the Shard Chains to listen for blocks that will be included onto the beacon chain (the PoS chain).

Yes, there are going to be multiple Shard Chains. Remember, Sharding is an attempt to avoid having “every single node validate every single transaction”. This will allow for more scalability.  In order to do so, instead of having one single chain, we will have multiple shard chains. I explain Sharding in more detail in this article: Ethereum Sharding Explained Using An Analogy.

Essentially, you can think of the Shard Chain as a group/block of multiple chains. All the transactions will take place on these Shard Chains – and will be split between each shard.  The account data will also be stored on these shard chains.

Above, I mentioned the Beacon Chain links up to a Shard. Well, there’s also a link from the Shards to the Beacon chain. This link needs to be attested/signed-off by a sub-group of Validators that will be pseudo-randomly picked.
​

Casper will be using Proof Of Stake which does not require “mining” to validate blocks. If a miner wants to continue validating blocks on Casper, he will have to deposit 32 Ether into the Beacon Chain like everybody else.

Once 32 Ether is deposited, the person will go into the “Queued Validator” pool and eventually get added to the “Active Validator” pool. Active Validators will be responsible for producing blocks, sign off on blocks and sign off on links (to shards).

You may be wondering why the Ethereum team chose the term “Beacon Chain?”.  The Beacon Chain was originally only part of the Sharding spec. It’s role was (and still is)  to link up to Shard Chains and signal which blocks should be added to the main chain. 

The Validators utilize the crosslinks between the two chains to “listen” for new blocks on the shard chains. They then sign off on the block and the crosslink if it is to be included on the main chain.

Beacon essentially means “Lighthouse/signal” – and that’s precisely what the role that the Beacon Chain serves.

Disclaimer: I’m sort of taking an educated-guess at this one. To be honest, a lot of the terminology in Sharding & Casper PoS is sorta...confusing (e.g: proposer, collator, validator, committee...come on Vitalik!)

As you can see, the Beacon Chain in the new Casper implementation isn't all that complicated. All you need to know is that it will serve as the foundation for the Proof Of Stake and facilitate the communication via the Shard Chains (via cross-links).  You can become a Validator on the Beacon Chain if you deposit 32 Ether from the current PoW Chain. Once you do that, you can take part in the Proof Of Stake consensus process as well. Validation & Finality  will take place on the Beacon Chain. Transactions & Account Data will be on the Shard Chain.

Simple, eh? Tbh, maybe all you need to read is the conclusion of this post. Damn. Oh well.

Follow up Reads:
1. Casper Roadmap Update Explained
2. ​Ethereum Sharding - A Simple Analogy
3. Finality: Understanding Settlement & Finality

There has been a lot of talk about Bitcoin ETFs recently - So let’s explore the basics of what a Bitcoin ETF really is, and the implications of it. 

Put as simply as possible, an ETF (Exchange Traded Fund) is traded on the stock market just like a stock, but instead of being a share in a public company such as Amazon, it tracks the price of an asset instead. 

There are many types of ETF's that track different things, but for simplicity lets use Gold as an example:

If you think gold is going to rise in price, you could go to a stock exchange and buy shares of a Gold ETF, which can be shares in a Trust which stockpiles physical gold. If gold goes up, the ETF shares will go up similarly. This way, you don’t have to go to a futures market or hold any gold yourself. 

A bitcoin ETF would be similar to the above example: an easily tradable asset that ultimately tracks the Bitcoin price. Traders and investors could go Long (buying in anticipation of increasing price) or Short (selling in anticipation of decline).

It may not matter much at all. We got this far without an ETF after all. However the clearest benefit to a Bitcoin ETF is in opening the market to many more participants and significantly more capital. 

In much the same way as you don’t want barrels of crude oil in your living room, many individuals and institutions don’t fancy getting their hands dirty on the unregulated, uninsured, hackable, dodgy overseas crypto exchanges such as Bitfinex.

Many ETFs have been proposed to the SEC (US Securities Exchange Commision). However, all but one of these were all recently denied by the SEC, killing most of the dreams and leaving one last man standing: The VanEck SolidX ETF.

This is the ETF you have probably heard most about, brought to the SEC by a partnership of Investment firm VanEck and financial services company SolidX. This proposal is also endorsed by the CBOE (Chicago Board Options Exchange), known for launching their Bitcoin futures in December), and if approved it would trade on the CBOE exchange.  

Buying this proposed ETF would basically represent shares in a Trust, and the Trust’s assets would be securely-stored Bitcoin (insured against loss or theft). Therefore as bitcoin rises in price, the assets of this Trust appreciate and make money.

ETF Hopefuls file a “Proposed Rule Change” to the SEC. When received, the SEC posts a “Notice of Filing” and then has 45 days to approve or deny (or delay decision on) the proposed ETF. 

