Autor Cointelegraph By Anthony Clarke

Why quantum computing isn’t a threat to crypto… yet

Why quantum computing isn’t a threat to crypto… yet

Uverejnil používateľ | sep 9, 2022 |

Quantum computing has raised concerns about the future of cryptocurrency and blockchain technology in recent years. For example, it is commonly assumed that very sophisticated quantum computers will one day be able to crack present-day encryption, making security a serious concern for users in the blockchain space.The SHA-256 cryptographic protocol used for Bitcoin network security is currently unbreakable by today’s computers. However, experts anticipate that within a decade, quantum computing will be able to break existing encryption protocols.In regard to whether holders should be worried about quantum computers being a threat to cryptocurrency, Johann Polecsak, chief technology officer of QAN Platform, a layer-1 blockchain platform, told Cointelegraph: “Definitely. Elliptic curve signatures — which are powering all major blockchains today and which are proven to be vulnerable against QC attacks — will break, which is the ONLY authentication mechanism in the system. Once it breaks, it will be literally impossible to differentiate a legitimate wallet owner and a hacker who forged a signature of one.”If the current cryptographic hash algorithms ever get cracked, that leaves hundreds of billions worth of digital assets vulnerable to theft from malicious actors. However, despite these concerns, quantum computing still has a long way to go before becoming a viable threat to blockchain technology. What is quantum computing?Contemporary computers process information and carry out computations using “bits.” Unfortunately, these bits cannot exist simultaneously in two locations and two distinct states.Instead, traditional computer bits may either have the value 0 or 1. A good analogy is of a light switch being turned on or off. Therefore, if there are a pair of bits, for example, those bits can only hold one of the four potential combinations at any moment: 0-0, 0-1, 1-0 or 1-1.From a more pragmatic point of view, the implication of this is that it is likely to take an average computer quite some time to complete complicated computations, namely those that need to take into account each and every potential configuration.Quantum computers do not operate under the same constraints as traditional computers. Instead, they employ something that is termed quantum bits or “qubits” rather than traditional bits. These qubits can coexist in the states of 0 and 1 at the same time. As mentioned earlier, two bits may only simultaneously hold one of four possible combinations. However, a single pair of qubits is capable of storing all four at the same time. And the number of possible options grows exponentially with each additional qubit.Recent: What the Ethereum Merge means for the blockchain’s layer-2 solutionsAs a consequence, quantum computers can carry out many computations while simultaneously considering several different configurations. For example, consider the 54-qubit Sycamore processor that Google developed. It was able to complete a computation in 200 seconds that would have taken the most powerful supercomputer in the world 10,000 years to complete.In simple terms, quantum computers are much faster than traditional computers since they use qubits to perform multiple calculations simultaneously. In addition, since qubits can have a value of 0, 1 or both, they are much more efficient than the binary bits system used by current computers.Different types of quantum computing attacksSo-called storage attacks involve a malicious party attempting to steal cash by focusing on susceptible blockchain addresses, such as those where the wallet’s public key is visible on a public ledger.Four million Bitcoin (BTC), or 25% of all BTC, are vulnerable to an attack by a quantum computer due to owners using un-hashed public keys or re-using BTC addresses. The quantum computer would have to be powerful enough to decipher the private key from the un-hashed public address. If the private key is successfully deciphered, the malicious actor can steal a user’s funds straight from their wallets. However, experts anticipate that the computing power required to carry out these attacks would be millions of times more than the current quantum computers, which have less than 100 qubits. Nevertheless, researchers in the field of quantum computing have hypothesized that the number of qubits in use might reach 10 million during the next ten years.In order to protect themselves against these attacks, crypto users need to avoid re-using addresses or moving their funds into addresses where the public key has not been published. This sounds good in theory, but it can prove to be too tedious for everyday users. Someone with access to a powerful quantum computer might attempt to steal money from a blockchain transaction in transit by launching a transit attack. Because it applies to all transactions, the scope of this attack is far broader. However, carrying it out is more challenging because the attacker must complete it before the miners can execute the transaction.Under most circumstances, an attacker has no more than a few minutes due to the confirmation time on networks like Bitcoin and Ethereum. Hackers also need billions of qubits to carry out such an attack, making the risk of a transit attack much lower than a storage attack. Nonetheless, it is still something that users should take into mind.Protecting against assaults while in transit is not an easy task. To do this, it is necessary to switch the underlying cryptographic signature algorithm of the blockchain to one that is resistant to a quantum attack.Measures to protect against quantum computingThere is still a significant amount of work to be done with quantum computing before it can be considered a credible threat to blockchain technology. In addition, blockchain technology will most likely evolve to tackle the issue of quantum security by the time quantum computers are widely available. There are already cryptocurrencies like IOTA that use directed acyclic graph (DAG) technology that is considered quantum resistant. In contrast to the blocks that make up a blockchain, directed acyclic graphs are made up of nodes and connections between them. Thus, the records of crypto transactions take the form of nodes. Then, the records of these exchanges are stacked one on top of the other.Block lattice is another DAG-based technology that is quantum resistant. Blockchain networks like QAN Platform use the technology to enable developers to build quantum-resistant smart contracts, decentralized applications and digital assets. Lattice cryptography is resistant to quantum computers because it is based on a problem that a quantum computer might not be able to solve easily. The name given to this problem is the Shortest Vector Problem (SVP). Mathematically, the SVP is a question about finding the shortest vector in a high-dimensional lattice.Recent: ETH Merge will change the way enterprises view Ethereum for businessIt is thought that the SVP is difficult for quantum computers to solve due to the nature of quantum computing. Only when the states of the qubits are fully aligned can the superposition principle be used by a quantum computer. The quantum computer can use the superposition principle when the states of the qubits are perfectly aligned. Still, it must resort to more conventional methods of computation when the states are not. As a result, a quantum computer is very unlikely to succeed in solving the SVP. That’s why lattice-based encryption is secure against quantum computers.Even traditional organizations have taken steps toward quantum security. JPMorgan and Toshiba have teamed up to develop quantum key distribution (QKD), a solution they claim to be quantum-resistant. With the use of quantum physics and cryptography, QKD makes it possible for two parties to trade confidential data while simultaneously being able to identify and foil any effort by a third party to eavesdrop on the transaction. The concept is being looked at as a potentially useful security mechanism against hypothetical blockchain attacks that quantum computers might carry out in the future.

