ETHEREUM BASICS: ITS BLOCKCHAIN, ETH, SMART CONTRACTS
The Ethereum blockchain is a distributed network focused on running the programming code of any decentralized application (DApp). The consensus for the Ethereum blockchain is based on miners and a “proof of work” system. Under such a system, rewards are distributed to miners solving a computational puzzle the fastest, placing the latest block on the blockchain. Proof of work incurs much computational power - through mining - in order to solve puzzles and verify transactions.
A base currency to run the Ethereum platform is required to reward miners. Enter Ether (ETH), stage center! As of now, ETH’s main use case is node-related. Miners execute a program on the platform, and receive a transaction fee for running the code. The transaction fee is "gas" paid in Ether, dynamically dependent and distributed based on the price current price of ETH. Transactions are executed primarily through smart contracts, described in the paragraph below. Additionally, transaction fees work as spam protection for the Ethereum network.
Smart contracts are self-executing, self-enforced programs governed by explicit terms and conditions laid out within. Smart contracts represent special algorithms to automate contracts, taking out intermediaries to execute transactions. Accordingly, this provides the parties involved “autonomy, decentralization, and auto-sufficiency”. Facilitating the exchange of anything, smart contracts are advantageously:
- Fast, efficient, and cost reductive;
- Accurate, clear, transparent, and trustworthy; as well as
- Secure, backed-up, and enforceable.
However, smart contracts are burdened by transaction time and cost. At the moment, skepticism has lead to slow adoption of this new technology (as for the entire blockchain industry). Thus for the moment, smart contracts are a breakthrough for the blockchain world, but are nowhere close to mass adoption outside of this domain.
Ethereum is most certainly a game changer, because it currently provides the most reliable and trusted platform for decentralized applications to exist. Blockgeeks notes that dapps never go down, no third party can make changes to the data, no central point of failure, and that censorship is impossible. Compile that with the benefits of smart contracts, and Ethereum has much to tout on its merits and accomplishments.
On the flipside, Blockgeeks makes it clear: smart contracts on Ethereum are only as good as the people who write them. Further, questions of scalability constantly arise, as Ethereum “will never be seen as efficient as other faster blockchains”. At the time Alyssa Hertig wrote her article on the topic, Ethereum could support roughly 15 transactions per second, as compared to Visa’s 45,000 per second. Due to “nodes” volunteered to download the entirety of the blockchain when new blocks are written, Ethereum transacts more slowly when considering other centralized alternatives. Today, security and decentralization are at odds when it comes to the Ethereum blockchain.
Moreover, pillars of being “backed-up” and “enforceable” have been proven problematic in the face of large-scale hacks on a quest for Ethereum. In 2016, the funds from The DAO (decentralized autonomous organization) were drained into a group of hackers’ mimicked accounts, forcing Ethereum to make a hard choice: would the transactions be rewritten to allow recovery of the funds (breaking immutability) or does the hack go unfettered (breaking security)? In the end, immutability was breached for the sake of security. A fork took place of Ethereum to recover the funds and splice ETH into two coins: Ethereum and Ethereum Classic.
In total, Ethereum’s ingenuity is also its achilles heel, and requires its builders of applications to create solutions to such challenges.
THE FINNOQ PROTOCOL AND FNQ TOKEN
On another dimension just outside of Linz, the Finnoq protocol is going to decentralize opinion markets by leveraging the wisdom of the crowd to create a solid basis for decisions. The wisdom of the crowd states that when individuals in a group give unbiased, uninfluenced opinions about a query, 95% of the time the average collective response is better than responses of the smartest group members alone. Thus by creating a protocol centered on this philosophy, quality unbiased opinions can be incentivized and rewarded by funneling Advisors’ opinions into collective statements, all while the credibility of opinions is tracked over time. This is achieved by participating in the Finnoq core as an “Advisor”.