Here is the Notice of Filing for the most hyped up ETF of the year, the VanEck/SolidX ETF (mentioned above):

“Notice of Filing of Proposed Rule Change to List and Trade Shares of SolidX Bitcoin Shares Issued by the VanEck SolidX Bitcoin Trust”

VanEck/SolidX ETF Approval - When Will We Know?

The SEC delayed the decision on the VanEck/SolidX ETF to September. They are able to delay further 2 more times, and very likely to do so. This gives the deadlines of:

1. September 30

2. December 29

3. And finally, February 27 

Bitcoin ETF's & The SEC - What Does It All Mean?

The SEC is not friendly to these proposals, and their reasons are clear.

The Bitcoin market is unregulated, easy to manipulate, and not liquid enough (not enough trading volume occurs). The SEC are concerned that Bitcoin trading almost exclusively 

occurs on unregulated venues overseas that are relatively new and that generally appear to trade only digital assets.

Given these problems, the VanEck/SolidX ETF is also in trouble, as currently it does not appear to solve any of them. There is a low likelihood that it will be accepted, at least before the Crypto markets have matured a whole lot.

While an ETF would be great for adoption and more widespread trading of Bitcoin, it is certainly not a necessity, and many other projects are in the works, such as those listed in our article:

Ever since Bitcoin was created in 2009 by Satoshi Nakamoto, it has largely been pushed aside by the traditional financial services industry and the institutional space. A similar attitude has been displayed towards most cryptocurrencies and digital assets, based on fear and the fact that very little was known about these new “actors” in the industry. Now that they are gaining traction and have received the attention of millions of investors, lawmakers and governments are beginning to address the question of regulation for these virtual currencies.

This war between the institution and the new wave of digital assets has been going on for years. However, it seems like we are noticing a shift in mentality and approach from the institutional space towards bitcoin. More and more financial organizations are changing their opinion about the first-ever virtual peer-to-peer currency and have developed interest in these new forms of potentially lucrative investments for their loyal customers.

In this brief overview, we will see how the tide is turning for bitcoin and how it is becoming one of the most sought-after assets by large and reputable financial firms all across the globe. In turn, we will demonstrate how this could eventually lead to the crypto markets regaining their strengths and how we might be on the cusp of one of the largest bitcoin bull runs in history.

Some recent events and news have been very positive for bitcoin and its slow but steady breakthrough within the institutional space. Institutional investors refer to large entities such as banks, hedge funds, insurance companies, investment groups and more. The first major news that has been affecting the space as of recently and that showcases bitcoin’s growing position within the institutional markets is the upcoming (and recently delayed) decision by the U.S. Securities and Exchange Commission (SEC) regarding the approval of a bitcoin exchange-traded fund (ETF).

An ETF is a fund that represents an asset’s value and that is traded directly on the stock market. They are considered passive investments.

In the recent weeks, the cryptocurrency community, as well as actors in the institutional space and even some members of the SEC, have been strongly advocating for the creation of a bitcoin ETF. This truly shows that there is a heavy desire from financial firms and large investors to join the cryptocurrency trend.

Another recent report by Forbes has stated that the Northern Trust, a financial services firm that has close to $10.7 trillion in assets under custody, has opened their doors to companies involved in the crypto space. In addition, the firm is supporting multiple blockchain-based projects. Moreover, Northern Trust’s President, Pete Cherecwich says he believes in a tokenized economy and future.

The Intercontinental Exchange (ICE), parent company of the New York Stock Exchange, has announced that it will be launching a new company called Bakkt which aims “to create an open and regulated, global ecosystem for digital assets”. It will enable big organizations to purchase, sell, and safely store virtual currencies and other decentralized assets. With large companies such as Microsoft and BCG involved in the project, this shows how blockchain-based applications and crypto-assets are gaining in popularity and are making their way through various industries. The ICE also plans to initiate a one-day physical bitcoin futures contract when Bakkt launches.

Furthermore, the National Bureau of Economic Research (NBER) recently published a 70-page-long report on the “Risks and Returns of Cryptocurrency”, analyzing three major coins: bitcoin, ripple, and ethereum. The fact that this paper is being published already shows that cryptocurrencies are actively being discussed by institutional investors. The NBER explains a “strong time-series momentum effect and that proxies for investor attention strongly forecast cryptocurrency returns”. The report even goes as far as recommending investing in digital currencies with “1 or 4 or 6 percent in bitcoin”.

Lastly, popular cryptocurrency exchange Coinbase has recently announced the launch of the Coinbase Index Fund. It allows institutional investors, with a minimum investment of $250,000, to place money and bet on the performance of the Coinbase Index. The Coinbase Index is composed of all the coins listed on the American giant’s platform. We clearly see that the desire to invest in cryptocurrencies is not strictly one-sided, but that the crypto space is also eagerly waiting for these institutional investors.