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How high transaction fees are being tackled in the blockchain ecosystem

How high transaction fees are being tackled in the blockchain ecosystem

Uverejnil používateľ | sep 7, 2022 |

High transaction fees have been a long recurring issue for users on popular blockchain networks like Ethereum and Bitcoin during periods of increased demand. However, there are protocols, platforms and methods that help users to reduce costs.What are transaction fees?Transaction fees are fees that users pay to send a transaction or interact with a smart contract on a blockchain network. While gas fees can refer to transaction fees on any blockchain, the term is mainly used to describe the Ethereum network transaction fees.Transaction fees are paid in small fractions of the network’s native cryptocurrency. For example, with Bitcoin (BTC), users will pay in Satoshi’s (very small fractions of BTC), and with Ether (ETH), they will pay in gwei.There are two main reasons users need to pay fees when sending a transaction. The first reason is to pay miners or validators (also known as nodes) for securing the network. Proof-of-work (PoW) blockchains have miners who validate transactions by using their computing power to solve complex algorithms. In contrast, proof-of-stake (PoS) blockchains have validators who stake their tokens to secure the network. In return for securing the network and ensuring that no fraudulent transactions are placed, these nodes are compensated with transaction fees on the blockchain. Network validators make it possible for the blockchain to operate in a decentralized manner without having to rely on centralized entities to ensure that no malicious activity takes place on the network. The second reason users pay transaction fees is to enable the operation of smart contracts. Smart contracts are programs that automatically execute once certain conditions have been met. For example, a smart contract may be programmed to release tokens or a nonfungible token (NFT) once they receive a payment or once a certain amount of time has passed. Just like users, smart contracts have to pay fees, too, since they’re also sending out transactions. So, if a user wants to perform a certain function on a smart contract, they will pay the gas fees.Why can transaction fees get very expensive?Transaction fees are not static and they vary based on many variables. One of these variables is speed, meaning that transactions with higher fees get prioritized by nodes, reducing the time it takes for them to arrive. On the other hand, transactions with lower fees take longer to validate since nodes do not prioritize them. Most mainstream platforms, for example, wallets and exchanges, preset the fee for a transaction at a medium level. However, users can change the fee, increasing the amount for urgent transactions and reducing the amount to save money while waiting longer for the transaction to complete.Supply and demand are the biggest factors in high transaction fees. Once a blockchain network has a high demand for transactions, costs naturally rise since the supply cannot keep up. This leads to nodes prioritizing transactions with higher fees, which leads to users increasing their transaction fees, which raises the bar higher. For example, imagine the average transaction fee is $3.00, but the network is congested. So, many users start setting their transaction fee at $10. Reasons can include a popular initial coin offering or NFT offering that people are trying to get into. Recent: DeFi Regulations: Where US regulators should draw the lineHowever, the demand keeps growing, and even the $10 transactions take too long to complete. So, users start paying $15 for gas, then $25, $50 and so on. In addition, there could be a massive ecosystem of tools and products (i.e., additional NFT offerings, yield farming, lending, borrowing, general decentralized finance (DeFi) etc.), so demand for transactions has exploded across different sectors. Now, transaction fees are costing over $300, which was the case in May, with gas fees costing over $450 on Ethereum due to the Yuga Labs launch of their Otherside NFT collection.Ivo Georgiev, CEO of crypto wallet Ambire, told Cointelegraph, “As much as we all in Web3 like to challenge TradFi and expose its weaknesses, one should admit that there is no gas fees problem in TradFi. Fees for operations in traditional finance are negligible and people are used to not even care about them.”Georgiev continued, “Now imagine you get into Web3 and at busy times you have to pay a $30 fee for exchanging tokens worth $150. Given that in crypto interactions are made more often — add/remove liquidity, move positions between protocols, bridge between layers — it is important that gas fees are low enough in order to onboard the next 1 billion users to crypto with lower friction.”So, essentially, when there is high demand, users are willing to pay more to ensure their transactions get through. As transaction fees increase, other users pay more to outbid the previous users and ensure that their transactions are completed first. Over time this leads to a general increase in transaction fees on a blockchain network.Anthony Georgiades, co-founder of Pastel Network — an NFT and Web3 infrastructure and security project — told Cointelegraph:“Low gas fees are reflective of less congestion and lower ‘network difficulty’ on the blockchain, which allows users to engage in cheaper network transactions with an increased capacity for capital efficiency. Moreover, the cost of buying and listing crypto assets decreases with low gas fees.”Georgiades continued, “High fees are also a major deterrent for new and existing users who don’t want to spend exorbitant amounts on gas — sometimes equal to or more than the cost of their purchase. In order to ensure the space remains accessible and welcoming to users, it’s important to keep gas fees low.” Current solutions to high transaction feesDifferent protocols have been developed in response to the high transaction costs experienced when a blockchain is congested. One of the most popular solutions is layer-2 platforms. Layer-2 platforms operate on top of the main blockchain, or the layer 1, taking a portion of the transactions and validating them off-chain. By verifying transactions on a separate network, L2s reduce the strain on the main blockchain, preventing congestion and keeping fees low while keeping speeds high. L2 networks themselves have very low fees and fast speeds. The most popular L2 platform is the Lightning Network which helps to scale the Bitcoin blockchain. Polygon is another popular L2 for the Ethereum network.Another popular layer-2 solution is zero-knowledge Rollups (zk-Rollups)that work by taking batches of transactions off the main chain and rolling them into a single transaction. The single transaction is verified and a validity proof is sent back to the main chain. Zk-Rollups enable the Ethereum blockchain to have lower transaction fees, increased transaction capacity and faster transaction times due to the reduced strain on the network.Recent: Ripples of Bitcoin adoption at Biarritz’s Surfin Bitcoin Conference in FranceProtocols and wallets have also taken measures to reduce transaction fees for users. Ambire Wallet, for example, has a Gas Tank feature that enables users to reduce transaction fees by prepaying. This works using credits to pay the current gas fees, which will be used for future transactions. So, for example, if gas fees are currently low, a user could prepay a transaction using the current fees, enabling them to send the transaction at a later date with the prepaid rates. Users can also pay for gas fees using stablecoins like USD Coin (USDC) or Tether (USDT), which are less volatile than regular cryptocurrencies.Different ways users can reduce transaction feesThere are different ways users can manually save on transaction fees. One way to reduce fees is by timing transactions for periods with lower activity or congestion on the network. For example, the Etherscan gas tracker shows the average gas fees on the Ethereum network as well as the highest and lowest values. Users can aim to send out transactions when the costs are at their lowest to take advantage of the reduced fees.Depending on the wallet or exchange, users can manually reduce the fees they pay for transactions. However, doing this can cause their transactions to be delayed due to the lower priority they will receive from nodes on the network. If users reduce fees too much, they could be waiting a long time before their transaction is validated. This approach is best taken during periods of high network activity and for non-urgent transactions. Timing transactions is a better alternative.

