Cryptocurrency exchange ShapeShift announced the availability of a new report titled “New Frontiers: An In-Depth Analysis of Cosmos, Polkadot, and Near.”
The document, released on February 10, 2021, analyzes these three blockchains specialized in smart contracts. It stands out that a wide variety of decentralized applications (or dApps) can be run on them.
“We’ve done everything we can to make this analysis timeless,” says ShapeShift in the introduction. In any case, they clarify that “that is impossible” and justify this limitation by the rapid advance of these types of technologies. “Three months in cryptocurrencies equals three years in real world time,” the text adds. The company emphasizes the importance of keeping this in mind “when embarking on the learning journey.”
Cosmos: launch your own blockchains
The company begins its analysis with the Cosmos blockchain. Classifies it as the most consolidated of the three. In addition, the report clarifies that ShapeShift “has extensive experience and institutional knowledge around this technology.” They claim to have contributed to the decentralization of Cosmos through MicroTick, a software development package (or SDK, for its acronym in English).
According to the report, Cosmos, which was launched during the “ICO bubble” of 2017, “has partially fulfilled its vision.” Even so, they emphasize that the team responsible for its development “continues to work to improve it.”
The fundamental idea behind Cosmos is that intractable scalability issues arise when using “one blockchain to rule them all” and ShapeShift cites Ethereum as an example.
Every dApp running on Ethereum can take advantage of the network’s robust proof-of-work (PoW) security, says the report, adding: “As a DApp maker, you have a lot to worry about, but the Network security is not a big cause for concern; you can launch a smart contract and immediately enjoy the peace of mind that comes with thousands of nodes and extensive hashing power.
This, which is beneficial in terms of safety, it is detrimental to scalability. “This is because every node on the network must process every transaction,” the report states.
Cosmos vision was avoid shared security and instead establishing a completely different paradigm: giving cryptocurrency projects the tool and the means to create their own blockchains and then connecting them all using a specialized communication protocol.
This approach should be much more scalable, since nodes do not have to think about process transactions in a whole universe for a whole dApps universe. But there are still certain characteristics of these blockchains (or Cosmos zones) that can be adjusted to meet the exact needs of the application that is running on it.
Polkadot: Scalability Through Partitioning
The text addresses, in the second section, Polkadot. He begins by explaining that the self-sovereign model used by Cosmos is compelling. On the other hand, he says, it has worked very well with Ehereum, despite the lack of scalability.
Reflectively he states, “So why not keep testing this model while making some fundamental changes that allow it to scale?” ShapeShift responds that this is precisely what the blockchains specialized in smart contracts are trying to do. Ethereum has taken this approach with Ethereum 2.0; Near Protocol also uses shared security; and this is also part of the emerging blockchain of the Polkadot ecosystem.
ShapeShift looks at “three smart contract blockchains” that can run a wide variety of decentralized applications. Source: xresch / pixabay.com
The path to scalable shared security is explained in a concept called partitioning. The basic premise of this concept is quite simple: in Ethereum 1.0 scalability is limited by the fact that each node must process a transaction.
According to ShapeShift’s comment, “this could simply require each node to process more transactions, but that would translate into fewer, more expensive nodes, making efforts to have the most decentralization difficult.”
Partitioning splits things up and allows each node to process only a specific subset of transactions. Scalability increases proportionally according to how many of these subsets (or shards) exist on the network. So all things would be considered equal, 64 chunks would provide a 64 increase in transaction performance, the document reads.
NEAR Protocol: room to grow
ShapeShift saved for last the newest platform, Near, which was launched on the market in October 2020. It was created by Illia Polosukhin and Alexander Skidanov, two engineers who entered the “crypto space” between 2017 and 2018.
Briefly explain that Near tries to distinguish itself from other forms of smart contracts by being the most friendly for developers. It resembles Polkadot and Ethereum 2.0 in that the platform aims to provide a minimized, scalable blockchain that can be trusted through partitioning in a shared security context.
The founders of Near previously developed the partitioned databases for Google and Microsoft. This gave them great credibility in the tech ecosystem, allowing them to raise about $ 21 million in the 2020 launch round.
Following their turn to cryptocurrencies, they demonstrated extensive knowledge of blockchain scalability and fragmentation. At NEAR they evaluated the pros and cons of approaches employed by Ethereum 2.0 and Polkadot.
NEAR, which seeks interoperability between blockchains, uses its own unique variant of proof of stake (PoS), dubbed Thresholded Proof-Of-Stake (TPOS). According to the ShapeShift report, this allows for faster processing of transactions.
ShapeShift moves towards decentralization
ShapeShift, while still centralized and requires registration to use, is on its way to becoming a DEX. Source: shapeshift.com
The team at this cryptocurrency exchange did not resist the growing popularity of its competition from decentralized exchanges (DEX). On the contrary, he decided to take advantage of it by being part of it.
His plan focuses on migrate out of the business model that requires you to comply with the Know Your Customer procedures (KYC for its acronym in English) to become an interface that operates in an integrated way with open protocols, without custody of funds or customer data.
ShapeShift CEO Erik Voorhes announced in a post on January 7, 2021 that the company would phase out its centralized business to adopt a 100% DEX-based decentralized alternative. In this way, it will offer its services without requiring personal information from users, to whom it will provide instant liquidity without the need for them to trust custodians, CriptoNoticias reported.