In conclusion, there has been a shift in the way digital currencies, especially bitcoin, are viewed in the institutional space. Previously considered scams, frauds, and even fake, they are now starting to be looked at as real financial assets with considerable potential and upside. In this article, we have seen that numerous events have cemented the belief that opinions are changing, and so has the place of bitcoin in larger investors’ hearts. As a result, we can probably assume that the crypto markets will be positively impacted by the increase of institutional investors in the near future. 

Sharding has morphed from an obscure concept in 2017 into the buzz-word of 2018. The need for blockchain scalability has become glaringly obvious, and several projects have turned to Sharding as a solution.

However, Sharding a blockchain is not a simple task. In fact, it poses challenges that have our best thought-leaders scratching their heads. Several projects have made lofty promises of future scalability using Sharding. But, only few have provided a viable Sharding solution for mass adoption. RadixDLT is one of the rare projects that brings forth a novel approach to Sharding –– an approach that seeks to meet the demands of mass adoption

Right from its conception, the goal for Radix was:  Every single person, on every single device using a single protocol simultaneously.

​Every single person, on every single device using a single protocol simultaneously.

The RadixDLT Sharding architecture was designed (unlike other projects that approached Sharding “after-the-matter”)  to allow for unbounded scalability while maintaining security, and maximizing decentralization.

In this post, I will explain how Sharding works in Radix in a simple way – without any technical jargon.

Break a window, and you have shards of glass. Break an iceberg and you have shards of ice. A shard is simply a broken piece of ‘something’.  So, when you “shard” something, you’re simply breaking it into smaller pieces.

But, why do we shard? Well, you usually shard something because it’s easier to manage. For example, we ‘shard’ a large pizza because it’s easier to eat one slice at a time. It also allows us to share (distribute) the pizza with friends a lot easier.

Similarly, when a database gets too large to handle, we shard it and distribute it across multiple computers. There you go –– you now understand distributed computing & Sharding. It’s really that simple.

Sharding has been used to partition databases for a long time. You simply cut the database (think of an excel sheet) horizontally into several pieces and distribute across multiple “database servers” (machines that ‘serve’ you data when you need it). When the data needs to be retrieved or processed, the relevant database server is called upon to do the task.

In Blockchain these “servers” are what we call “nodes”.  However, Sharding a decentralized system isn’t as straightforward as we’d like. There are complications that a centralized system doesn’t need to concern itself with.

Every distributed system requires a Consensus Method. But, developing a Consensus Method for a Sharded blockchain is tricky. You find yourself sacrificing security in favor of scalability.

Why? Well, a huge component of the security comes from the fact that every node stores all the data. Since every node keeps a copy of the entire database – you can’t cheat/lie about past events. But when you shard that database, each node stores partial data. Suddenly, you can tell Node Bob one thing, and tell Node Lisa another.

To understand this better, think back to when you were a kid.

Remember when your Mom grounded you and your Dad didn’t know about it? If you were anything like me, you tried to sneak out by asking your Dad for permission. Dad didn’t have all the info. And you took advantage of it.

Mom and Dad represent a Sharded database. Sure, together they have all the info needed to run the household. But as individuals, they don’t – and can be lied to about past events (like you being grounded or not)

Founder & CTO  Dan Hughes identified the scalability issues that would plague Bitcoin back in 2012. After several attempts at improving the protocol, he realized that the only solution is a brand new architecture and consensus method. Six years and a lot of sweat later, he brought us Radix DLT – a unique Sharding approach and consensus algorithm.

Radix DLT approaches Sharding in a unique but simple manner.  Most projects take existing Consensus Methods and build a Sharding solution on top of it. But as discussed, this leads to sacrificing security. For example, Sharding on PoS network could result in a One Percent Shard Attack.

Radix, however , started with a Sharded network –– and built a unique consensus method on top of that network. This “Sharding-first” approach allowed them to bypass the limitations faced by other consensus methods.

Essentially, Radix began with the end state in mind, which is:  every single person on every single device using a single protocol.

Radix’s pre-sharded network serves as a fundamental around which they have designed their consensus method (Tempo).

The size of each shard, and the number of total shards are predetermined. Nodes then place themselves atop shards – and can overlap with other nodes in layers. 

This is where it gets interesting…

Remember, every shard has already been created. They all live in the same “Universe” and their location ID is known. Every transaction is stamped with a blend of the sender’s ID and shard ID.

This makes it extremely simple to locate the Shard from which the transaction that has been sent.  Now, if Node Bob tries to double-spend his $10, we don’t need to check every other shard to catch him cheating. We can simply check his shard.