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Crypto noobs: What to tell newcomer friends about digital currency

Crypto noobs: What to tell newcomer friends about digital currency

Uverejnil používateľ | sep 5, 2022 |

Interest in crypto has been growing since the 2017 bull market and has increased even further since 2021, which saw the nonfungible token (NFT) boom and Bitcoin (BTC) hitting its highest price so far. So, what can a crypto investor tell family and friends who are interested in cryptocurrency? Here are some common and important questions that one can come across regarding crypto and some appropriate responses with opinions from experts in the industry.What is cryptocurrency?One of the most common questions a crypto investor might get asked is what cryptocurrency is in the first place. Cryptocurrency is a digital currency that is designed to be used as a medium of exchange. This exchange can come in the form of peer-to-peer (P2P) payments and retail purchases. Lucaz Lee, CEO of Affyn — a mobile-based metaverse platform — told Cointelegraph, “A cryptocurrency is a digital or virtual currency designed to work as a medium of exchange. It uses cryptography to secure and verify transactions, making it difficult for anyone to create fake transactions or counterfeit money.”Lee continued, “Additionally, cryptocurrencies are decentralized and use distributed ledger technology, meaning no central bank or government is controlling them.”Cryptocurrencies exist on the blockchain, which is a public ledger that records all transactions that take place, making it possible for anyone to see how money moves through the network. While anyone can see how much money a user owns and how it is spent. Users need a wallet to send and receive crypto, and these wallets use alpha-numerical identifiers, which add a layer of anonymity to the users.What purpose does cryptocurrency serve?The main purpose behind cryptocurrency is the ability for anyone to send and receive money through a decentralized P2P network. This works as a digital version of cash. For example, when users pay with cash, they pay directly to another person without having to go through an intermediary such as a bank or payment processor.Cryptocurrency does this on a digital level, allowing anyone to transfer money directly to another person, entity or organization while retaining control of their funds at all times. Lee agreed with this take, stating, “cryptocurrencies can be used as a medium of exchange or payment for specific services without any intermediary or centralized control. It removes the limitations of traditional finance, enabling the globe’s large numbers of unbanked and underbanked users to access financial services.”Cryptocurrencies are also being used as investment vehicles, with users being able to make high returns due to their limited supply, high volatility and high level of speculation. Lee added, “With each passing day, cryptocurrencies are becoming more attractive investment options. Certain variations also support opportunities to generate passive returns, helping investors expand and diversify portfolios.”If crypto isn’t backed by anything, how is it worth anything?Most cryptocurrencies aren’t backed by any traditional assets apart from stablecoins like USD Coin (USDC) and Tether (USDT), which have a large portion of their tokens backed by reserves of fiat money and bonds. Some people may wonder why cryptocurrency has any value if they aren’t backed by anything. First, a lot of the value comes from the utility of a cryptocurrency. The more a cryptocurrency is needed for a particular task, the more demand there will be for that cryptocurrency. Examples include using crypto as a store of value and uses for particular protocols within sub-industries like decentralized finance (DeFi) and NFTs.Recent: Armenia aims to position itself as a Bitcoin mining hubIgor Mikhalev, partner and head of emerging Tech at EY and decentralized autonomous organization chairman of Blueshift — a decentralized exchange — weighs in on this question, telling Cointelegraph, “cryptocurrencies built well are worth increasingly more because they exhibit the foundational functions of traditional currencies: scarcity, medium of exchange/account and store of value. It is possible due to advances in the underlying tech, legislation and people’s general attitude toward it.”It’s also worth noting that fiat currencies like the United States dollar, euro and Great British pound aren’t backed by anything (hence the term “fiat” currency). Mikhalev spoke on this, adding, “the USD is not backed by real assets such as gold and is only backed by people’s trust in the U.S. as the issuer. So, why should we not want to support, own and exchange currencies issued by other mission-driven collectives backed by their value and utilities? This is the foundation of the new decentralized