What the technology hype cycle tells us about the future of cryptocurrency

Getting a ringside seat to cutting-edge technology that has changed the world is one of the fascinating chances I’ve had in my profession. Being at firms with a huge influence on their industry, such as Microsoft, Amazon, and now Coinbase, allows me to work on and experience disruptive technologies every day. Experiencing the Hype Cycle up close. At Amazon, I saw the whole lifecycle of a service — from creating the business plan for AWS Lambda to launching it at re:Invent to continuing to grow it into one of the world’s largest enterprise-grade cloud businesses. As VP of Engineering at Coinbase, I’m taken by some parallels between Serverless computing and crypto as they progress.

How do you evaluate the long-term impact of ideas with significant potential for change before they’re widely accepted?

Let’s take a look at Lambda and serverless computing to see where crypto has been, where it’s going, and how (and when) it’ll be accepted.

Innovate with the Incubator’s Innovation Trigger and the Inflated Expectation Peak

Almost every significant new technology, though, goes through the same thing: it is overhyped. In the early days, immature tooling and techniques haven’t caught up with client and developer demands. Back in November 2014, when Lambda initially launched, let’s take a look at it. At the time, it only allowed for a single minute of execution time, 1 GB of memory, operated in a single region, had no means to connect to consumer Virtual Private Clouds (VPCs), and did not allow for synchronous (direct) invocations. It included two event sources: Amazon S3 and Amazon Kinesis, as

Meanwhile, the frenzy was off the charts — reporters predicted that this new computing paradigm would displace existing computation and software. Customers were ecstatic as they dreamed of a world without servers, with limitless cloud capacity, and with optimum utilization. The first launch presentation was packed to capacity, as was the repeat session the next day. It appeared that cloud nirvana had arrived at last. The team in Seattle celebrated our success, confident in a bright future filled with client success and a new, developing Amazon company.

The Trough of Disillusionment for Lambda functions as a turn in the road.

After a few months, reality set in: running time and memory restrictions, the lack of access to SQL databases (virtually all of which sat behind VPCs), the restricted quantity of event sources, and other limitations became more apparent. Articles, postings, and tweets about no longer talking about optimism and enthusiasm began discussing the problems and boundaries. Customer dissatisfaction grew in some regions when new areas had limited capacity and calls were restricted. “Cold starts” and other friction from those early days enraged some early adopters, who called the technique a failure. Some of the same people who had praised it initially branded it as DOA by the time the term “serverless” entered into popular usage. On the commercial side, adoption was increasing, but sales were slow in the first few months, and we began to question ourselves — had we perhaps done something ordinary and uninteresting or was it a costly failure?

The Hockey Stick Growth and the Slope of Enlightenment

Meanwhile, the Lambda team was working hard to remove limitations and deliver features: synchronous invocations, dozens of new event sources, larger memory, longer running times, new regions…the service quickly grew into the enterprise-grade offering that customers needed to really get value from it. They did, and in less than a year after launch, business users became a substantial market. Customers who had previously rejected the idea came back to reconsider. Revenue, volume, and adoption were all exploding as we’d anticipated.

It was just as important that the technology matured. The entire ecosystem needed to mature, including meeting client expectations as a complete solution. That included AWS Solutions Architects who could train clients on best practices, new conferences being created, and lots of case studies to assist with this new architecture of writing apps.

It took time to grow into its shoes, in part because new technologies, such as Firecracker, which allows a single EC2 instance to run multiple hypervisors, had to be created. Because Lambda has developed so much over the years, every change had to keep the “production promise” for hundreds of thousands of consumers.

The Plateau of Awakening is the name given to a region in northwest New World.

Meanwhile, the ecosystem was also developing. Application modeling and deployment technologies were developed, Lambda passed stringent security and payment-card-industry standards like SOC and PCI, and formal SLAs were implemented. Third-party tools and services for everything from security to monitoring to support became available. Today, Lambda executes trillions of computations each month and has hundreds of thousands of active users. It’s been adopted by numerous Fortune 500 firms, with 60% of IT departments already using it or intending to deploy it, and it’s seen as an essential component of best cloud architecture practices. That initial euphoria was just a bit premature.