To better understand this let’s go back to our Mom & Dad analogy

​Your Mom grounds you. But this time, she stamps your forehead with the word “Grounded”. You now go to your Dad’s study room and ask him if you can out to play. Your Dad simply looks at your forehead and says “Nope”.

He didn’t need to go check with your Mom. He didn’t need all the info – and was still able to stop you from cheating.

Similarly, the overlapping of nodes and easy cross-shard communication allows each node to store partial info. Which essentially means: not all nodes have to store all the data!  This plays a significant part in Radix’s massive scalability without sacrificing security.

(I simplified this, of course. But we will discuss more on Atoms, Universes timestamping & Temporal Proofs in future posts)

As mentioned earlier, the need to store and process every transaction is a huge limitation for blockchains. Radix is a cleverly designed network that avoids this limitation.

Radix has presented an innovative and noble approach to solving the scaling issues of DLTs. 

Over six years of sweat and frustration, Dan Hughes and team remained true to the goal: Every single person, on every single device using a single protocol simultaneously. The project is still in alpha and the team urges us to participate and help find any potential issues or flaws. 

​Although this was an introductory explanation, I’m sure you can’t help but wonder... Will Radix DLT be the answer to the burning question for mass adoption? Time will tell.

The current process for clearing and settlement is wasteful – and blockchain tech is poised to change that. The results will be a net gain for everyone -- not just for businesses, but for consumers as well.

We tend to take our daily transactions for granted. It’s as simple as swiping your credit card or depositing a cheque, right? Wrong. It only seems that way. In truth, every transaction you make is simply a promise. Once the promise is made, a clearing house steps in to facilitate and  settle the promise .

The clearing house consists of a plethora of middlemen. They ensure that the finality & settlement of the promise made. And in return for their good-deed, they charge you hidden fees. Ding!

Businesses have to endure these unnecessary fees as well – but on a grander scale. They trade securities that have various risks managed by the clearinghouse. This leads to higher fees. Businesses are then forced to pass these costs down to their consumers.  Ding!

We essentially get Double-Dinged!  But wait – it doesn’t end there. Since we’re getting double-dinged, we have less money to buy stuff. And because we have less money to buy stuff, businesses lose profit. Businesses now have to either increase prices or close shop. As you can see, it’s just one never-ending loop of economic waste!

However, eliminating the middlemen like settlement Clearing houses has been all but a fantasy… until the advent of blockchain technology.

Our current models of eCommerce are facing a hasty demise. Enterprises have been swift to leverage blockchain clearing and settlement solutions. The efficiency and cost savings that the technology delivers has been far too enticing to ignore.

Traditional methods of clearing and settlement rely on middlemen to facilitate trust & security. But the friction is so severe that it can take weeks to settle a single transaction.

However, blockchain and distributed ledger technology provide trust & security without  a middle man. This reduces friction and costs for all parties. Furthermore, transaction settlement is conducted within seconds! The resulting cost savings are massive – which are then passed down to consumers.

Across the globe, big name firms and established players have been experimenting with blockchain and distributed ledger technology. The list extends from one end of the world to the other

USA based Broadridge Financial Solutions will be using blockchain trade settlement in the repo market.  Broadridge believes that blockchain technology can

1. Reduce counterparty risk

2. Eliminate wasteful manual intervention

3. Streamline current processes for confirmation

4. Increase audibility, and transparency

London based SETL already utilizes a blockchain platform for settlement of payments. They empower participants to deploy their own blockchain within minutes.

In 2016, India based uTrade was the first Indian company to  employ a blockchain technology for trade settlement. Their “uClear” blockchain platform allows for real time clearing and settlement of securities.  Fast forward to 2018, and we have the Security and Exchange Board of India (SEBI) have begun exploring blockchain technology for trading the stock market.

The Australian Securities Exchanges (ASX) isn’t interested in falling behind either.  ASX will be launching their blockchain based financial services by 2021. The goal is to allow stockbrokers & fund managers to use the blockchain for real-time settlement and tracking.

Established processes and policies have firm roots in modern day operations. Uprooting these policies and redistributing resources will be the biggest challenge firms will face. Change is not easy – and will face strong resistance and certain junctions. Furthermore, the technology itself requires to be battle-tested some more. The complexity combined with the shift in mindset may cause onboarding issues.

Even with the political and regulatory resistance, the adoption of the technology has been moving forward. As understanding increases, decision makers will be coaxed into action by the following advantages:

1. Drastically reduced transaction costs

2. Near instant settlement and clearing

3. Easier Risk management

4. Increased Transparency

Blockchain technology is paving the way for a financial revolution that eliminate a lot of economic waste.