economy.”Lee gave his opinion on the value of cryptocurrency, adding, “cryptocurrency is not backed by anything, but it is intrinsically worth something because people believe it has value. Market forces of supply and demand determine the price of a cryptocurrency.”Speculation and investment also play a role in the value of cryptocurrency. If investors believe the value of a coin will increase over time, they’re more likely to buy and hold that coin, expecting to turn a profit in the future. Lee added, “the more people want to buy a cryptocurrency, the higher the price will be. The more people want to sell the cryptocurrency, the lower the price. Blockchain technology has proven reliable and secure; accordingly, many people believe in its longevity and therefore invest in cryptocurrencies.”Can cryptocurrency replace real money?In a broad sense, no, as cryptocurrency isn’t regulated, and there are a lot of services, products and commodities that will always need traditional cash. However, governments are looking into creating their own digital tokens known as central bank digital currencies (CBDCs) and there are growing uses for decentralized cryptocurrencies.“You can’t walk into a Starbucks in America and pay with Swiss francs or pounds. Yet, both of these are real money. Context matters.” Rockwell Shah, co-founder at Invisible College — a Web3 learning community — told Cointelegraph, adding:“Similarly, the major cryptos are native currencies of their own digital nations. They have relevancy in their own blockchain borders. If the use cases of crypto are so compelling that people use them instead of traditional currencies even outside of their digital borders, then great. Welcome to the free market.”Lee also believes the answer to this question is context-based. “The answer to this question is not a simple yes or no. It depends on the country and the corresponding economic system. In countries like Venezuela, where the government has mismanaged the economy and sparked high hyperinflation, cryptocurrency has become a way of life for many people.”“Compared with traditional money, cryptocurrency is very new and its implications on the larger society are yet to be tried and tested. Nevertheless, central banks are exploring the idea of transition to digital currencies, known as central bank digital currencies,” he added.Some experts believe that the underlying principles behind cryptocurrencies actually put them ahead of traditional currencies when it comes to adoption.Recent: Crypto winter teaches tough lessons about custody and taking control“Remarkably, crypto has already started surpassing national currencies on the foundational functions because of their democratic and transparent nature people intrinsically lean toward. Coupled with the decline in trust in government/official institutions, this presents fertile grounds for accelerated adoption,” Mikhalev said, continuing:“One can see this awkward (for traditional money institutions) situation already today: The debate around the introduction of CBDCs (nation-level digital currencies) is stalling. Central, by nature, institutions do not want decentralization, as it will lead to their demise. However, there is no turning back. Once the technology is mature enough (and one can argue that it has already happened), it will only take one major geopolitical event for the explosive adoption to begin.”Can cryptocurrency be hacked?Blockchains themselves are largely impervious to cyberattacks. Lee spoke to this point:“Blockchains, by design, are nearly impossible to hack because they are decentralized and rely on different security mechanisms. However, external variables such as hot wallets, centralized wallets, bridges and even smart contracts can be hacked.”Therefore, the best way to secure users can secure their funds is by storing them in a noncustodial wallet, which is a wallet that allows them to own the private keys and wallet seed. This way, an attacker would need to know the private key and wallet seed to access their funds. Regarding platforms, hackers usually resort to phishing attacks to try and trick users into giving away information such as passwords and login info so the hackers can access their funds.What causes cryptocurrency prices to increase?Speculation and supply and demand are some of the main factors driving cryptocurrency prices. Most cryptocurrencies have a limited supply, and when there is a lot of demand for that coin (due to speculation of utility), the price usually surges in response to this.Lee also believes supply and demand is the main reason a cryptocurrency’s price increases, stating that “the price of all assets, including cryptocurrencies, are determined by demand and supply. When the demand for an asset exceeds the supply, it creates a price surge. At times, macroeconomic and geopolitical factors also influence crypto prices.”

