Comparison analysis for interchain

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Comparison Analysis for Interchain

COSMOS, ICON and AION focusing on technical and market potential

I have introduced ICON, COSMOS, and AION projects based on their white papers (Even if those were written in Korean, I am willing to publish all materials in Korean as well as English). I skipped basic contents you can easily check through whitepapers and I am willing to make a framework to evaluate each blockchain project soon. I will appreciate your questions and critics which will help me learn more.

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Brief Summary
Many interchain projects have emerged as the necessity for interoperability has been risen. I analyzed three interchain projects including COSMOS, ICON, and AION based on their whitepapers to figure out technical and commercial strength.

Key questions to conduct technical analysis for interchain are:

1. How could this interchain connect other blockchains
   • How each interchain connect with private or public blockchains
2. How well the consensus algorithm has been constructed
   • How the crypto-economy (Incentive mechanism in the blockchain ecosystem) is developed to secure the network as well as to encourage participants

Key questions to conduct analysis for market potential are:

1. How many partnerships with private blockchains or partnerships
2. The volume of ICO
3. The level of community maturity

If you are interested in the content, I recommend you to read this article.

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What is an interchain?

While there are increasing numbers of blockchain projects with diverse awareness of problems and their own solutions, each project is isolated and interoperability is unlikely. In the case of Bitcoin and Ethereum, the representative projects of blockchain, there are still many challenges to be solved due to scalability. Several interchain projects have launched to enable blockchain projects to interoperate and overcome the limitations of scalability through distributed connections. In this article, I will describe the criteria, required to evaluate relative technical and commercial strength, and contents.

1. Technical Analysis of interchain

Important factors to evaluate technical characteristics of the interchain are: 1) how well it can be linked to other blockchain projects and 2) whether the consensus algorithm is designed to be secure and well organized by economic incentives for its members. First, I selected the following criteria to evaluate the level of interoperability with other blockchain projects.

• Communications between blockchain
• Incentive mechanism related to consensus algorithm

1.1. Communication between blcokchain

In an interchain project, how to connect with other blockchains is an important factor. COSMOS, ICON, and AION all have each protocol for communication between blockchains. In order to compare protocols, the characteristics of each communication protocol and the degree of compatibility with other blockchain projects should be considered. (e.g.token exchange and interchain compatibility) If an interchain allow blockchains to transfer their tokens, which strength decentralized exchange has should be considered. Finally, whether you will provide compatible services to your existing central system (enterprise or government) should be considered.

COSMOS

Hubs and zones in the COSMOS network communicate with each other through inter-blockchain communication, which plays as a kind of UCP or TCP for block chains. COSMOS not only supports an exchange of other blockchain projects’ coins, but also allows a person who has Ethers to peg them to a privileged zone in COSMOS. COSMOS supports a consensus algorithm (Ethermint) for pegging ether into COSMOS network, and Ethermint provides fast commit speeds, which helps Etherium’s EVM to operate at higher performance on Ethermint.

Distributed exchanges in COSMOS network can provide sufficient liquidity comparable to a centralized exchange in terms of transfer throughput and commission rate. In the case of a previous decentralized exchange, transactions were only possible when the parties were online, and the COSMOS exchange can handle transactions regardless of their online status. In addition, zone in COSMOS network can provide a blockchain system suitable for centralized groups such as corporations and governments. While the underlying part of the service could be run by the organizations, specific part of service can be operated by TMSP application to ensure network interoperability.

ICON

ICON has a Community and Nexus (corresponding to the zones and hubs of COSMOS) and has a Blockchain Transmission Protocol (BTP) for linking transactions between blockchains connected to Nexus. BTP delivers transactions between blockchains through the Notary Channel configured within the Nexus. The Notary channel is implemented based on the multi-channel support of loopchain. It can identify the transactions confirmed by respective blockchains throughout the blockchain’s Light Client linked to Nexus.