The Hype Cycle of Cryptocurrencies

If you’ve been paying attention to the cryptocurrency world, this all sounds very similar. There was a lot of excitement (‘fiat money will be phased out!’) followed by excruciating reality. In 2018, Bitcoin and other popular assets experienced sharp declines in value, which were widely considered to signify crypto’s failure as an idea; Meanwhile, genuine limits of the early technical expressions of crypto and blockchains were (and are) misinterpreted as their ultimate consequences. The notion of utilizing blockchain as a payment processing platform was challenged by comparisons between Bitcoin’s 4.6 transactions per second and Visa’s average of 1,700. The proof-of-work method’s numerous economic drawbacks, difficulties some firms had in coping with customer funds, and scalability, latency, and throughput restrictions all diminished its early shine.

As with Serverless, the underlying technologies (as well as their ecosystems of tools and procedures) are maturing up. Fundamental progress may be wider than ever before, and it’s growing fast on every front:

  • Through traditional optimization such as sharding, as well as novel crypto-native techniques including batching, STARKS, and Layer 2 protocols, scalability and throughput are being addressed. Proof-of-stake and associated governance mechanisms provide a supplementary model to proof-of-work with lower latency and aggregate power use.
  • The rise of smart contracts and built-in application platforms is allowing for a “distributed cloud” that redesigns software architecture and economics.
  • At the same time, cutting-edge entrepreneurs are looking at new ways to expand their business model. How real estate, art, and other assets and activities might be represented in a crypto-centric manner are all examples of this.
  • True to crypto’s origins, conventional finance is being reimagined and reinvented. Both the technology and the businesses developing it are finally growing into their (extremely large) boots.

You Are Here

Crypto’s “Hype Cycle”

The Gartner Hype Cycle model has been applied to cryptocurrencies.

What factors influence the length of time it takes to go through the hype cycle? The broader a technology’s market reach and the more disruptive it is versus what went before, the longer it will take you to reach the final stages, where technology reaches its full maturity in terms of both implementation and adoption. That took around three years with Lambda. Lambda has now reached its “productivity plateau,” having been adopted by a third of all businesses, with serverless computing becoming the fastest-growing cloud computing technology.

On the one hand, blockchain is a technology that has the potential to revolutionize how everyone on the planet receives financial services. Its reach goes beyond software development and IT efficiency, and its economic impact extends deeper than the cloud. As a consequence, there’s still a long way to go before crypto becomes as common as fiat currencies and as simple to code. The Bitcoin network has yet to reach its productivity plateau, but we’re close enough now to get a sense of what some of those enhancements might look like across the whole cryptoeconomy. (Note that these are ideas we’d want to support via both Coinbase and our venture arm, Coinbase Ventures):

  • To scale, we’ll aggregate global payment transactions per second so that every individual and commercial transaction may be recorded in a blockchain.
  • Per-transaction latency (through L2 solutions, for example) in low-digit milliseconds – regardless of location.
  • The costs of computing and storage that represent the fundamental running expenses of cloud infrastructure, regardless of network distribution.
  • Businesses, not just consumers, will benefit from the blockchain’s decentralized nature. It provides a high degree of security and transparency for all participants, including users, organizations that make transactions on or use cryptocurrencies (wallets), and those who integrate smart contracts into their business models.

Blockchains and cryptocurrencies are where the public cloud was 10 years ago, but they’re on an amazing acceleration path, with core R&D, customer-centric engineering, and ecosystem enablement all occurring simultaneously. One of the most amazing things I’ve seen in my career is the cutting-edge implementation work being done in many open source communities and firms like Coinbase to develop new capabilities, remove barriers, and bring fascinating technologies to market. Hype curve smashed!