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How cryptocurrency could help tackle global income inequality

How cryptocurrency could help tackle global income inequality

Uverejnil používateľ | aug 31, 2022 |

Over the past few decades, the inequality of wealth distribution globally has become all the starker.For example, as of 2022, the top 10% of Americans hold nearly 70% of US wealth. This means that 90% of the country only takes home 30% of the wealth. South Africa is another example, with the top 10% taking home 65% of the wealth. Many citizens also lack access to general banking as well as high-class financial services (i.e., services limited to accredited investors) that are readily available to the more well-off residents. Cryptocurrency can help to reduce wealth disparity by providing users with access to a means to earn, store, receive, send and invest their money. This analysis looks at how cryptocurrency can help close the gap regarding income inequality.How can crypto solve income equality?Cryptocurrency gives users easier access to financial tools and a more affordable method of money remittance. Many people in developing nations rely on their family members abroad to send money back to help with living expenses. Money remittances account for 20-38.5% of the GDP of countries like El Salvador, Haiti and Tonga. United States dollar-pegged stablecoins like USD Coin (USDC) and Tether (USDT) can ensure that the recipients receive more of the transferred funds without intermediaries taking a cut in the form of transfer fees. SWIFT transfers can be costly, with some banks charging 3–5%, while others charge a fixed fee of $25-$45. Transfers via Western Union cost $25 on average for online transfers, $2.99–$29.99 via credit/debit card and $7.99 when done in-store. On the other hand, stablecoins like USDC can cost $3–$5 to send on Ethereum and less than a penny on BNB Smart Chain, Tron and Cardano blockchains. While saving an extra $20–$44 on transaction fees might not seem like much to many people, this makes a big difference for people in developing countries or with lower incomes. For example, the average monthly salary in Venezuela is roughly $25.These savings make it possible for people to make a better living from family members working overseas. In addition, family members will also be able to send money back home more frequently due to the very low fees and fast transaction times.Ben Caselin, head of research and strategy at AAX — a cryptocurrency exchange — told Cointelegraph: “Bitcoin, but also stablecoins, generally provide more accessibility than traditional banks, especially in emerging markets where large populations often find themselves unbanked either due to lack of infrastructure or documentation or exclusion in the basis of social standing, gender, religion or political viewpoints.”“A shift toward Bitcoin and stablecoin payments can also be driven by sanctions or tight capital controls that make it virtually impossible for ordinary citizens and businesses to participate in the global economy either through trade, commerce or otherwise,” he added.Caselin also noted the importance of the low costs when it comes to money remittance using cryptocurrency, saying, “users in both developed and emerging markets can benefit from bitcoin and digital assets when engaged in cross-border payments. This is not only because these are processed more efficiently on the blockchain but also at a much lower cost than through correspondent banks and money transfer operators such as Western Union.”Recent: Crypto market turmoil highlights risks of leverage in trading“But it’s not just about accessibility and efficiency; switching to digital assets and self-custody over holding funds with a bank and using their services is building toward a new more mature financial culture and builds safety as societies continue to digitalize and threats to privacy and freedom proliferate.”Easier access to payment systemsWhile PayPal is one the most popular ways of receiving payments for freelancers, users need to have their account linked to a bank in order to cash out their payments. This is because users can only withdraw money to their bank accounts, with the only other option being to spend the money with a PayPal debit card. This can make it difficult for unbanked members of a nation to make a living online.Conversely, blockchain technology has enabled users to receive payments without needing an intermediary such as a bank. Users only need to own a crypto wallet to receive payment directly from another user. This can prove very useful for online freelancers. For example, if a freelancer is commissioned to develop a website or provide any other online service, they only need to provide their crypto wallet. Dunstan Teo, co-founder of Philcoin — a blockchain-based philanthropy project — told Cointelegraph, “Cryptocurrencies typically need only a wallet and Internet connection for someone to sign up and transact. They offer an opportunity for those in developing nations to store their assets somewhere else other than under a mattress or in a cupboard.” He continued:“This helps to reduce income inequality by giving anyone, anywhere in the world, access to the same financial products