Source: ICON WhitepaperICON provides ICX-based Decentralized Exchange (DEX) as a blockchain network that links

blockchain projects with their own governance. In particular, based on the Bancor Protocol, suitable prices are calculated in order to provide transaction between other blockchain projects’ tokens. In the case of a blockchain using a consensus algorithm such as Loopchain, currency exchange is done in real time. For example, when there is a cryptocurrency called Fcoin in a blockchain for a financial institution connected to a Nexus, Fcoin and ICX can be traded in real time and can also trade with other cryptocurrencies linked to ICON.
The strength of ICON is to support fast token transactions with the private blockchain ecosystem (hospitals and financial institutes) but ICON’s interoperability with other public blockchain projects such as Ethereum is less than COSMOS’s.

AION

AION has a Connecting Network and a Participating Network (corresponding to COSMOS Hub and Zone), and the Bridge in the AION network is a protocol that enables communication between Participating Network and Connecting Network. In the previous two projects, IBC and BTP focused on linking zones and hubs. AION’s Bridge has its own validators to ensure protocol transfer in order to maintain accountability across networks. The Bridge uses a light-weighted BFT-based agreement algorithm and deals with transactions when two-thirds of the validators vote. The Bridge’s validators are run by people who have a stake in the Connecting Network, which is directly connected. Multiple Bridges can be created if multiple validators register themselves in the same blockchain network. Which bridge to use at this time depends on each user’s choice. Bridge verifies the presence of signatures and the appropriateness of fees.

While AION’s Connecting Network is operated by validators in the BFT consensus algorithm, but interchain transaction contract is required in order to interoperate because the functionality is not inherent on Ethereum. If two or more Bridge validators within AION approve the interchain transaction, the contract will be processed. While the whitepapers of previous two projects described the Decentralized Exchange, the whitepaper of AION does not include the content. Instead, it states that if the other blockchain project uses the AION Token, the volatility of the newly issued token can be controlled.

When evaluating three projects based on blockchain communication, COSMOS is developing with a focus on increasing interoperability with other blockchain projects (focusing on Ethereum). It is expected to contribute for scalability of Ethereum. ICON focuses on building its own ecosystem by focusing on interoperability with private blockchain consortiums. AION has a unique blockchain communication protocol called Bridge that has its own set of validators.

1.2. Designing mechanism for consensus algorithm and validators

One of the most important parts of the blockchain project is consensus algorithm and incentive mechanism. The consensus algorithm is closely related to the transaction as well as the creation of the block, and the incentive mechanism is an essential system for creating the ideal ecosystem. Critical factors in the incentive mechanism include the validators’ selection criteria, the change in the number of verifiers, the reserve / compensation / penalty ratio of the validators, and the monitoring system for malicious behavior.

COSMOS

COSMOS has a tendermint agreement protocol and it is a consensus algorithm combining DPoS (Delegated Proof-of-Stake) concept with PBFT concept. Tendermint consensus is composed of three steps in total, and when validators over two-thirds agree, the next step is taken. Depositing a certain amount of token when you vote resolve a Nothing-at-Stake issue.

Tendermint Consensus Algoritm(Source: https://tendermint.com/intro/consensus-overview)Tendermint handles thousands of transactions per second with a commit delay of about one to two seconds based on a massive cloud of 64 nodes spread across seven data centers on five continents. In addition, Tendermint’s consensus algorithm is characterized by simplified light client security, suitable for use on mobile and the Internet. Without having to synchronize the block headers, Tendermint allows to determine the up-to-date status by just verifying the pre-commits of the latest blocks (the last step among three decision steps described in the above).

A node with a stake can obtain transaction processing fee or a commission for block creation by delegating a staking token called ‘Atom’ to an arbitrary validator, but if the delegated validator is hacked or has malicious behavior can also get punished. The validator in COSMOS is determined by the amount of Atom submitted as collateral, and a candidate who wishes to be a validator after the first set of assertions should provide more than the Atoms as collateral with the least validator. Initially, the number of validators will start at 100, increasing by 13% each year, and will maintain 300 validators after nine years from the beginning. Cosmos hub validators can receive any type of token as well as Atom for a transfer fee, and each validator can choose the exchange rate and transfer method subjectively. The collected fees are redistributed to shareholders in proportion to the deposited Atom, excluding taxes.