The Finnoq protocol consists of three layers (and its respective elements therein):
- Finnoq core, where identification verification (“Whitelisting”), token staking, credibility scoring, and rewards distribution takes place;
- Service Layer, where all of the possibilities to use the Finnoq Core are created. Standardized APIs, parameters, modules, templates, and ways of distributing of rewards are conceived; and the
- Application Layer, where end applications and collective opinions are developed.
In order to accomplish all of this, the Finnoq protocol (just like Ethereum) requires a token. Move over ETH token (to left or right), and now enter FNQ Token, stage center!
The FNQ Token serves three purposes: execution of work/voting (i.e. forming collective opinions), payment as the fuel of the ecosystem (when rewards are distributed), and governance of the protocol itself (how the protocol evolves over time). Given the design of the Finnoq protocol, its three layers, and guiding principle in incentivizing unbiased opinions from a decentralized community, FNQ’s use, flexibility, and governance control give it a fightin’ chance in decreasing marginal percentage gains vis-à-vis ETH over time.
LOFTY AMBITIONS OR AN ARTISANAL LINZER TORTE?
First, FNQ is based on need, without a speculative component to its inherent merit. The design of the Token model is such that Advisors are required to stake FNQ tokens into contracts. By doing so, two things happen. On one hand, the token velocity is “healthy”: not too fast and not too slow. Thus by only having necessary amounts of tokens staked in contracts, the amount of available tokens naturally decreases. On the other hand, as use continues to increase, the amount of overall tokens minted does not. Thus, demand for use of FNQ will increase.
Alternatively, ETH has long been seen as a speculative sale for its participants (even if this is not Ethereum’s goal), noted by the South Korean government in 2017 for example. Also, token scarcity has not been determined in the case of ETH. Further, as governments and regulators sort out the rules of the game going forward for crypto markets, price fluctuations all crypto assets will continue. However, FNQ relies not on speculation, an established name, or prior achievements, but on its use within a well-devised protocol.
Ethereum’s platform - as described above - is the foundational protocol bringing endless possibilities to a new generation of bright thinkers and innovators. That being said, Ethereum’s success will require it to stay put in its established place, where developers will use it as the platform to launch into decentralized success. Certainly, different forms of smart contract will take place, be adopted, and the platform will evolve over time. However, fundamentally it will remain where it is. The Finnoq protocol is more agile. The protocol is constructed agnostically to be moved onto other public blockchains, if needed. Thus, if and when better solutions more beneficial to the Finnoq protocol exist, we can migrate the entire protocol accordingly and access the advantageous position of the evolving blockchain space. Such would prove beneficial for FNQ’s continued use. How would this be done? Through governance!
Besides voting on whether the Finnoq protocol should migrate to another public blockchain going forward, the protocol has a nifty feature that is currently absent on the Ethereum platform: “Blacklisting”. Just as we can “Whitelist” an Advisor and confirm his or her identity (to access the Finnoq core), the community can also forbid malicious developers from access. As previously discussed, when ETH were stolen due to a hack of The DAO, it was faced with a tough choice: rewrite on the blockchain and reimburse ETH to the victims or let the hack stand. By “forking” Ethereum and rewriting the transactions, a schism and headache was caused by the entire ordeal. Alternatively, the Finnoq protocol does not need to rewrite anything; rather, FNQ holders can vote to expel bad actors, hackers, and obvious manipulators contrary to the philosophy of Finnoq.
As you can see, the advantages of Ethereum paved the way for the Finnoq protocol. We as many other projects learned from the pioneering done at Ethereum, and are thankful for their work. Through trial and error, the Ethereum platform has given us much inspiration in making our protocol more efficient, usable, flexible, and assured. We and many others believe the FNQ Token has massive potential over time to outpace ETH.Through a well-designed token model with precisely-defined uses, a flexible and agnostically-constructed protocol, and efficient governance function, FNQ will make waves as a standard-bearer for decentralized opinion markets. A bold statement only to be tested by the intervals of time, and we do look forward to verifying the results.