so they can reap the rewards of a rapidly growing asset. Quite simply, crypto levels the playing field for all.”If freelancers cannot access a bank, they can withdraw their earnings through a Bitcoin ATM. Countries like Uruguay, Nigeria, India, and Kenya have installed Bitcoin ATMs, providing an alternate route for unbanked users to buy and sell crypto, making it a viable option for cashing out.Crypto wallets will make it easier for workers to make an income online as well as send and receive payments. Some wallets even let users receive payments via usernames instead of the usual alpha-numerical crypto addresses. Solana-based Web3 payment platform PIP, for example, uses tags (e.g., user@solana) instead of wallet addresses to prevent users from making mistakes when sending or receiving payments. If users have the browser extension installed, they can send and receive crypto payments through social media by hovering over the tags to activate a payment box.Access to protocols that simplify the user experience is crucial for users since an estimated 20% of Bitcoin has been lost due to user error. In addition, a survey covered by Cointelegraph found that 75% of respondents said they found crypto transactions “stressful” and “unnecessarily complicated.” However, human-readable addresses can address this issue and help to increase adoption in developing nations.The use of cryptocurrency and self-custody wallets within the gig economy can be instrumental in creating income opportunities for people from developing countries or low-income backgrounds.Corbin Fraser, head of financial services at Bitcoin.com — a cryptocurrency exchange and wallet — told Cointelegraph, “crypto is a good way for users to receive payments for services. This was one of Bitcoin’s original tenets. Removing middlemen, reducing fees and unlocking a globally connected population with new opportunities thanks to magic internet money.” Fraser continued:“The silver lining on the covid pandemic was widespread adoption of remote work. As companies naturally evolve to hiring with remote in mind, we expect those companies offering payment in crypto will attract an even more dedicated workforce.”“International payments through traditional financial institutions are still a huge pain for everyone. Funds get caught in limbo for days or even weeks and leave people with sticker shock from high fees thanks to legacy systems. Those fees are felt most in developing nations […] We’re seeing a rise of cryptocurrencies focusing on low fees, and even ETH post-merge has sub $.05 fees on the horizon. So it’s no doubt that this is where it’s all heading.”Easy access to financial tools Cryptocurrency can help to reduce the wealth gap by providing a wider range of users with access to financial tools. Centralized financial tools like stocks, bonds and indexes usually require users to sign up to platforms and provide legal documents, including proof of income and bank details.Decentralized finance (DeFi), on the other hand, lets users engage with financial protocols such as staking, yield farming and lending/borrowing platforms using only their wallet. This makes it easier for low-income users and people in developing countries to earn interest on their holdings and lend out money or borrow money. DeFi essentially levels the playing field regarding accessibility for financial tools.The DeFi sector offers multiple ways for users to earn an income with their crypto assets without the interference of any centralized entity, from providing liquidity on a decentralized exchange (DEX) and earning a percentage of the tokens traded to earning up to 20% by staking stablecoins.Ethereum co-founder and Cardano founder Charles Hoskinskin believes the DeFi revolution will take place in the developing world. When previously interviewed by Cointelegraph, Hoskinson predicted that developing nations would add 100 million new users to the DeFi sector in the next few years. A currency that is resistant to inflationInflation reduces the spending power of a nation’s fiat currency. As a result, people in countries like Venezuela have adopted cryptocurrency to combat hyperinflation. Cryptocurrencies like Bitcoin are deflationary by nature, meaning their supply reduces over time, increasing their value and spending power. For example, one Bitcoin was worth $0.40 in 2010, compared to the $21,000 one BTC is worth as of today.Recent: What the Taliban crackdown means for crypto’s future in AfghanistanTeo weighed in on how inflation is affecting people in developing nations:“Let’s face it — everything is becoming more expensive lately and even more so for those in developing countries. Across the world, we’re dealing with higher petrol costs, inflation, food costs, housing, education and more. The disposable income we all once had is now being eroded by a higher cost of living. And since inflation is not showing any sign of slowing down, we can expect that disposable income to keep withering away.”Users in developing nations can also hold stablecoins if they don’t want to deal with the volatility that comes with traditional cryptocurrencies. Tether and USD Coin are great alternatives for users who want to keep their funds in a cryptocurrency pegged to the USD.

