Skycoin is a Next Generation Cryptocurrency

This is an archived post from the bitcointalks thread on May 06 2014.

Quote from: -Greed- on May 05, 2014, 04:25:46 PM +1 for skycoin being truly 2nd-gen coin. Bitcoin and all its forks are first-gen IMO.

Some of the things we are laying the foundations for are third gen. A working, usable coin, with a clean code base and good security, no mining, no 51% attack and a reason to use the coin is just second gen.

Digital contracts, communication and identity infrastructure lay the foundation for the third gen. We do not know what the third gen will look like, but believe that it will involve platforms and 3rd party applications.

A first gen coin is extremely easy to fork. You just change the hash function or the name and logo and then release it. The first generation was about marketing. Bitcoin and then Dogecoin were the most successful coins in the first gen. Bitcoin has a strong community, the strongest merchant adoption and ecosystem. Dogecoin has the best community, the best marketing and wide adoption among younger users.

Between the second and third gen, we are seeing features like messaging for communication between addresses and other extensions. You cant fork the coin because your fork is no longer compatible with the ecosystem of the original.

At the same time, between the second and third generation the new platforms increase interoperability between first generation coins. Any two coins become automatically convertible between each other at the spot price. You don’t care if they accept Bitcoin or which basket of currencies they accept, because it is the same for the end user. They just go to their wallet and hit “pay” and select the currency to pay in and which wallet they want to pay out of.

The third gen will have more community currencies or companies issuing their own currencies as gift cards (“small tent” special purpose currencies). In the second generation, we are seeing wallstreet exchanges and banks integrating Bitcoin as a commodity, like Gold. They are trading Bitcoin as a commodity, but have not adapted to run their infrastructure on Bitcoin type systems.

In the third generation, we might see new banks and exchanges which build their whole transaction infrastructure from cryptographic primitives, receipts and contracts. A user of an offshore bank has a receipt and counter-receipts from each transaction and the counterparties. The bank cannot steal his money or change his balance. The bank cannot authorize or forge a receipt for sending money to a third party without the users cryptographic signature. All banks expose a common API.

The things in the account no longer have to be currency pairs but can be other assets. All fiat is the same. You do not have separate systems and a separate database table for different types of fiat. The system handles all fiat transactions in a consistent way.

In the third generation, anyone can issue bonds and options. Previously, there was counterparty risk for options. Only large financial players could issue options on equities. A large company is less likely to default from a bad options position. In the third generation, anyone can issue options. Options are digital contracts and the performance of the option contract is guaranteed by assets in third party escrow. Crypto-assets become accounting mechanisms for legacy assets.

Many coins such as Mastercoin, Ethereum and colored coins are trying to jump to gen three. However, we believe that gen three will emerge organically on top of infrastructure developed for gen two coins.

Bitcoin has extremely poor extensibility for standards, so you have three wallets and three different wallet implementations and no interoperability, no interoperability between exchange APIs and no roadmap which allows third party developers to drive protocol evolution. Personal blockchains in Skycoin are designed be generic and allow users to individually upgrade their nodes to support new scripting languages, types of contracts and put control of the protocol in the hands of users and third party devs. The wire protocol is extensible and allows association of new applications with the Skycoin daemon.

We had to invent personal blockchains, so that individual users and developers could experiment and extend the protocol without threatening the mainchain. Colorcoin and other coins embedded on the blockchain will never be able to achieve the functionality required for practical use, because the Bitcoin developers have been forced to disable op codes for security, there is no mechanism in the blockchain for pulling in the required data for a practical system of financial contracts and any experimentation with new protocols requires a blockchain fork.

If the evolution of the ecosystem stops at where Bitcoin is today, the full potential of crypto currencies will never be realized.