JUN 18, 2014
“NXT is to Bitcoin …as Tesla Model S is to a Volkswagen Beetle” – NXT Interview
Cointelegraph had the chance to catch up with the NXT team to get the scoop on their recent developments and future plans.
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Cointelegraph had the chance to catch up with the NXT team. Known for its less resource-intensive mining and 100% proof-of-stake, it is no wonder why NXT recently surpassed the popular Dogecoin by market cap. But exchange rate and speculation aside, the NXT team explains why it is the "next" step in the evolution of cryptocurrencies and why Bitcoin is just the beginning.
Cointelegraph: Nxt includes an innovative “proof-of-stake” feature which essentially means that coins are not created by “mining.” How then are Nxt coins created and put into circulation?
NXT: All the 1,000,000,000 NXT were available within the Genesis Block (= first block) and got distributed to the initial stakeholders. It was hardcoded into the source code.
Transaction fees are how NXT are re-circulated back into the network. Currently transaction fees are generated by sending NXT, assigning aliases, using the arbitrary messaging feature, issuing, buying or selling the assets. Transaction fees are currently set at a minimum of 1 NXT per payment. As NXT price increases, the minimum fee is planned to be reduced to continue to allow micro-transactions to be practical. The total fee reached 1,112,084 NXT after 6 months. 4,697,286,927 NXT were already transferred (= 4.7 x total supply of NXT).
CT: Being considered a second-gen cryptocurrency, do you see Nxt making Bitcoin obsolete or can both have their specific uses and co-exist?
NXT: Andreas M. Antonopoulos often says: there will be millions of cryptos and they will happily co-exist. David Johnson [Mastercoin] also shares this opinion; there will always be a space for more players, since each crypto aims for specific users. Nxt is to Bitcoin probably like Android to Nokia or Tesla Model S is to a Volkswagen Beetle. So people will still use Nokia or drive Volkswagen. But the geeks will choose Nxt. Or not, this will also depend on cooperating payment systems, like GoCoin.
But originally, due to its Java roots, proof-of-stake hashing and ability to trim/reduce the blockchain, NXT is extremely well suited for use on small, low-power, low-resource devices. It would be easy to imagine and implement NXT on low-powered, always connected devices such as smart phones. The majority of the network could be supported on these devices. Since millions of people worldwide already possess smart phones, NXT could quickly be deployed among these devices to help support the network without the costs associated with traditional crypto-currencies.
NXT features, such as instant transactions make smart phones an optimal platform for use the use of NXT in everyday monetary transactions [Food, Fuel, etc.]. While solutions exist for other crypto-currencies (e.g. Bitcoin) in this realm, the use of these devices does not actually contribute to the stability or health of their networks because of the massive resources (computing power) needed to maintain these networks. With NXT, any device that has the ability to send and receive transactions also has the necessary computing power to add to the network stability and further decentralization.
CT: Pre-mining is often seen in the negative light by the community. Do you think the pre-mine approach was a good strategy for Nxt? Can pre-mine be the right strategy in some instances?
NXT: As the Bitcoin network becomes stronger, there is less and less incentive for an individual peer to keep supporting the network as their potential reward is split among more and more peers. Some peers keep adding resources at the cost of both specialized, proprietary, expensive hardware and increasing energy costs. As time goes by, the network becomes more and more centralized as smaller peers (those who can do less work) drop out as their reward goes more and more towards larger peers (those who can afford more resources and energy).
In the proof-of-stake hashing model used by NXT, network security is governed by peers having 'stake' in the network. In order to achieve the 100% proof-of-stake model, the pre-mine was needed. In the crypto world, you can collect up to 3,000 IPO investors, if it was very cheap. But even this number is too small if you compare it to Billions of people around the world. If you study the distribution charts, you can see that the distribution of the Dollar is worse than Bitcoin and the distribution of Bitcoin is more unfair than Nxt. But your wife probably doesn't care about unfair distribution of gold among the richest people/corporations; she just wants you to buy her new golden earrings.
CT: What about transparent forging? How does this work, and when will that feature be fully implemented?
NXT: The chance of forging a block for an actively forging account is proportional to its amount of NXT compared to all active forging NXT in the network. A small amount of randomness is required to eliminate the possibility of attacks based on knowing the far future forgers, but the near future should be as close to deterministic as possible to allow significant reduction in network bandwidth usage.
Transparent forging allows for a centralized action in a decentralized network. This is the fundamental breakthrough that NXT incorporates. Transparent forging allow each users client to automatically determine who will generate the next block, so that they can then send their transactions to that node. This allows additional fees to be realized for immediate/priority transactions. An equally important feature of Transparent forging is an outstanding security feature of the protocol to temporarily reduce to zero the forging power of nodes who should generate the next block but don't.
This feature is designed to prevent against even a 90% majority owner of all NXT branching out and forcing a fork. So if a node that has 90% of all NXT doesn't generate a block when scheduled, the system will reduce its mining power to zero temporarily to prevent a bad fork from being forced. Its mining power is distributed out to the rest of the network so the network is still at 100% and thus whatever this potential adversary is doing on its other branch can be counteracted by some mechanisms of advanced consensus.
Time Warp is a feature of Transparent Forging that will support very high transactions per second within Nxt.
CT: When can we expect to Nxt to implement its own decentralized exchange?
NXT: Part of the Nxt Platform is the Asset Exchange that is a decentralized exchange that aims to make centralized Exchanges redundant. People can trade with each other directly, securely and cheaply and not just currencies but any other assets users choose to create. Right now you can trade NEM, NHZ, QORA, NAS coins and some new coins created only for AE, like MIC. But the gateways are still centralized. Nxt needs decentralized multigateway for 100% decentralized exchange. Multigateway is currently under beta testing. So the release could be in the next month.
CT: What are some planned or currently in-development features for NXT that you’re excited about?
NXT: InstantDEX is an important service built on top of Nxt’s Multigateway service and Nxt Asset Exchange and has been shown in a proof of concept to have achieved ~5 second transaction times. The goal of InstantDEX is to allow for real time trading of any Nxt Asset against any other Nxt Asset.
Monetary System will allow you to create currencies backed by NXT. New coins are created by "locking" NXTs. This could be thought as similar to “burning” Nxt but this is inaccurate as the process can be reversed. If you destroy 7% of the supply the created coins then you get 7% of the locked NXTs back. You are unable to lock more NXTs into the coin once it is created so the supply can’t be inflated.
Automated Transaction will be trustless Escrows. Work is being done on a Turing-complete scripting layer that can operate on top of the Nxt blockchain. "Turing-complete" is a term that means the scripting language is not limited in scope and can compute anything. This Nxt application will allow for the creation of Distributed Autonomous Corporations (DACs) that can issue transactions automatically, based on a set of rules.