On the other hand, for breach of Tendermint consensus protocols or dual signing, the validators may lose its status and the bonding and the shares it holds may be destroyed. Sometimes validators can be disconnected such as local network disruptions, power failures, etc. The level of punishment is based on the number of absence for vote. For malicious behavior that leaves no trace, validators can agree outside and exclude the malicious validators. When more than one-third of malevolent validators stop COSMOS, the hub recovers through a block restructure through a hard fork.
Unlike other projects, COSMOS will use Atom, which was originally issued as a dedicated stake. In addition, it will issue a new Photon for Transaction. When using a single token for both staking and transaction function, people are less likely to stake token, and a large amount of fluidity can cause attackers to collect the tokens required for a PoS attack. Photon will be distributed to owners who have Ether, and those who have it can take the Photon and move it to the hub or other zones of the COSMOS ecosystem. Additionally, there is a reward system for hackers to monitor the validator’s behavior. If the validator is revealed to be hacked, the punishment will reduce the Atoms of the validator and the delegates, and the hacker will receive the reward (5%) accordingly.

ICON

Source: ICON WhitepaperICON Republic is a place where communities are connected, consisting of C-Rep, the representative of the community, and Citizen Nodes, which generate Loopchain-based DApp in ICON Republic. The blockchain network that makes up the ICON Republic is called Nexus, and Nexus is built on Loopchain and LFT-based Consensus. Each blockchain connected to the Nexus has its own governance. Nexus operates like a kind of representative democracy, with each C-Rep having an equal representation. For example, when deciding the operation policy in Nexus, the node management and ICX fee are determined in the Representation Channel composed of C-Rep. Reserve Channel is a blockchain channel consisting of nodes of Nexus that can generate ICX, and ICX is issued according to predefined rules, and ICX issued is kept in Nexus’s Public Treasury.

Loop Fault Tolerance(LFT) Overview, Source: ICON WhitepaperLoopchain supports fast consensus with no forks by grouping multiple trust nodes into a single group. The LFT consensus algorithm consists of a leader node that generates and broadcast a block, and a validator node that votes the validity of the block by verifying the contents of the generated block.

C-Rep, elected as representative of each community, has the right to vote on verification and governance of transactions on ICON Republic. Based on the contribution to the ICON Network, only the representative nodes of the community included in the upper scoping range can be C-Rep. The contribution of the representative node to the ICON Network is measured by ICON Incentives Scoring System (IISS), an AI-based scoring system. The representative node that has maintained the I_score (score of IISS) above the reference value for a certain period of time will have the minimum requirement as C-Rep. Finally, after the process of agreement between the existing C-Rep in the Representation channel, C-Rep will be determined. The maximum limit on the number of specific C-Reps and the minimum requirements for C-Rep qualification can be adjusted through C-Rep consensus.

IISS is an artificial intelligence based assessment system for effective ICX allocation. Based on ICX trading volume, DEX trading volume, policy voting participation, DEX Freezing volume, DApp creation and usage amount, the score will be calculated and then ICX will be distributed according to the score. Block generation nodes must bond a certain level of deposit to the Reserve Pool and bonded ICX will be reduced if validator either proposes an invalid Block or votes to an invalid Block.

AION

AION uses the Delegated Proof of Stake, in which people with stakes delegate their own stake to a specific validator. It has the premise that it is a powerful incentive to make sure that the process of electing a representative is the one that will bring the best results to each person. To be a validator, you must be registered as a pre-validator and be fully supported. Backers supporting the validators are composed of two parties: Solvers who solve cryptographic quizzes through the Proof of Intelligence and gain a solution to back a validator, and Stakers who must deposit a certain amount of money to support their own validators.

Selection Process for validators (Source: Aion Whitepaper)The validators have a term of a certain period and goes through the selection process of the following validator before the term is finalized. The Live set is updated as network participants support candidates or withdraw support from existing verifiers, and the Static set overwrites the existing Live set when the period expires.

The percentage of rewards for validators and supporters is presented by the validator from the time the validator becomes a candidate. So supporters and potential validator can set reasonable market values. Within the Active Set, the validator has a layered structure based on the total number of backing. The high rewards of those who are highly supportive are great, but if many supporters are involved, the rewards that individual supporters may receive may be small. Therefore, supporters will support a variety of validation groups, including those who do not act.
Penalties for malicious behavior include penalizing all stakes submitted by the validators and backers for a period of time and excluding them from the list of validators. Solvers who have supported the validator with a solution that solves the encryption problem will be invalidated. The absence of the validator’s activity is punished with demotion of the class and excluded from the consensus process for validators at the lowest tier.

