The Lamen’s Story behind QTUM
Market Update: Th crypto market cap has climbed back above $500 billion. Well done folks! I am liking the slower gains, as I think this could be new entrants. We have a ton of people way behind in cost basis on every coin, so I am just not convinced that those people sold at the bottom and then are re-entering. We waited this out, and the chatter throughout the media is getting to be too much for the later adopters to bare without getting involved. I have begun my history lesson to figure out where the true technical evolution is occurring in blockchain, and what will have the application to render an immediate investment. QTUM combines UTXO ledgers and smart contracts in one platform, and I need to understand their business reasoning behind why that is important. That starts with bitcoin.
The Timeline in Blockchain
The beginning was bitcoin. This framework was created by the infamous Satoshi Nakamoto, who wanted to encrypt the way that money could be transacted. The transaction model he chose for his ledger based blockchain was inputs and outputs. Each bitcoin is an output from an input, and outputs are used to send money, not accounts.
UTXO “Unspent Transaction Outputs” is what your bitcoin account consists of. Don’t expect Windows 95 to be the most sophisticated! So, when someone sends you bitcoin, it goes “UTXO”. It is added up with all of the other times you received but didn’t send…and there is your bitcoin balance. Here’s where it gets tricky. Say you have UTXO balances of BTC 5, 3, 2. That means someone sent those coins to you in 3 different transactions. Now you want to send 1 BTC. UTXO will choose the most prudent one, 2 in this case, and then create an input for 2. But I wanted to only send 1! Don’t worry, there will be two outputs, 1 BTC for your recipient, and 1 BTC back to UTXO. You cannot take portion of a UTXO, it will all go into the input, and out the output.
Ethereum was the evolution. Instead of this UTXO model where there is no real single account- just lists of inputs and outputs, there was a place where people could have an account that is much similar to a bank account. You send, you receive, and everything is recorded. There is no choosing which UTXO fits which transaction, each transaction can be unique, and only the amount needed will be input. Debits and Credits, just like a bank account.
Ethereum smart contracts are pillars of the account model. These contracts have unlimited capability to set rules (e.g., 100 voters, duration: six hours, choices: Candidate A, Candidate B, etc.), quantify inputs, determine precise results safely and securely, and dispense the ether of course! This new function in the blockchain required code of higher quality (I am not going to go GitHub level here) for the smart contract to work with, rather than a smart contract having to deal with a bunch of random UTXO’s. The account system worked for this just fine…or so we thought.
The DAO, founded by a consortium of Ethereum founders and followers, was a fund (a smart contract “account”) created in 2016 to be the first organization to promote the migration of business and commerce into the blockchain, and automate things for absolute and unbiased results. If you wanted to make a project that would benefit commerce on the blockchain, the smart contract would determine a consensus-based allotment.
Ironically, the DAO smart contract “account” was spoofed into funding a “Child DAO”, an exact replica of the DAO that convinced the smart contract to fund it multiple times over. Ethereum went from $20 to $13, as $70m was drained into the Child DAO. The Child DAO issue eventually led to an Ethereum hard fork, the result of voting to not let the attacker (who said he had legal right to his property through a lawyer) have his prize for his creation, and emptying the piggy bank to all those who lost ETH and laid claim to it.
I want you all to know that all of that information was needed for me to explain QTUM.
This all started when I wanted to do some research for my own benefit. QTUM’s “About Us” was claiming their new benefits were that they designed a UTXO blockchain that has accounts with a smart contract account layer. So my thought was, why does QTUM want a UTXO blockchain? They believe UTXO has much more in scalability terms for business functions by having limiting information and “Proof of Consensus” model, and they wanted to build something that could act as the ether for those who were hard at work mining in the bitcoin UTXO community.
Eighty percent of all the QTUM tokens will be distributed for an array of purposes, but a major one is to bring the real world application into blockchain. Much like the older brother before it, QTUM is providing a DAO-like Account that can incentivize technical projects that can stay on their UTXO chain, but come out of the shadows to work within the community. Those who are used to coding in the Bitcoin blockchain will be happy to see that they now have Ethereum’s paint brushes in their own technical backyard. QTUM also can migrate Ethereum’s contracts into this new smart contract environment.
The platform has partnered with two companies in China (cybersecurity & media) to date, both of which are working along the lines of bringing business into the blockchain through smart contracts. China has been very cold on blockchain as of late. This may be a good project, but they are fighting against my favored incumbent NEO, and there is nothing I would say that truly separates them as unique for large migration. There will only be a handful of platforms. One for each country depending on laws/regulations. NEO is my choice.
I am a fan of the concept of taking a big community of people and trying to give them incentives through smart contracts to work harder for business purposes. I am not sure how big the bitcoin UTXO community is. Like you have seen, this is very deep technical information and the differences between UTXO and the Account method are murky at best for a lamen.
I have a small holding of QTUM, and it will remain small. UTXO seems like a bridge to bitcoin’s old tech that they are reviving. Ethereum already has had the first wave of business migration, and it seems that Solidity, the coding language of Ethereum smart contracts, is on every developers to-do list.
Overall, if QTUM makes a ton of money, non-coders won’t know why. It is a platform for people in the bitcoin chain to use for business purposes, but Bitcoin was made by someone who vanished and there is no one leading the initiatives within. Does bitcoin have an initiative? This may be like a Coder’s Coin. They like it for the certain coding characteristic, but overall the difference is minimal other than the chains are different. I think paradigm platform chains will exist, and the current ones are Ethereum and NEO.
A true technical smart contract artist or developer may disagree with me, but I see no extremely valuable difference between Ethereum and QTUM. QTUM certainly isn’t a coin for business people like myself. I will stick to what I know, and that is Ethereum-based platforms and compliance.
None of this is a recommendation to buy or sell cryptocurrencies. I own a small holding, and as mentioned, it will remain small. Best of luck to you on the exchanges. If you would like to remain updated on my thoughts, please do follow me @raijincrypto on Twitter.
Featured image courtesy of Shutterstock.