This is a technical article that presumes prior knowledge of the Skycoin project. For an introduction to SKY, start with the links at the bottom of the page. Stay tuned for more analysis on this exciting coin.

Skycoin is an ambitious project to say the least. At the core of their vision for a global blockchain future is Skywire, a new decentralized internet protocol and the Skyminer hardware device. Here we attempt to give readers understanding of the Skyminer and Skywire platform by comparison to Bitcoin mining.

The problems

The Skycoin team saw several flaws in the Bitcoin architecture which necessitated the removal of miners, re-design of the consensus mechanism and the creation of a new un-censorable internet protocol. Briefly, these were:

Proof of Work (PoW) — Hashing power centralization into a succession of mining pool oligopolies has allowed miners to hold the Bitcoin network hostage. With increase demand for space on a Bitcoin block, miners have exploited the competitive fee market to spam the network with transactions, inflating their earnings in the form of transaction fees.

Misaligned incentives — Miners are getting rich at the expense of users. There is no financial incentive to run full nodes, essential for the integrity of the network.

Unsecured internet protocol — attacks on Bitcoin involving the creation of a shadow network could result in users connecting to fake nodes and being fed fake blocks, all the while unaware of the fact they’re not connected to the real Bitcoin network. This places Bitcoin, and other cryptocurrencies at the mercy of the internet protocol they run on.

The solutions

Obelisk, based on web-of-trust dynamics, is a novel consensus mechanism designed to remove miners and the role that PoW plays in consensus and network security.

Skywire, a protocol for the new decentralized internet, uses software-defined networking to enable information transfer in a more efficient, faster and private way than the current internet. Both have been built from the ground up and re-designed iteratively in the six years since Skycoin’s creation.

The official Skyminer produced by the Skycoin project in their factory in Shenzen, China.

Skyminer is the device that runs this new decentralized internet. The name ‘Skyminer’ is somewhat of a misnomer from the perspective of Bitcoin mining and those familiar with the PoW consensus mechanism. Similar to PoW, it earns coins for those who spend the electricity and hardware to run the device, but unlike PoW it doesn’t achieve this through a process of hashing. Those running Skyminers are rewarded in Skycoin hours proportional to the resources they bring to the network — currently bandwidth, but in the near future storage and computation.

If you provide bandwidth to the Skywire network, you will earn Skycoin hours. If you consume network bandwidth, you will pay Skycoin hours.

Skycoin hours are the inflationary coins that are generated spontaneously in wallets for holding Skycoin. They are used as the fuel to run the Skycoin ecosystem (explained in greater detail here).

Characteristics of the Skyminer vs bitcoin miner and bitcoin full node.

The most immediate and exciting use that Skywire and the Skyminer will enable is a highly secure VPN service that leverages Skywire’s default encryption for packet forwarding. Like TOR, each node can only see the previous hop and the next hop. This is incredibly timely given recent developments on net neutrality and internet freedom more generally.

Unlike other projects incentivizing users to contribute computing resources to a network, Skywire actually has the physical infrastructure to provide these resources. Furthermore, coin hours will have utility within a closed-loop Skycoin economy (see Fibre, Kittycash), making it more likely that the Skycoin tokens retain their value.

Community-led internet revolution

Official Skyminers are currently being manufactured in the Skycoin factory in Shenzhen, China and 600 devices have been shipped to date. In the spirit of the open source movement and to facilitate distribution of coins, the project is encouraging construction of DIY miners made to similar specifications as the official Skyminers. To cater to the enormous future demand, 3rd party manufacturers will also produce and sell Skyminers to the public. Bitseed has been verbally stated to be the first of these.

A DIY Skyminer. Community members have developed a wide range of interesting designs and housings based on the official Skyminer.

The Skywire community is incredibly active, with many different designs of DIY Skyminer being developed and discussed on the Skywug forum and the Skywire Telegram group. It has been suggested that there are users in more than 30 cities worldwide ready to bring their official and DIY miners online at the commencement of Skywire Phase I.

Looking ahead

In the longer term, it is envisioned that the Fibre network will allow businesses to run Skyminer nodes which maintain their own private blockchains. In such a scenario, a company might have hundreds of blockchains for different purposes, and will each is run on a separate computing board.

Phase I of Skywire is the public testnet, which will debut by the end of April. All official Skyminers will be whitelisted for participation in the network, as will home-made DIY miners that fit certain specifications. In this pilot phase, Skyminers traffic will run over the existing internet. Skyminers will be rewarded in Skycoin and coin hours for the amount of bandwidth they contribute to the network.