The defi crypto world is extremely new to most people and so Q&A is needed as well as video support for those who wish to get deeply involved in the young and lucrative industry.
What is decentralized finance? What is cryptocurrency?
In short, a decentralized financial system is one without a central point of authority. In the digital world this would be a ‘decentralized’ virtual currency with no centralized controlling server. Decentralization provides several advantages over traditional systems: censorship resistance, anonymity, transparency and redundancy.
What is cryptocurrency?
It is a type of monetary system that uses cryptography as the basic security mechanism, making it difficult to counterfeit. Cryptocurrencies are generally considered as one of many 21st century digital currencies. Bitcoin was the first decentralized cryptocurrency and first peer-to-peer payment system invented by Satoshi Nakamoto in 2008. Since then, many cryptocurrencies (or crypto assets) have been created, and decentralized exchanges (peer-to-peer exchanges) began growing.
The cryptocurrency market began booming in 2017 with Initial Coin Offerings (ICOs), though its roots were set three years ago when Mastercoin became the first ICO to fund a project based on the Bitcoin blockchain.
The decentralized financial system is happening, and Blocknet (blockchain inter-operability) aims to bring together different cryptocurrency communities. ‘Blocknet serves as a connector between blockchains, markets, and communities.’ It’s not in competition with them; it doesn’t seek to replace them. And in the world of finance it will help with interoperability between different decentralized financial applications.
What is Blocknet’s mission?
Blocknet has, for the most part, been about building an infrastructure to support cross-chain dapps that can communicate with each other through atomic swaps without a central point of failure. This will allow developers to create interoperable dapps that are not tied to one specific blockchain.
At the moment, if you were to create a dapp that wanted to include Nxt as a payment system, for example, you would have to re-implement it on proof of stake systems. It’s time consuming and not very economically viable. Even worse, if one were to attempt this between all of the cryptocurrencies in existence, it would take millions of man hours. The Blocknet will make this trivial and enable developers to focus on their end users.
What is blockchain interoperability?
Blockchains are like isolated islands that don’t communicate with each other. There has been a great deal of effort put into solving how blockchains can communicate with each other, but the focus has been placed on scalability rather than interoperability.
At its core, Blocknet is a variation of a concept known as ‘inter-chain operability’, which aims to allow meshed networks of blockchains to be efficient and easily cross-connected through a standardized API that hides all the ‘messy low-level details.’
How does Blocknet solve issues towards interoperability?
Blockchains are not compatible with each other. A lot of them share similar code but are still considered different blockchains because their rules are not the same. One of the main goals of the project is to create a modular infrastructure that will support interoperability by creating a standardized API to allow blockchains to communicate with each other through it.
The blockchain router will route ipfs, snarks, and ‘standardized packets’ between chains. This will give users the ability to create dapps that run on multiple blockchains simultaneously. The team has also created an inter-chain data transport protocol that can move data from one chain to another. It is atomic, so it will either work or not work; there are no in-betweens involved.
How will Blocknet benefit developers?
One of the most time consuming aspects of cryptocurrency projects is having to write code for different blockchains (which require different languages). A project like Blocknet’s will make it easier for developers to create more efficient projects without having to learn about programming languages for each individual blockchain.
What is the connection between blockchains and interoperability?
Blockchains are isolated networks, so they have no way of communicating with each other. Interoperability is a term used to describe the ability to transfer data from one network to another. Blockchains by nature are not interoperable, but it’s possible that they can be automated into communication through an API.
What is the blockchain router?
The blockchain router enables cross-chain communication between different cryptocurrencies/dapps without any third party risk. It routes information through an API infrastructure that acts as a translator between incompatible networks.
What is the inter-chain data transport protocol and how does it work?
The inter-chain data transport protocol is a system of nodes that ‘listen’ for your transaction requests and then send them to validators, which then validate the transaction. After a consensus is reached, they sign the transaction and send it back to the protocol, then the nodes pack them into a packet that can be sent from one blockchain to another.
What is atomic cross-chain trading?
Atomic cross-chain trading is where coins of different blockchains are traded without any third party involvement. Coins are sent to a burning address provided by both parties which indicates their intent to trade, and after the waiting period they are released to the new owner.
Blocknet is an open source project that is designed to make it possible for people to create decentralized exchanges between cryptocurrencies. The team has developed four key components of their design:
The blockchain router enables cross-chain communication between different cryptocurrencies/dapps without any third party risk. It routes information through an API infrastructure that acts as a translator between incompatible networks. The atomic swap protocol is used to trade coins from one blockchain for another without requiring a 3rd party or broker. The peer-to-peer exchange protocol allows for direct communication and exchange between nodes on the network. The XBridge protocol is a system of nodes that enables communication and exchange between different blockchains.