If you’re interested in working on cutting-edge technology at a world-class firm like MessageLabs, we’d love to hear from you. We’re always looking for smart individuals who would want to be a part of this amazing adventure with us, so take a look at our open positions to learn more!

Different between Staking and Masternoding

 

Masternodes vs. Proof of Stake: What’s the Difference?

Masternodes and staking are often used together, but they are in fact two distinct consensus algorithms. Mining Scrypt on Litecoin is not the same as SHA 256 mining on Bitcoin, despite the fact that they accomplish distributed consensus by locking up “stake,” which acts like collateral that they will not attack the network, and getting payments for verifying

Staking and Masternodes: This post will address the most frequently asked questions, such as Why should I use Staking?

  • How can staking or masternoding provide passive income?
  • Are you paid interest on your investment?
  • How does the crypto interest system work?
  • What are the differences between the yield bearing methods?
  • Is there more going on with this system than just giving interest??
  • What does the crypto network gain from it??

The pros and drawbacks of each solution will be outlined to assist you in deciding which one is preferable. Let’s begin with the Blockchain technology for those who aren’t familiar with it.

What Is the Blockchain Technology and How Does It Work?

The technology behind Bitcoin, Blockchain, may be applied to anything of value. Anything that can be exchanged for another may be traded. The ability to trade an asset via the internet adds value to it since it is faster and easier. This also implies that keeping your asset online must have a secure security system in place against malicious assaults.

The actual value of blockchains is their unique consensus mechanism. Whether you fully understand how they work or not, the most important thing to know is that even in hostile conditions, they achieve consensus. Even governments would have a hard time breaking or changing Bitcoin’s consensus, as demonstrated by its resilience.

Gold and silver coins have this same attribute, which means they too can help you preserve information, value, money, data, or anything else online. You don’t need to understand how it works in order to utilize it, much like the internet itself.

Blockchain consensus mechanisms:

A method is a set of rules for calculating or resolving other problems, especially by a computer that verifies transactions on the blockchain in order to establish consensus (a basic agreement). There are several consensus mechanisms, and each one is somewhat different from the rest. Hybrids or mixes of various algorithms exist as well.

Here are some of the common mechanisms.

This article, on the other hand, will only be able to discuss the differences/s between Proof of Service (PoSe) and Proof of Stake (PoS).

(PoS) Proof of Stake and (PoSe) Proof of Service

What’s the difference?

Before we can compare the two, we need to discuss the Blockchain’s initial ever consensus mechanism, which is what Bitcoin utilizes (PoW), Proof of Work. ( If you already know what PoW is and how it works, feel free to skip this section.) )

What is proof of work (PoW)?

(PoW) Proof of Work is a consensus algorithm that;

  1. assigns nodes/computers to,
  2. verify/validate transactions,
  3. creates blocks.
  4. Makes new coins to reward or pay the nodes and
  5. distributes them accordingly.

The Blockchain is a chain of blocks that includes a duplicate of all the previous transactions, which are used to verify the current set of transactions that took place in 10 minutes. The more activities performed in 10 minutes, the harder it is to validate a block. This implies that calculating the work required to verify a block requires a lot of computational power or effort

Rewards are given to miners who secure the network in one of three ways: by using a Proof-of-Stake system, a Proof-of-Work system, or a Proof-of-Stake with POSe. They serve as a type of inflation until transaction fees are sufficient to support the network.

The practice of verifying a block of transactions in order to earn bitcoins is called mining.

Whether or how much of a reward you get for solving the block is dependent on how much computing power you have. (PoW) Proof of Work is a more well-known form of consensus than other methods. This is because it was invented by the first person to do so, and thus has been widely utilized by popular cryptocurrencies such as Bitcoin,

However, the need for a lot of computing power is causing electricity bills to rise “to the moon.” It’s so high up that this drawback was at a point where electricity bill costs exceeded earnings. Making it unprofitable and unpleasant for miners to mine and balance this out transaction fees increased significantly.

