ON–008: DeFi

Welcome to Our Network #8. This week we’re covering early-stage networks. Before we dive into the on-chain insights though, I’d like to make a brief announcement.

Today I am announcing a new project that I have been working on for the past year called Crypto AMA.

Crypto AMA is a telegram group that I run comprised of more than 600 institutional investors, operators, and researchers in the blockchain space. Each week, the group hosts founders and leaders from top crypto projects, who appear as guests and answer questions from the audience via text message in Ask-Me-Anything (AMA) format.

All of the live AMAs are moderated by yours truly, and I have had the distinct pleasure of hosting 50 talks with some of the top names in crypto, including:

• CZ (CEO of Binance)
• Ryan Selkis (Founder of Messari)
• Emin Gün Sirer (Founder of Ava Labs)
• Galen Wolfe-Pauly (CEO of Urbit)
• Arthur Breitman (Founder of Tezos)

One piece of feedback I have received over the past year is that it would be great to share our past transcripts with the broader crypto community. This comment from Brian Kerr (CEO of Kava) particularly stuck with me:

So today we are doing just that and publishing a huge number of our historical AMA transcripts on a brand new website, which you can view by clicking here.

You can also subscribe and get new AMA transcripts delivered straight to your inbox as soon as they are published. For example, today we are doing an AMA with Opyn, a new trustless insurance primitive, and we will publish that transcript later this week.

Now let’s get back to on-chain fundamentals.

This week our contributors cover two early-stage networks: Handshake (which recently launched) and Kadena.

Contributor: Chjango Unchained

• PoW: Handshake is secured by Proof-of-Work mining using a customized hashing algorithm that has yet been dubbed a name. It is a combination of blake2b + sha3 (keccak). Handshake mainnet went live on Feb 3, 2020. In less than 2 weeks, hashrate on Handshake has climbed to 19.46 TH/s—amounting to Bitcoin's hashrate when Bitcoin had been running in production for nearly 4 years. Notably, ~45% of the total network hashrate is currently represented by one mining pool: 6Block. However, the network has been getting more decentralized over time as more miners come online, because initially, 100% of the network was being mined by 6Block. (source)

• Difficulty: The initial network target contained 40 leading zero bits, which required roughly 2^40 rounds of hashing to find a block. This means that the Poisson distribution of the time between Handshake blocks is around 10 minutes, or 600 seconds. But due to staggering amounts of hashrate that came online at genesis, where roughly 220 GH/s from hundreds of hardware devices began mining, this led to blocks being mined every 5 - 30 seconds in the first few days before network difficulty adjusted accordingly. Consequently, the difficulty has now risen to 54 leading zero bits (2^54 rounds of hashing), where each incremental bit equates to 2 times the amount of required hashrate from the previous hashrate. (source)

Airdrop: Handshake has pioneered the advent of privacy-preserving airdrops. The top 250,000 GitHub users ranked by their number of followers with a minimum of 15 followers have had their SSH and PGP keys added to a [Merkle tree](https://github.com/handshake-org/hs-tree-data). Likewise, an additional 30,000 keys were taken from the PGP WoT Strongset and added to the tree. In order to preserve privacy, each key included in the airdrop merkle tree has had a random nonce encrypted to it and posted publicly.

For EC keys, the privacy preservation mechanism is straightforward and is something akin to HD key derivation, using the encrypted nonce as a scalar to derive a new key not known to the public. For RSA keys, a more novel approach, called [GooSig](https://interchain-fm.simplecast.com/episodes/003), is necessary. All of this is required to obfuscate the link between the key and the key owner's real world identity. Every person with a valid key has several thousands of HNS coins tied to their keys when coin transfers are unlocked after 2016 blocks, or in approximately 24 hours from the time of publication, have been mined.

• Supply: One block yields 2000 HNS up to a total supply of 2.04 billion coins. At the time of publication, there have been 3.7 million coins mined. A third of all coins, or 680 million HNS, are mineable and the other two-thirds of all coins, or 1.36 billion HNS, are earmarked for airdrop redemption. Naturally, some coins likely won't be redeemed by airdrop recipients. There's another mechanism that further diminishes the total supply. Coins exchanged for domain names on Handshake are sent to a sort of smart contract, known as a covenant, that get locked up and effectively burned, decreasing the amount of coins in circulation.

  The below chart shows you the total number of coins mined so far. But ahead of transfers being unlocked at 2016 blocks, airdrop recipients haven't started redeeming coins from the protocol yet. Note that in the event that an airdrop recipient redeems their coins, it constitutes as equivalent to a "mining" event, such that the protocol mints new coins through a coinbase. Also note that the below Coins Burned chart shows 0 because no coins have been burned yet to buy names since transfers aren't unlocked.

  Fun fact: A unit of HNS is denominated in 1 million "dollarydoos", a Simpson's reference to the fictional Australian currency.

  Circulation:

  

  Burned:

  

• Donations to other open-source projects: 1.36 billion coins have been earmarked to be distributed by the protocol over time to stakeholders in the greater FOSS and cryptocurrency communities who redeem their allocations by submitting various proofs.

  • Pre-Launch Blockchain Development: 7.5%

    • AKA the initial core development team

  • Financial Contributors and Pricing: 7.5%

    • AKA the initial investors

  • Free and Open Source Software Developers: 65.0%

    • The lion's share of the premine was used for a no-strings-attached airdrop to the FOSS community through crawling GitHub and the WoT Strongset for SSH and PGP keys. No cryptocurrency project in the history of this industry has done this before, and the library that was hand-written to enable this is [open-source](https://github.com/handshake-org/hs-airdrop).

  • Domain Name Holders: 7.5%

    • AKA Alexa Top 100,000 TLD owners are incentivized to claim their names that have been pre-reserved on Handshake.

  • CA/Naming Corporations and Other Blockchain Projects: 7.5%

    • ICANN, ENS, Namecoin, Blockstack, Cloudflare, Keybase, Verisign, Public Internet Registry, Afilias, Brave, and IdenTrust.

  • Non-Profits and FOSS Projects: 5%

    • Other non-profit organizations

Contributor: Tony Pham, Head of Marketing at Kadena

• The Kadena public blockchain has now had over 3 million blocks mined, a 50% increase over the course of a month. The network hash rate remains consistently between 30-40 TH/s.
• Kadena nodes are decentralized across the world. While the United States has the largest share of nodes (39.4%), the majority of nodes are running in a range of countries including China (18.2%), Japan (15.2%), and the European Union (15.2%).

• There have been over 60,000 successful token transfers on the Kadena network. That is a 20% increase in the number of transactions taking place over the past month. Below is a visualization of the transactions:

• Block time for KDA has been stable at ~3 seconds, making Kadena the fastest POW blockchain on the market and one of the fastest public chains overall. (For context, Ripple runs one block about every 3.5 seconds.)

Our Network is a weekly newsletter where top blockchain projects and their communities share data-driven insights. If you know someone who is interested in on-chain fundamentals, please share this post.