Skycoin Coin Hours is the fuel for Skywire, a new global decentralized Internet running on the Skycoin ecosystem.

Unlike Bitcoin, Skycoin users don’t need to give away part of their balance as an incentive for miners to process their transaction. Instead, they use Coin Hours as fees. A transaction requires a minimum percent of input Coin Hours to be destroyed. This Coin Hour burn fee prevents transaction spam by rate limiting the number of transactions a single entity can make. Coin Hours are automatically generated, at a rate of one Coin Hour per hour per coin. Coin Hours are similar to “Gas” in Ethereum and NEO and act as a separate parallel currency in Skycoin. There is no cap on the number of Coin Hours in the network. Coin Hours provide a way to allocate scarce resources (like bandwidth or storage) without the need to rely on the coin supply.

Coin Hours’ primary function is to prevent transaction spam in the network. A transaction must destroy a minimum percentage of its Coin Hours in order to be processed by the network. This percent is configurable and current set at 50%. The percent is always rounded up. A transaction must destroy at least 1 Coin Hour.

A transaction spends one or more UXTXs as inputs and creates one of more UXTXs as outputs. The sum of Coin Hours for all inputs must be at least 1. The sum of Coin Hours for all outputs must be less than or equal to the 50% of the sum of input Coin Hours, rounded down.

In the case of transaction congestion in the network, the number of coin hours burned per byte prioritizes transactions. A transaction may optionally burn more coin hours than the minimum required in order to increase its priority.

On Skyfiber, Skycoin will have several hundred tokens (over a dozen have already been launched, including a few that have raised some monies in their pre-ICO like solarbankers.com, spaco, mdl etc.).

All these coins on the platform will be buying Coin Hours to rent Skywire Miners nodes (a new coin can spin up to ~400 nodes on demand, just like you can on EC2 or golem network.

This is why there are 8 boards on the first generation Skywire Miner hardware unit and for bandwidth and for caching blockchain (blockchains are have been moved to CXO and CXO will be moving onto Skywire).

Skycoin Coin Hours can also be used to pledge collateral on the OTC market the project is building and for other purposes

Using Skycoin Coin Hours, allows blockchains without their own coins (block chains that are only data or record chains), to stop spam, generate small amounts of money for the operator and each transaction could be 1/1000th of a cent or 1 millionth of a cent, or just enough to stop DDoS attacks, but essentially free to any Skycoin holder (who is constantly generating more Coin Hours

The number of Skycoins is fixed and capped (like gold).

However, the amount of storage/bandwidth/CPU power of the network is uncapped. It can expand by millions of times, so to make the equations for pricing balance (so that unit prices for bandwidth will not increase with the Skycoin price); Skycoin introduced the Coin Hours currency (which is uncapped).

Coin Hours are used to allocate scarce resources between network participants in a fair way (bandwidth, computation, and file storage and transaction rate).

Coin Hours also stop spamming and DDoS attacks.

The number of Coin Hours increases massively and linearly in time, so Skycoin is creating mechanisms for Coin Hour burn (so the number of coin hours reaches a peak and equilibrium). The CoinJoin servers are going to burn most of the Coin Hours and they are going to burn all the coin hours in the developer and foundation wallets to reduce supply.

Coin Hours are only recalculated when a new block is published because the block timestamps are used as the network clock. The amount of time passed is calculated as the difference between the head block time and the time of the block in which the UXTX was created. The local computer’s time cannot be used to calculate coin hours because system clocks are not synchronized across a decentralized network.

Coin Hours will be used for bandwidth for VPN and Socks5 proxy, but will also be used for renting VPS nodes by the hour (Sky wire miner cards) and later distributed exchange fees will be in Coin Hours.

Coin Hours are used for transaction fees in Skycoin and will also be used for network resources on Skywire.

Coin Hours may eventually also be used for allocation of distributed computation resources, storage or bandwidth on Skyfiber and any Skycoin side changes with embedded CX scripting language.

Coin Hours will be the basis of several Skycoin-powered features, such as payment for VPN services, or bandwidth on Skywire .

Coin Hours are used as the payment currency for bandwidth in the Skywire network.

Every time Skycoins are spent, 25% of the Coin Hours in your wallet from any unspent outputs are transferred with them to another wallet. In addition to this, 50% of the accumulated Coin Hours from the unspent outputs that are used are then burned when transferring Skycoins around. This calculation is based on “unspent outputs”, and is therefore challenging to calculate and predict.