Blocknet’s interoperability protocols will allow for more decentralized trading, certain cross-chain dapps such as decentralized exchanges, new business models such as third party oracle feeds and so much more.
What is a bridge node and how does it work?
A bridge node functions as an exchange facilitator. They can be used to find out if there are sufficient funds on the other side of the trade, or to monitor for successful atomic swaps, so that both parties can rest assured that the transaction has been completed successfully.
What are the benefits of blocknet’s interoperability protocol?
There are many advantages to Blocknet’s interoperable protocol that aren’t possible with current models, such as:
Increased speed for transactions between cross-chain cryptocurrencies. Decreased cost because there is no third party risk involved in trading coins from one blockchain to another. More control because you don’t need to rely on any third party service provider, if the protocol doesn’t operate as expected, your coins aren’t at risk.
Blocknet’s interoperable protocol will be beneficial for many different user cases such as exchanges between cryptocurrencies, dapps that require data feeds from other chains or perhaps even voting systems that require cross-chain verification.
What is a service node and how does it work?
Service nodes are another important part of the Blocknet infrastructure, as they play a big role in transaction validation and relaying. These nodes contribute to the network with valuable capabilities such as:
Relaying/pushing transactions from one blockchain to another. Validating transactions from blockchains that don’t have their own validator nodes. Monitor for and relay data feeds from other chains in order to provide data feeds for dapps that require them.
What is a Bridgechain?
A bridgechain is a blockchain whose main purpose is to facilitate cross-chain communication, transactions and governance. It exists mainly to connect blockchains together in order to facilitate interoperability.
What is an inter-chain data transport service?
An inter-chain data transport service provides a way for services/dapps to send and receive data between different chains such as those on the Blocknet protocol.
What is a decentralized exchange (DEX)?
A DEX is an exchange that occurs without the involvement of any 3rd party. It directly connects buyers and sellers to trade cryptocurrencies in a peer-to-peer manner, removing the need for any third party middleman/intermediary. Blocknet’s interoperable protocol will allow for trustless, decentralized exchanges between cryptocurrencies.
What is a service node vote?
A service node vote is similar to how regular blockchain votes work, but instead of the entire network validating the vote, it’s just done by representatives. These representatives are called “service nodes” and they serve as agents of governance that vote on a certain issue.
What is an oracle?
An oracle can be defined as a “source of truth,” where data used in blockchain applications originates from outside of the network and feeds directly into smart contracts. An example of this is price feeds, which are needed to keep cryptocurrency values in check.
What is a decentralized oracle network?
A decentralized oracle network provides a way for oracles to submit and serve data feeds in a peer-to-peer manner. Like the service node system, service nodes will play a crucial role in this by verifying and relaying these data feeds. More on this will be explained later in this article.
What is a decentralized exchange of application (dexOA) demo?
A dexOA demo is a video demonstration of Blocknet’s interoperable protocol running a decentralized exchange between two cryptocurrencies, as well as an oracle providing real-time price feeds for said currencies. Watch the dexOA demo below:
What is the decentralized exchange of applications (dexA) demo?
The dexA demo is a video demonstration of Blocknet’s interoperable protocol running a decentralized exchange between two cryptocurrencies, but in this case it utilizes smart contracts to do so. Watch the dexA demo below:
What crypto yield farming?
Crypto yield farming can be defined as a way for organizations to profit from staking other cryptocurrencies, essentially allowing them to “mine” without mining. Subsequently this also opens up opportunities for those who may not have the necessary hardware/capital to mine a particular coin. The Blocknet protocol benefits from the profit gained by these organizations via the Superblock, which pays out a percentage of all fees collected from the network to services/dapps who stake their coins towards it.
How is crypto yield farming a good opportunity for investors?
The majority of projects currently being staked on the Blocknet protocol are early-stage cryptocurrencies that have yet to collect large marketcaps. This means that right now is an excellent opportunity to accumulate staking rewards/dividends, even if you don’t have the necessary hardware or capital to mine these cryptocurrencies yourself.
What are service nodes?
Service nodes are “agents” of governance on the Blocknet protocol that vote on how to allocate Superblock funds. Much like how Bitnodes is used to measure the number of nodes on a network, there are certain requirements for obtaining service node status. Part of these requirements include having an amount staked in your blocknetdx wallet equivalent to 10,000 BLOCK or more (for at least one month).
Many more questions can be asked of how the cryptocurrency decentralized finance works, but the Q&A in this post should provide a glimpse into the defi world of crypto currency and point you in the right direction.