KR1 April Update 📣 – KR1 – Medium
The Future is at Stake
April was all about change. A change in seasons from winter to spring.
A change for our climate — the message delivered by a young teenage Swedish girl called Greta, which brought London to a standstill.
A change from Proof of Work to ‘green’, sustainable Proof of Stake blockchains, with Cosmos going live for its first full month.
Cosmos Atoms and Staking
After finally releasing our public announcement via the exchange we can publish the blog with the main event in April for KR1: Cosmos went live with its Proof-of-Stake network generating KR1 revenue via Cosmos staking yields, see the announcement here, and also ATOM are being listed on all major crypto exchanges, allowing us to realise the occurring revenue from the staking yields.
As explained in the March update, Cosmos is exciting because it connects siloed blockchains together, it is the TCP/IP of blockchains. On top of that, Cosmos is the first large-scale, working Proof-of-Stake blockchain that has been deployed with a sophisticated staking logic. Both of these things have never been done or existed before in the blockchain universe until now.
April saw the first full month of Cosmos, the new ‘green’, clean and mean Proof-of-Stake (PoS) network in action, and it worked flawlessly. The network was quickly secured by over half the total supply of ATOM tokens actively staking. A great network statistics website for Cosmos network parameters is B-Harvest’s English wallet page.
Instead of farms of powerful computers using enormous amounts of energy looking for a ‘stupid’ cryptographic puzzle solution to be accepted as being a new, fresh block (this is Proof-of-Work), Proof-of-Stake networks do not require this computational power. Proof-of-Stake networks use ‘real’ economic value that is being deposited into the network’s ‘consensus engine’ to guarantee ‘truthful’ behaviour by the participants.
This means a leaner, faster, more secure crypto network. Why is it more secure? Well, if a Proof-of-work network is attacked by malicious entities to cheat transactions the attackers use the large-scale computer farms with the respective energy consumption. In case of an unsuccessful attack, the only thing an attacker risks is the energy that is being consumed, not hardware as in computer farms as those cannot be touched by the Proof-of-Work network itself. Thus, they could re-launch an attack with the same computers (and perhaps a few more) soon after the first attack or in a different case just attack a different blockchain that happens to have fewer computers securing it than the first one (thus making the attacker more powerful). Conversely, if an attack is launched on a Proof-of-Stake network, say Cosmos, the attacker loses their coins/tokens if the attack is detected and people decide to fork out the attacker (i.e. delete the coins/tokens from existence). For a second attack, the attacker would need to acquire lots of coins/tokens again and would start from a balance of zero, thus their assets are much more at risk and it requires much more economic power to sustain attacks, making it very unrealistic long-term.
In Cosmos case, ATOM tokens are used for this guaranteed security as a sort of ‘security deposit’ to participate in the validation and block production process and thus generate rewards for transaction checking and processing things on the network. Revenues generated through this process are referred to as ‘staking yields’. The fees generated can be in the form of ATOM (the native digital asset in the Cosmos network as a network reward/inflation), Bitcoin, Ethereum, Dai Stablecoin or any other arbitrary digital asset that is going to be white-listed as a fee token on the Cosmos network.
Details of the first two months of operations from staking activities for KR1 are the following. As in our annoucement, we’ve generated 15,463 ATOM up until the date of the annoucement. In addition, we’ve also sold the accrued revenue from the staking yields (the revenue is accruing in the native Cosmos digital asset, ATOM), realising 15,463 ATOM at an average price of $4.76 USD per ATOM for a total of $73,671 USD.
To summarise, we are starting to generate healthy revenues through staking assets and investments that are already major positions on our balance sheet for the first time, in this particular case we’re talking about Cosmos. This is a new dynamic for us as an investment company as we previously relied on selling assets or fundraise rounds to fund operations, while now the staking yields can play a role in subsidizing our operations. As in the announcement and also in the interview with George below, this is hugely exciting for the company and this is only the start as we believe there to be similar revenue potential from other Proof-of-Stake networks once those go live and launch. Most notably Polkadot and Dfinity, as well as RChain, Enigma and FOAM to a lesser extent, all of which are projects KR1 has invested in.
There was major excitement in that fact we heard that code plan for Ethereum’s highly-anticipated proof-of-stake (PoS) blockchain called Ethereum 2.0, is on course to be finalized as early as sometime next month. Such specifications are effectively blueprints for developers looking to work on Ethereum’s next-generation blockchain.
“One is Casper, which is our proof-of-stake algorithm which replaces mining…with something that we consider to be much more efficient,” Buterin said at the time. “The second part is sharding which is this massive scalability improvement which happens because you don’t need every computer in the network to process every transaction in the network any more.”
Buterin added that with sharding, he anticipates a “1,000 factor increase in scalability” to the network. However, sharding will only come in the later two phases of ethereum 2.0 roll-out. The first phase — dubbed Phase Zero — strictly launches ethereum’s new proof-of-stake blockchain.