AION has a Reputation system to help you choose the right validator. Reputation criteria include:

• Uptime (total activity time in the network)
• Total backing (indicators of past activity with total support and support received in that quarter)
• Centrality (an indicator of the degree of connectivity with other nodes in the social network)
• Transaction Origin (an indicator of the volume of transactions that has been on the network for the first time)
• Network Trust (an indicator of the value of good behavior between peers)

Both COSMOS and AION use DPoS, but the consensus process of COSMOS follows the algorithm of Tendermint consensus and issues spate tokens for the transaction and staking. It was also particularly interesting that COSMOS has a hacker system that would monitor the validators’ malicious actions. AION was following the DPoS scheme, but it was not only selecting the validator through staking, but also using a method of voting the validator using the Proof of Intelligence method, which solves the problem cryptographically. In addition, based on the Reputation System, we have been designing the mechanism so that the validator can steadily act in good faith. On the other hand, ICON has a representative democracy system and representation channel to manage its own monetary system.

1. Market potential of Interchain

The most important factor in an interchain is the degree of interoperability that can be linked to other blockchain projects. In the technical section described above, there may be some overlap with the description of interoperability of each project, but I will describe the part which is mainly focused on each project. In addition to interoperability, I would evaluate market potential according to the degree of community activation. Personally, I think there are a lot of things that need to be supplemented by the indicators that measure the market potential of an interchain.

2.1. Interoperability with other blockchain projects

COSMOS focuses on interoperability with Ethereum. Ethereum is a project that has been the focus of many developers in the blockchain field since it first proposed the Smart Contract concept. COSMOS plans to make a pegging zone in Cosmos to help Ethereum to expand and to enable Etherium developers to take advantage of the COSMOS environment.
ICON is the active project in creating a private blockchain ecosystem, which I think is not irrelevant to the fact that Loopchain is originally developed for private blockchain. To date, ICON has created a consortium with 26 brokerage firms to provide CHAIN ID, an association ID service, and automatic payment service to a consortium of large insurance companies in Korea. In addition, the bank community in ICON network is developing a pre-paid digital payment system, and installed smart vending machines in two universities in Korea. Finally, ICON plan to introduce blockchain technology into the precision healthcare information system.

AION has partnered with mobile payment systems (Bitt), digital asset block chain platform (Metaverse), mining company (Sonm), scalable security off-chain network (Enigma) and robotics vendor (Singularity Net). Leveraging AION’s technology, we are steadily increasing our alliances with those who can build better ecosystems based on the services of our alliance partners. In addition, ICON, WANCHAIN ​and AION announced that Blockchain Interoperability Alliance was established in November 2017.

2.2. ICO scale

AION proceeded to Pre-Sale, $ 22M for ICON, $ 40M for Token Sale, and $ 17M for COSMOS.

ICO size and community activation, Source: Github, Telegram, Medium, Tweet, Reddit

2.3. Community Maturity

Git Hub, which is an important indicator for development of code, can be evaluated by the number of Commit, Stars, and Contributors. COSMOS includes 3300 Commit (COSMOS Git Hub and Tendermint Git Hub), 1616Stars, 31 contributors (Tendermint Contributors Only) are higher than other projects. The reason why AION Git Hub has not been activated is that it is still a private development stage. Stars, COSMOS has gained, show a steady increase.

The graph for stars in Git Hub Stars (Green: COSMOS, Sky: ICON), Source: Git Hub

For the number of telegram members, COSMOS had 2,720 users, and the other projects did not have telegram rooms. Medium Post numbers and Tweet followers were relatively high for ICON, followed by AION. Finally, based on the number of Reddit subscribers who can measure community maturity, ICON was overwhelmingly dominant, followed by AION and COSMOS.

1. Last note

Evaluating technology based on only white paper is unlikely to be objective. The whitepaper might have lots of good skills, but there might be no activities at Git Hub, or there is a limit to evaluate the potential of team members. Therefore, more frameworks and methodologies are required to evaluate activities in Git Hub and team members’ capacities. In addition, more specific and various evaluation methods should be proposed to evaluate market potential, and hopefully more developed market evaluation framework will be created.