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Why interoperability is the key to blockchain technology’s mass adoption

Why interoperability is the key to blockchain technology’s mass adoption

Uverejnil používateľ | aug 28, 2022 |

Every year, we see new blockchain networks being developed to tackle specific niches within certain industries, each blockchain having specialized functions based on its purpose. For example, layer-2 scaling solutions like Polygon are built to have ultra-low transaction fees and fast settlement times.The increase in the number of new blockchain networks is also a result of the recognition that there is no one perfect solution that will be able to meet all of the needs associated with blockchain technology all at once. Therefore, as more organizations become aware of this rising technology and its capabilities, the interconnection of these unique blockchains is becoming necessary. What is interoperability?Blockchain interoperability refers to a wide variety of methods that enable many blockchains to communicate, share digital assets and data and work together more effectively. This makes it possible for one blockchain network to share its economic activity with another. For example, interoperability allows transmitting data and assets across different blockchain networks via decentralized cross-chain bridges. Interoperability is not something that most blockchains have because each blockchain is built with different standards and code bases. Since most blockchains are naturally incompatible, all transactions must be done within a single blockchain, no matter how many features the blockchain might have. Marcel Harmann, founder and CEO of THORWallet DEX — a noncustodial decentralized finance (DeFi) wallet — told Cointelegraph: “Interoperability can be understood as freedom in data exchange. Currently, base layer protocols cannot communicate with each other effectively. Layer-1 protocols like Ethereum or Cosmos have smart contracts built into their fabric, only permitting secure data exchange within their own ecosystems. Digital asset transfers that leave the network pose a question: How can a blockchain trust the state validity of another blockchain?” Harmann continued, “Consensus mechanisms on each blockchain decide the canonical history of all the transactions that were validated. This produces extremely large files that must be processed with each block and can only be viewed in the specific language native to the blockchain. Interoperability between two or more blockchains refers to one or both chains being able to understand and process the history of the other chain, thus enabling, for example, the exchange of assets between different layer-1 networks.”Even though it seems obvious that public blockchain projects should be designed with interoperability in mind from the start, this is not always the case. However, organizations are increasingly calling for interoperability because of the benefits of sharing information and working together.Why is interoperability important?To realize the full potential of decentralization, it is beneficial forpeople participating in several blockchains to be linked through a single protocol. This reduces friction for the user since they can access different decentralized applications (DApps) without having to change networks.Recent: How blockchain technology is changing the way people investDue to blockchains operating independently from each other, it’s difficult for users to take advantage of the benefits presented by each network. To do so, they need to hold tokens supported by each blockchain to engage with the protocols within their network. Interoperability can fix this problem by enabling users to use one token across multiple blockchains. In addition, by enabling blockchains to communicate with each other, a user can access protocols on multiple blockchains with greater ease. Because of this, there is a better chance that the industry’s value will continue to grow.Fabrice Cheng, co-founder and CEO at Quadrata — a Web3 passport network — told Cointelegraph: “Interoperability is crucial because it’s one of the key benefits to blockchain technology. Decentralized open-source technology allows the creation of products that are interoperable across chains, enabling more users, businesses and institutions to stay interconnected.”Cheng continued, “People who use blockchain technology want to make sure people are screened, KYC-verified and have good credit behavior. DeFi users can access trading options or have access to real-time price feeds. Interoperability is an efficient way to remove intermediaries for users and allows businesses to focus on their core values.” When it comes to decentralized finance, giving traders