The most prominent feature of Coin Hours is that they keep the Skywire network free of transaction fees. This means no fee jacking by miners for profit, as commonly seen with Bitcoin. It also means that a virtual cat game can’t skyrocket the network transaction fees up 1600%, a recent issue the Ethereum network had to grapple with. Users will never have to pay in Skycoin or fiat currency to access and use the network. Coin Hours will take care of that for you .

CoinJoin

In CoinJoin servers, Coin Hours can be used as collateral during the merging and mixing process, discouraging users from backing out or slowing down an ongoing CoinJoin operation.

Skycoin Coin Hours are also a very important part of the Skycoin CoinJoin infrastructure for increasing transaction privacy. Coin Hours will be posted as collateral for mixing to prevent participants from backing out of or slowing down CoinJoin transactions. Skycoin CoinJoin transactions improve the mathematical guarantee of Skycoin transaction privacy by spending outputs from multiple wallets in the same transaction. This prevents the most common deanonymizing attacks in Bitcoin.

When fully implemented, this will give Skycoin a ZeroCoin-level mathematical guarantee of transaction privacy, with orders of magnitude less complexity and computation overhead than the ZeroCoin implementation, by eliminating the requirement of the highly complicated zero-knowledge proof system.

Coin Hours are also used for Skycoin transaction fees.

Coin Hours are earned by holding Skycoin in your Skycoin wallet. It’s like mining or staking, except you do not need to leave the wallet open to earn the hours .

Coin Hours are earned by holding Skycoin in a wallet (holding Skycoin on exchanges won’t result in Coin Hour’s earnings). Coin Hours are attached to unspent outputs (UXTXs), and the amount is calculated as the following:

• Holding n SKY generates n Coin Seconds per second

• 3600 Coin Seconds equals 1 Coin Hour

• Coin Seconds are converted to Coin Hours and rounded down (only whole Coin Hours are considered a valid unit)

Holding 1 coin for 1 hour generates 1 coin hour. Therefore holding 1000 coins for 1 hour generates 1000 coin hours. The new wallet (version 20) now shows the “Coin Hours”, which users earn for holding Sky coin. Skycoin is working on an exchange for converting and establishing an exchange rate between Coin Hours and Sky coin.

Coin Hours are similar to the “Gas” in Ethereum or coin aging in Bitcoin, but are exchange-tradable and are a separate parallel currency in Skycoin.

The new wallet version has added an API and UI to specify or split the Coin Hour balances in transactions. If Skycoins are held on an exchange, the coin hours earned will go to the exchange.

Skycoin Coin Hours are also a very important part of the Skycoin CoinJoin infrastructure for increasing transaction privacy. Coin Hours will be posted as collateral for mixing to prevent participants from backing out of or slowing down CoinJoin transactions. Skycoin CoinJoin transactions improve the mathematical guarantee of Skycoin transaction privacy by spending outputs from multiple wallets in the same transaction. This prevents the most common deanonymizing attacks in Bitcoin. When fully implemented, this will give Skycoin a ZeroCoin-level mathematical guarantee of transaction privacy, with orders of magnitude less complexity and computation overhead than the ZeroCoin implementation, by eliminating the requirement of the highly complicated zero-knowledge proof system.

Recently the lead developer for Skycoin project Synth, informed the telegram group that the project is going do massive coin hour airdrop, the Coin Hour drop will be balanced out eventually by the Coin Hour burn, so the number of new coin hours going into circulation, equals the number of Coin Hours being destroyed.

The Coin Hour drop will not cause any inflation for the Skycoin (primary currency), but will increase demand (by giving people free coins or gas to spend on games and network services and also for regional incentives for Skywire deployment).

The Coin Hour bank is an SQL server (actually key-value store, but is SQL for testing) that has unspent outputs set like a blockchain, but will allow sharding across a key-value store and allows essentially infinite numbers of off blockchain transactions for the coin hours.

He informed the supporters of the project that the coin hour bank will be done within the next 2 weeks.

The reason for building coin hour bank is to move the Coin Hour micro-transactions off the blockchain so preventing cluttering the blockchain up.

