This week our Faast Coin of the Week is Aeternity (AE), a project based out the tiny European country of Liechtenstein. Aeternity is similar to Ethereum in some ways, and is focused on solving scalability problems with dapps and smart contracts by moving them off-chain. Intrigued? Let’s dig into the details and see what makes Aeternity unique, and what it might mean for the future of blockchain tech.

Aeternity in a Nutshell

Ethereum as we all know was a game changer for blockchain technology. For the first time, it was now possible to use blockchains for more than just exchanges of value. Developers could now build dapps, decentralized autonomous organizations (DAOs), and smart contracts, but it did not take long for critical vulnerabilities in the Ethereum network to manifest themselves.

The increase in users brought on by the massive bull market of 2017, as well as apps like Crypto Kitties slowed the network to a crawl. Many began to wonder: if Ethereum could be brought to its knees by a silly app, how could it ever live up to all the high hopes of blockchain enthusiasts? While Ethereum is making progress at dealing with this issue, this hasn’t stopped other developers who anticipated these scaling challenges from working on their own solutions. Aeternity is one of these projects.

While there are numerous projects trying to outdo Ethereum, Aeternity has 3 unique attributes that make it stand out from the rest:

1) State Channels. There are 3 basic approaches to solving the scalability problem: sharding, using a different consensus mechanism (like Delegated Byzantine Fault Tolerance with NEO), or simply moving certain activities off-chain. The “state channel” approach used by Aeternity is an example of the third option. A state channel is a direct line of communication between the two (or more) parties involved in a smart contract, which is moved off the main blockchain.

Using this method, the only state update handled on the main blockchain is the transfer of aeon, or if there is some kind of dispute with a smart contract, where the network will act as a “jury” and render a decision. This reduces fees, as well as the overall burden on the network. It also offers more privacy, since only the parties involved in the contract can see the details of the contract. This is potentially big for enterprise users, as some companies might be hesitant to put sensitive information in a smart contract that would be recorded on a public blockchain.

2) Hybrid Proof of Work (POW) and Proof of Stake (POS). Consensus and governance are handled using these two processes in a complimentary way. With Aeternity, consensus is achieved through its “Cuckoo Cycle” POW algorithm, which is much more energy efficient than the methods used on other networks, and could allow mining to be performed on devices as small as a smartphone. Theoretically, you could mine while your phone charges overnight. (See white paper for a detailed explanation of Cuckoo Cycle.) Governance on the Aeternity network uses a delegated voting POS method, where votes are weighed based on how many tokens you hold.

3) Oracles. In the white paper, the Aetertnity team explains that a smart contract which cannot communicate with the outside world or receive value inputs from the environment is basically a closed system. In such a system, external data that is relevant to the contract (changes in the price of an item, a specific event occurring, etc.) cannot be factored in. Aeternity’s solution to this is oracles which allow users to enter new information into the contract. (See this post which covers how Aeternity’s oracles work in detail.)

If you boil all this down to its essence, it amounts to 4 main value propositions for Aeternity: Privacy, Security, Scalability and Low Costs.

The Team and Performance So Far

Aeternity is led by Yanislav Malahov, who is referred to by some as the “Godfather of Ethereum” due to his collaboration with Vitalik Buterin on Keidem (now known as ascribe.io) and his involvement in very early meetings about a project that would eventually become known as Ethereum. Malahov has assembled a pretty impressive team which includes no fewer than 6 PhDs working hard to make sure that Aeternity’s vision remains viable and on track.

Since hitting the exchanges in almost exactly 1 year ago, it’s price has gone from $0.68 (USD) to an all-time high of $5.00 in early May before settling around $3-$3.50, where it is hovering at the time of this writing.

All in all, Aeternity has a lot of potential. The competition for scalable alternative smart contract and dapp platforms will be fierce in the coming years, and if Aeternity stays on track and delivers on their vision (Mainnet is due to launch in August), then AE could be a real contender.

Official website: https://aeternity.com/

Check Aeternity on CoinMarketCap