What is Aeternity? | The Ultimate Beginner’s Guide
Aeternity (AE)—pronounced eternity—is a distributed blockchain platform that features smart contracts for the creation and management of decentralized applications (DApps). The Aeternity network has its own native cryptocurrency token, Aeon (AE), which had a successful ICO in 2017.
According to the official Aeternity website, “Aeternity is a new blockchain technology, designed to deliver unmatched efficiency, transparent governance, and global scalability.”
At its core, Aeternity’s aim is to make transactions around the world more efficient and scalable. The network can interface with real world data through a technology called oracles, which are essentially smart contract functions that can be executed based on external information like election results, weather or even the price fluctuations of cryptocurrencies.
In this guide we will cover the following aspects of Aeternity:
- What is Aeternity?
- The Technology Behind Aeternity
- Aeternity Applications
- Aeternity Mining and Governance
- How to Buy and Store AEON (AE) Tokens
Aeternity was founded by the self-proclaimed “Godfather of Ethereum”, Yanislav Malahov. The goal was to create a truly scalable DApp platform that would not be confined to the Aeternity blockchain, but could also interact with the outside world. The scalability and flexibility of the platform are thanks to the two primary features of Aeternity, state channels and an oracle system.
The project is being developed by a team of 48 individuals with significant experience in cryptocurrency and other industries, led by Director Marion Vogel and COO Emin Mahrt.
State channels are a feature of the Aeternity blockchain that allow for smart contracts and their functions to be initiated and fulfilled off-chain. This means that two or more parties can create a state and contract in which only the final state of the contract is recorded on the blockchain. For example, users can write contracts to interact with each other financially and the details of their interaction is kept private off-chain, but the record of the transaction happening and that all parties were satisfied is recorded on-chain.
This enables a substantial level of scaling because a smart contract between parties could potentially involve multiple transactions that would normally need to be recorded on the blockchain at each stage. By completing these transactions off-chain, the network is less likely to be congested by numerous smart contract functions executing at various times.
If any part of the smart contract is disputed, the signed off-chain transactions can be uploaded as a blockchain record and the dispute can be examined by the consensus system of the network.
An oracle, in the case of Aeternity, is a computing mechanism built into the network that allows for real world data to be implemented in the execution of smart contract functions. To use betting as an example, the taker of the bet can write a smart contract that says if Team A wins, certain bettors are paid X amount, and if Team B wins, this group of bettors is paid X amount. Now this seems like a simple use case—and it is—but many blockchains out there merely record transactions of their own native currencies between users and not much more. In this case, the Aeternity oracle connects to the Internet to monitor the outcome of the game specified in the contract. When the results are in, the contract is executed according to the terms.
The main idea behind the implementation of oracles is in prediction markets. Ideally, the oracle system would be able to take a broad range of data to make predictions based on statistical analysis.
Aeternity is currently on the home stretch before the Mainnet Launch in August 2018. The team has already had a successful testnet launch and backing campaign. Current work to be done includes rounding out the platform’s essential apps as well as completing a security audit before the official launch.
Aeternity is an interesting project as it has a wide range of applications. Aeternity oracles, combined with state channels, enable scaling and complex functions that are not limited to the Aeternity system itself.
One major use, as stated above, is in prediction markets. This is possible thanks to the system’s ability to translate large amounts of data into a deterministic value, which can then be used to initiate terms of smart contracts. The idea is to apply the wisdom of the crowd concept to statistically predict the probability of certain things happening and verify other legacy systems based on freely available data. This could be used for price prediction of financial securities, cryptocurrencies, sporting events—even the weather.
Using the market prediction function of Aeternity oracles, events, such as natural disasters, death, or other occurrences can be “bet on” with a determined set of odds. Users can write secured smart contracts that effectively eliminate trust-related risk.
If one of the mentioned events were to occur, the smart contract will execute immediately and irreversibly.
For example, you could start a company and take out a digital insurance policy on the life of your CEO, you. In this case, you would set up a smart contract to pay out to the company or to your family, whatever you choose, in the event of your death. The terms of the insurance contract would include input from an oracle to determine the risk of your death based on a probabilistic model, which would in turn affect the payout.
I apologize for the morbid example, but it works nicely.
Supply chain management on the Aeternity network can be used to simplify some of the most complex systems in business. The process can be written as a smart contract that is in constant communication with the network’s oracle.
Procurement orders can be fulfilled based on inputs such as cheap prices of raw materials or if the workers update warehouse data showing inventory is low. A hypothetical use case of this would be McDonald’s theorized system for bringing back the McRib periodically. The (conspiracy) theory says that the McRib is a limited time menu item that only pops up when the McDonald’s analysts determine pork prices are low enough to hit their margin targets. An Aeternity smart contract could be written for McDonalds that would interface with an oracle to automatically determine when pork prices are prime. The contract could then execute orders to distributors.
Aeternity features a hybrid consensus protocol that combines proof-of-work (PoW) mining to verify daily transactions and proof-of-stake governance that secures the decision-making process on the network.
Transactions on the Aeternity network are verified using a Cuckoo Cycle algorithm. The Cuckoo Cycle PoW system is more power efficient than other systems, like Bitcoin’s, in which large mining pools use application-specific integrated circuits (ASICs). The Aeternity consensus mechanism is designed specifically to be more egalitarian and allow for individual miners to have a chance at mining rewards.
Typically, when a major system change is made on other blockchain networks, the various miners and nodes on the network need to come to an agreement. Sometimes disagreements can’t be resolved and result in a hard fork. When the DAO hack resulted in Ethereum funds being stolen, the network was hard forked to recover the funds but that led to infighting as some thought the immutability of the blockchain was compromised. This led to the continued development of Ethereum along with a new (or old depending on how you look at it) chain in Ethereum Classic.
Aeternity decisions are made via a delegated proof-of-stake (DPoS) voting system in which any holder of AE tokens can participate in the governance of the blockchain. On-chain voting results in transparent decision-making that can hopefully prevent disagreements caused by miscommunication and incorrect information. Voting tools are accessible through a software client created by the Aeternity developers to simplify the process.
AE tokens are available for trading on 17 different exchanges, including Binance, HitBTC and Bithumb, with 7 trading pairs, including AE/BTC, AE/ETH and AE/USDT. At this time, AE tokens cannot be purchased directly with fiat currency.
AE tokens are not yet transferrable as the network is still in testing, but AE tokens can be stored in ERC20 compliant Ether wallets including MyEtherWallet and hardware wallets like TREZOR or Ledger Nano S.
Aeternity is on the cutting edge of blockchain scaling and flexibility thanks to its state channel and oracle capabilities. Having the ability to interact with events occurring outside of a self-contained blockchain opens up a world of possibilities. The network is not yet live, but Aeternity’s potential is sky high.
While it is way too early to compare it to Ethereum or call it an “Ethereum killer”, the Aeternity team has a project that, if implemented successfully, will have the attention of Ethereum developers. Overall, this is a platform to keep your eye on as development progresses.
Jack of all trades, master of none but enjoying life all the same. I love the often chaotic nature of the crypto world and the disruptive new technologies. Excited to learn more and share what I know along the way.