To address these difficulties, various consensus algorithms were developed.

What is (PoS) Proof of Stake, and how does it work?

The consensus algorithm Proof of Stake, also known as (PoS) Proof of Stake, has features comparable to the (PoW) Proof of Work. Features include:

  1. Determines and assigns nodes/computers to,
  2. verify/validate transactions,
  3. makes blocks by bundling all transactions made in a 10 minute interval.
  4. Creates new coins to reward or pay the nodes and
  5. distributes them accordingly.

The majority of cryptocurrencies, especially bitcoin, use a combination of proof-of-work and proof-of-stake to generate new coins. In this case (number 4), some currencies employ proof-of-work to create new money, while others utilize proof-of-stake. Peercoin was the first cryptocurrency to do so.

What is the mechanism behind (PoS) Proof of Stake?

How does (PoS) Proof of Stake function and who are the winners? Unlike PoW, which relies on labor to authenticate/validate transactions, PoS solves this problem by eliminating the element that consumes a lot of power. Instead, PoS uses the coins that have been staked by the person who owns them.

The danger is staking your own coins for the new transactions to be verified, which may potentially damage them. This implies keeping or spending your coins in a wallet connected to the network and that must be unlocked/unencrypted at all times since the verification process needs data from your wallet, such as the number of coins there are.

The more coins you have, the more trustworthy the data you have, which means that your node is more likely to win. Because of this system’s nature, there is no minimum amount of money needed to stake in order to be a part of the network. Let’s look at how Masternodes differ from PoS Nodes. And how these

What is PoSe’s Proof of Service — Masternodes?

The primary reason I had to create this essay was because many newcomers to the cryptocurrency world believe that Masternodes and Staking are the same. No, they are not the same. Despite this, both activities are quite similar. And the only thing they have in common is that they’re both a method of generating passive revenue.

Dash was the first masternode network to be created. It’s added another security layer to the network by creating masternodes. Because PoS is required to somewhat jeopardize security in order for it to fix issues caused by PoW, it’s mostly because of this. Masternodes are like more of an add-on than a standalone

Masternodes are not in a position to generate new blocks, yet they may verify them. Keep this distinction in mind between the two.

Although masternodes are unable to generate new blocks, they can verify transactions. It is still considered a consensus mechanism due to its emphasis on network security. Because of its concern for network safeguard, it has the ability to reject blocks that might cause damage to the network.

Clearly, masternodes provide a variety of services beyond simply security. As a result, it was deemed to be a Proof of Service or Commitment and compared to staking in order to demonstrate how different it is.

Holding Masternodes also has the ability to,

Maintaining a blockchain from start to finish

These additional premium services open up +additional rights and functions, such as

  • Governance and voting rights.
  • Instant transactions (InstantSend).
  • Private transactions (PrivateSend).

What is Proof of Service — Masternodes, and how does it work?

Users that keep their bitcoin in a Masternode will receive a 45% cut of the block reward. The remaining 45% is shared among users who maintain coins in a network that includes a Masternode and PoW miners, such as DASH or PIVX, or both PoW and PoS stakers like LuxCoin.

In PoSe — Masternode, there is a large minimum investment required to operate a complete node/masternode. For example, consider DASH. To run a masternode, you’ll need 1000 DASH coins; at present, that’s worth $68,000.

Furthermore, just having the cash on hand for the required amount will not be enough to start the masternode. Other criteria must also be satisfied, such as whether or not a currency’s staking position has been moved.

Also, it must be accessible online at all times, which necessitates the use of a VPS (Virtual Private Server).

Proof of Stake + Masternodes

Proof of Stake and Masternodes are commonly paired to build a more secure consensus mechanism with some agreed governance. Everyone may stake, ensuring the network’s security and generating blocks. Those that are heavily involved and lock up a significant number of coins are rewarded with masternode bonuses as well as voting weight in governance.

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