Synth is of the belief that this should handle 20,000 to 60,000 transactions per second at the start, and then can increase the number of servers as necessary.

Since there is an unspent output set, there can also be public files that contain all of the transactions/logs for a whole day. Someone can take the previous days balances and apply the transaction set and verify the outputs.

The Skycoin coin hours will be used as gas on other independent chains. It will also be used for chains that do not even have coins (pure data/execution/receipt chains, etc.).

The coin hour bank is supposed to be replaced with a decentralized credit system similar to “ripple-pay” (not ripple).

This will be the quickest/fastest way to get micro-payments working at the rate, needed for the bandwidth network payments and Skywire

He went to elucidate that the policy for most blockchains will be to keep the transactions free if demand is below a certain rate. Then start charging fees or Coin Hour fees over a certain rate and ordering the transactions by the fee and waiting time.

Each function call is in some sense a transaction and based upon the storage, size of transaction and number of CX CPU instructions the execution requires, you can create a price function which depends on the individual blockchain and the policy.

Breaking down these updates further Synth was merely explaining that Skycoin will be interconvertible with Skycoin Hours.

You can choose to receive the payment in Skycoin and then sell the coin hours to get more Skycoin.

Skycoin will have carriers and the carriers will be buying the coin hours just to buy the bandwidth from the backhaul people so it will balance out.

If Skycoin has a million devices and they’re each getting paid a million transactions every hour. To scale all that payments, it will mean removing all the payments of the bandwidth off the blockchain into what’s called the coin Hour bank and when you get enough coin hours you can sell them for Skycoin.

There is going to be some exchange rate.

The interest rate for holding the sky coin right is you earn Coin Hours automatically and what is going to happen is the Coin Hours are going to be spent in providing networking services and eventually, you are going earn a lot more Coin Hours from running the network services than holding Skycoin in your wallet.

Running the networking services requires a fee like the electricity cost, the hardware cost as well as people will want to get back the the cost of the hardware they invested.

The Coin Hours that they earn from the hardware will have a price floor because they spent this much money and so they’re unwilling to sell them for less than the amount spent.

Skycoin will link the cost of resources spent or the cost of the “mining” or the cost of the network to the coin hours generated and will use this to generate or create a price floor.

It’s similar to the psychology the Bitcoin miners and that there’s a formula that people can use to calculate what the Coin Hour price should be.

As per trying to determine what price coin Hours will trade, The Skycoin project thinks a person with a Skycoin should within the first year will generate or produce enough Coin Hours to buy at least another 20 to 30 percent more Skycoin.

For example, if Skycoin has 10 million coins distribution as it is right now and they decide to issue another 2 million coins, that s a 20 percent increase.

If those go to the existing Skycoin holders, they will receive Coin Hours and if Skycoin bought back the Coin Hours for Skycoin then it’s just like giving everyone an extra 20% more Skycoin.

The reason above is behind Synth announcement of the Coin Hours drop.

If people are earning Coin Hours for owning the Skycoin and use the Coin Hours to buy more Skycoin, after one year, you have 20% more Skycoin .

The implication of this is that the distribution the people will increase their net holdings of Skycoin. Some of the increase will be from redistribution of existing Skycoin and some of it will be from new Skycoin being issued.

The Skycoin project is at the moment looking at those numbers.

The Project has assured its followers and supporters that during the first year there’s going to be a very large bonus for the people who have Skycoin now and the project might support the rate of the buyback of the Coin Hours at a price a little bit above what it would be naturally just so that project can get more coins in circulation and meet its distribution target.

Coin Hours will hold a monetary value, which will eventually be decided, by the market. The value will also be maintained by an OTC buy-back program for a time, which will allow holders of Coin Hours to trade them in for more Skycoin.

The Coin Hours will essentially give Skycoin holders the opportunity to earn residual income while holding Skycoin as Gas does for Neo and Vethor does for Vechain.

Find out more about the Skycoin project and Coin Hours by checking out the following links

https://www.skycoin.net

Telegram: https://t.me/Skycoin

Buy Skycoin directly from the website @ https://www.skycoin.net/buy/

Facebook: https://www.facebook.com/skycoinproject

Twitter: https://www.twitter.com/skycoinproject

Reddit: https://reddit.com/r/Skycoin

follow me on twitter https://twitter.com/bivins1

Check out my full contact details via my BlockDelta profile.