Bitcoin was originally ideated as a peer-to-peer electronic decentralized payment system, based on a public ledger or blockchain. Developers soon realized that the scope of blockchain extended much beyond a modest payment service. Vitalik Buterin viewed it as a platform on which decentralized applications (DApps) could be written using smart contracts, and brought Ethereum to life, which ushered in a new era of blockchain projects.
Another application of blockchain technology that has gained ground recently is as distributed data systems. Just like we use centralized data systems like Google Cloud and Amazon AWS, with some optimization, blockchain can be used as a decentralized database. V Systems is a blockchain database cloud project and DApp platform, that aims to create a general purpose distributed database for a new digital economy.
The project is based on a brand-new consensus method called Supernode Proof of Stake (SPoS), developed by none other than Sunny King, the brain behind the well-known PoS algorithm.
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The obvious question that comes to mind is why can’t the Bitcoin blockchain itself serve as a decentralized database? Well, Bitcoin wasn’t originally created to serve as a database! The data used per transaction is about 100 bytes, and the maximum block size was limited to 1 MB by Nakamoto himself, with new blocks produced every 10 minutes or so.
This limitation was deliberately introduced since the increase in data usage would conflict with the system performance. There have been attempts to increase the maximum block size, but all such efforts have led to a lot of heart burns and hard forks!
Another problem here is that in its current form, Bitcoin it is not scalable. Today, the Bitcoin network processes less than 10 transactions per second (TPS). With every transaction, each node in the network has to validate the new blockchain state in its entirety.
If data usage is increased, it would either require an upgrade of all the nodes, or result in a heavy decrease in the already-low system throughput.
Bitcoin’s chosen consensus algorithm is Proof of Work, or PoW. Nodes in the Bitcoin blockchain (called miners) solve cryptographic puzzles to validate transactions and create new blocks, keeping the network secure in the process.
Computation power is expended during this process, and the miner who solves the puzzle first is rewarded with newly mined Bitcoin. The puzzle solving difficulty increases with time; in other words, more computation power (or hash rate) is required, leading to more electricity being consumed.
While 10 years ago one could mine Bitcoins using literally the cheapest laptop available, today special Application Specific Integrated Circuit (ASIC) processors are needed.
In fact, the hash rate of a single ASIC processor is also insufficient today, forcing miners to combine their hardware’s hash rates and form what are called mining pools.
This power-consumption is an ever-increasing headache. Currently, the annual energy consumed by Bitcoin miners is around 22 TWh, which is almost the same as Ireland’s power consumption.
And with bitcoin mining difficulty increasing with time, this number will only grow. Moreover, the tendency to form mining pools tends to centralize the whole ecosystem, which attacks the fundamental value on which Bitcoin was built.
Any mining pool that accumulates over 51% of hash power can end up modifying the Bitcoin blockchain as per its fancy!
The high energy cost of PoW is a necessary evil, as the huge hash power required to mount a 51% attack is what potentially discourages attackers. However, there have always been voices of dissent against PoW’s wasteful nature.
One such voice belongs to Sunny King. Many people might not be familiar with this name, specially since the person behind this pseudonym maintains a reclusive persona, communicating mainly through public forums.
King is the developer of the Proof of Stake (PoS) consensus algorithm. He is considered to be one of the legends in the blockchain space. In fact, Buterin even referred to him as “the single most original altcoin developer”. Peercoin, launched in 2012, was the first digital currency to adopt PoS.
Today, Neo, EOS, Cardano and a bunch of other crypto-currencies use PoS. And Ethereum is also implementing a move to PoS through the Casper upgrade.
In PoS, nodes (called minters) deposit (or stake) coins to the network, and earn minting fees when they create new blocks. The creator of the next block is chosen in a pseudo-random manner, which depends on the quantity of tokens staked.
This randomization prevents centralization; otherwise the node with the most tokens would always end up being the block creator. The general notion is that greater a node’s stake, more the likelihood that the node would want the network to remain secure.
In case a node behaves fraudulently, all the tokens staked by that node are confiscated.
51% attacks in a PoS system would require 51% of all blockchain coins. This would be an extremely costly affair, as any such purchasing activity would pump up the token price.
Moreover, since the minting fees earned is proportional to the number of coins staked, there is no added incentive of joining mining pools. And finally, as no energy-extensive hardware is required, PoS is much more energy efficient than PoW.
PoS also had had its fair share of issues, such as stake grinding and the nothing-at-stake problem, but these have been resolved through updates in the algorithm.
Problems related to code updates are easy to resolve, but when it comes to hardware issues, it becomes a major contention. And that is the nemesis PoS faces today. The increased performance demand from blockchain networks requires nodes with improved hardware. However, all nodes might not have enough incentive to upgrade. This causes the entire network to suffer.
Another problem is that although the average block generation time is fixed, an individual block might actually take much longer. It is preferable to keep the block generation constant to ensure steady system performance.
These issues motivated Sunny King to develop the SPoS algorithm. While PoS allows any computer to mint coins, SPoS requires supernodes with much higher memory, bandwidth and processing capacity. Supernodes can process transactions much faster than ordinary nodes, making SPoS much more scalable.
Ordinary nodes can lease their coins to a supernode, which in turn stakes these coins to earn minting rewards. The rewards are then proportionately distributed among the stake owners. Since minting is done only by supernodes, a constant minting interval can be maintained here. Typically, 60 minting slots are provided each minute, and a supernode has to own a minting slot before minting a new block.