more ways to use their assets can bring additional growth and opportunities to the sector. For instance, multichain yield farming enables investors to generate multiple returns as passive income on many blockchains for owning a single asset. The investor would only need to hold Bitcoin (BTC) or a stablecoin like USD Coin (USDC) and then spread it across multiple protocols on different blockchains via bridges. Interoperability will also improve liquidity across multiple blockchain networks since it will be easier for users to move their funds across different chains.Interoperability does not only refer to connectivity between blockchains. Protocols and smart contracts are also interoperable. For example, t3rn, a smart contract hosting platform, enables smart contracts to operate on multiple blockchains. This works by the smart contract being hosted on the smart contract platform and being deployed and executed across different blockchain networks. Interoperable smart contracts make it easier for developers to create cross-chain applications and for users to run cross-chain transfers. Interoperable smart contracts will make it easier for users to access multiple decentralized applications since they won’t have to change networks. For example, suppose a user uses a DApp on Ethereum and wants to access a lending protocol on Polkadot. If the Polkdadot-based DApp has an interoperable smart contract, they access it on Ethereum.Oracles are another protocol that can benefit from interoperability. Oracles are entities that connect real-world data to the blockchain via smart contracts. Decentralized oracle platforms like QED can connect oracles to multiple blockchain networks, making it possible for real-world data to be shared across blockchains. In addition, oracles can take data from an API or sensor and submit it to a smart contract to activate once certain conditions have been met. For example, a supply chain has multiple organizations that use different blockchain networks. Once a component in the supply chain reaches its destination, the oracle can submit data to the smart contract confirming its delivery. Once delivery is confirmed via an oracle, the smart contract releases a payment. Since the oracle is linked to multiple blockchains, each supplier can use the network of their choice.Interoperability is also important for the exchange of digital assets between blockchain networks. One of the most common ways this is done is by the use of cross-chain bridges. In simple terms, cross-chain bridges allow users to transfer tokens from one blockchain to another. Wrapped tokens, for example, allow users to use Bitcoin (BTC) on the Ethereum network as Wrapped Bitcoin (wBTC). This is important in the DeFi industry since users can engage with DeFi without buying a platform’s native token, which may be more volatile than stablecoins or blue chip coins like BTC or Ether (ETH). Being able to easily move assets between blockchain networks is a major benefit of interoperability. Anthony Georgiades, co-founder of the Pastel Network — a nonfungible token (NFT) and Web3 infrastructure and security project — told Cointelegraph: “Interoperability is of vital importance to the blockchain industry due to the diversity of data and assets found within the crypto ecosystem. Decentralized cross-chain bridges are necessary to facilitate transfers between different kinds of tokens or assets.”The key to the success of blockchain technology will be the level of interaction and integration between the many blockchain networks. Because of this, interoperability between blockchains is crucial since it reduces the barrier to entry for users who want to engage with protocols across multiple networks.Recent: Bitcoin and the banking system: Slammed doors and legacy flawsInteroperability across blockchains will enhance productivity throughout the whole crypto sector. Users can quickly move data and assets across blockchains, increasing flexibility for everyone involved. Instead of being tied to a single blockchain, smart contracts can function on multiple networks and oracles will submit real-world data across different platforms. When combined with the advantages of public decentralized blockchains, interoperability should provide the basis for widespread blockchain adoption and utilization.Georgiades continued, “Therefore, interoperability allows users to transmit cryptocurrency from one blockchain to another and enables users to post tokens or NFTs as collateral for other assets. An interoperable Web3 world is a vision we are tirelessly working towards. A multichain ecosystem facilitated by seamless cross-chain bridges will get us there and bring that vision to fruition.”

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