Contention of minting slot by challenger supernodes is also allowed. This redundancy ensures that system performance is not hampered if some of the supernodes suddenly malfunction.
This idea of leasing coins (also called cold minting or cold staking) originally came from the Peercoin days, and involved 2 separate keys — a minting key and a spending key.
The minting key remains online, allowing the minter to sign the newly block minted; the spending key, which actually ‘owns’ the stake, is kept offline safely. This allows nodes to lease their coins without giving up on ownership, but this also encourages the creation of mining pools.
This is actually one of the biggest arguments against SPoS today as well.
King’s solution to this plight involves providing equal minting rights to all supernodes. Stake owners will tend to lease coins to supernodes which pay more, and this additional lease will lower that particular supernode’s lease rate due to its constant minting output.
This mechanism maintains a balance between the lease rates of all supernodes.
The hardware requirement of all supernodes is also standardized through community effort, which ensures that no supernode ends up being more powerful than others.
SPoS also implements what is known as stake liquidity, where both minters and stake owners can spend or transfer the staked coins whenever they want to.
This encourages more nodes to participate in the network, increasing overall security.
On the downside, this can lead to the busy contention attack, where a stake owner might try to move the stake around rapidly to claim multiple minting slots.
To counter this, an average minting balance of the account is used when bidding for minting slots, forcing the stake to stay in the account for a certain minimum amount of time.
On 11th Jan, 2019, Sunny King introduced V Systems as the first project to implement SPoS. King has been associated with this project for over a year now, in the capacity of Chief Architect.
Their primary goal is to be a distributed database infrastructure on which new blockchains and blockchain applications can be developed at a low cost.
They believe that the future of blockchain entails multiple application-specific blockchains, instead of a single blockchain to rule them all. A single blockchain will suffer from scalability limitation, provide no application-wise isolation, and hinder the proper utilization of resources when sharing resources over multiple applications.
V Systems will provide custom blockchain solutions for organizations through their decentralized cloud platform, and user-friendly modular development platforms for developers to create blockchains and DApps instantly, without worrying about complicated time-consuming codes.
Thanks to SPoS, their platform is highly scalable and low-cost. Supernodes will be provided enough incentive to constantly upgrade hardware as required, to support large scale growth of DApps.
V Systems is also working on next generation smart contracts, as the current breed is difficult to scale and lack security. Their main-net will launch the smart contract and DApps development platform functions later this year.
For now, they will support Ethereum and EOS smart contracts. Enterprise DApps will also be supported on their decentralized database platform, with a full privacy protection layer for smart contracts, ensuring that the blockchain is transparent but data remains private.
Finally, V Systems’ long term vision also includes a decentralized mobile internet network, which will include browser support for mobile phone users.
(VSYS Function Roadmap)
The V Systems blockchain explorer shows that new blocks are minted every 4 seconds. VSYS is the native currency of their blockchain. The total coin supply is around 5.14 billion. They are used for paying transaction fees on the network, as well as for leasing and minting.
Each transaction on the blockchain leads to burning of VSYS and a subsequent deflation. Payments for accessing DApps on the V Systems network, and utilizing resources on the decentralized cloud database, will also be done through VSYS coins.
On 27th March, 2019, Hong Kong based ZB/BW/ZBG exchanges co-launched the sale of VSYS on their project launchpad platforms.
Over 300,000 KYC users participated in the sale, which got over in less than 10 seconds. VSYS is trading at ~6x of the launchpad price in exchanges worldwide, as on 18th April, 2019. EOS, whose current market cap is nearly 5b USD, is probably their biggest competitor in the blockchain space.
V Systems has 15 supernodes in operation now, and a handful of backup supernodes. New supernodes get listed in the backup section, and if they manage to get a large amount of leased coins, they get promoted to active supernodes.
As explained earlier, when users lease their coins to supernodes, their average minting balance (AMB) increases, such that they can contend for minting slots and earn minting rewards. The supernodes keep a certain portion of the rewards as hardware maintenance fees, and distribute the rest to the users.
A point to note here is that supernodes with 100% capacity will not provide users with minting rewards.
(VSYS Economy Model)
In order to lease coins to a supernode, users will first have to create a V Wallet. Once a wallet is created, copy the address of the supernode of your choice, go the ‘Leasing’ section of your wallet webpage, and enter the details as required.
This section is extremely easy and intuitive to navigate, and even first time users should have no difficulty at all.
In case additional help is here, some explainer videos can be found in their official Youtube channel. Cancelling of lease can also be done through the same page.
Most supernodes actually start giving out rewards once coin age duration is complete. In simple words, users will start getting rewards after roughly 4 days (or 86,400 blocks to be precise) from the time the lease transaction was completed.
After more than a year in crypto exile, Sunny King is leading a team of blockchain developers to reduce the technical barriers and entry cost of blockchain technology. Centrally hosted databases have high communication costs, are prone to hacking, and are susceptible to single-point failures.
On the other hand, distributed database systems have high concurrency, are customizable, have high data security, and other added advantages. The main roadblock to blockchain based database systems today is the low network throughput.
With their SPoS consensus algorithm, V Systems promises to change that, and make blockchain technology more accessible to developers.