The Blocknet: How It Works and Initial Token Offering Rules

October 22, 2014

It has been described as revolutionary, and indeed it is. The Blocknet, which is a true peer-to-peer protocol between nodes on different blockchains, enables open-ended communication and delivery of services between users of different cryptocurrencies.

It also increases the potential user base of any coin. It is for that reason that it has come to earn the moniker “the internet of blockchains.” Its ITO (Initial Token Offering) will take place on 29 October 2014.

Blocknet: How the Idea Began

The idea of the Blocknet began with Dan Metcalf, a developer at XCurrency. He had been trying to solve the problem of how to build XCurrency’s user base and improve the state of crypto-currency in general. It was then that the idea came to him that he could accomplish both goals by enabling one coin’s features provide services accessible to every other cryptocurrency.

As he developed the idea further, he saw that the foundation that supports this technology could also be used to ratify new coins and weed out “scamcoins” too. It could also incubate further development and enable collaboration between talented developers.

Also read “XCurrency Introduces the ‘Internet of Blockchains’ – The Blocknet”

A Truly Democratic, Non-Centered Project

The Blocknet is not the only project that seeks to create an internet of blockchains. There are other projects working toward the same goal. For example, there is the SuperNET, which has the BTCD as its core currency. The Blocknet differs from the SuperNET in three main ways.

First, though XCurrency initiated the idea, the XCurrency’s XC is not the core coin. It works like any other participating coin. The team at XCurrency does not control the Blocknet Foundation. Every participating coin is eligible for a seat on the Foundation’s board. This setup ensures that that Blocknet remains free to freely link any one coin to the other, and become a true internet of blockchains.

Secondly, joining the Blocknet does not require 10% of a coin’s money supply being bought and centrally controlled. Centralization in of itself demands trusting a single authority. The Blocknet is different since its core technology; the XBridge protocol will be open source and can, therefore, be integrated into a wallet’s code for free. The Blocknet works because of its usefulness and practicality.

Thirdly, the Blocknet is founded on the XBridge, which is not an RPC call protocol but a true P2P protocol. In an RPC call protocol, a client/server methodology is used which is not P2P. The XBridge connects nodes to each other and thus becomes a true peer-to-peer protocol.

Structure of the Blocknet

How It Works

If some cryptocurrencies are creating “blockchain 2.0” features, the Blocknet is an “inter-blockchain 2.0” technology. It is distributed; its technology coded into every Blocknet-compatible node. It is trustless. It is not a coin, but a way of enabling nodes from different coins to render services to each other. Its core technologies are the XBridge protocol, by which nodes communicate, and a decentralised exchange, by which nodes are remunerated for their services. All of its technologies are accessible via an API.

The Blocknet has its token of value. However, it is not a coin, but a token of the value the Blocknet adds to every service it enables. Every time a service is rendered, the node(s) rendering the service receive payment directly from the node(s) that request it, and the Blocknet charges a micro-fee for supporting the service. Owners of Blocknet tokens earn these fees in proportion to the number of tokens they own – the accounting for which is, of course, done trustlessly and in the public domain.

The Blocknet ITO and Conversion to Normal Operations

Services that the Blocknet can support

Ten million tokens will be created for the ITO. No more tokens will be created after that. The price per token will be 0.00025 BTC, or equivalent in any one of the participating coins. Tokens purchased using a participating coin will be sold at a discount of 10%. Any unsold tokens will be destroyed. The tokens will be available on Bittrex, Poloniex and CoinGateway.

The Blocknet’s decentralised exchange will not exist until after the ITO funds its development, and so third parties (Bittrex, Poloniex and CoinGateway) will be used for the ITO. Once the Blocknet is ready to start paying fees to token-holders, Blocknet tokens may be redeemed for Blocknet assets on the NHZ asset exchange. Following this, payments can reliably be made to holders for Blocknet services.

Share your thoughts on the Blocknet in the comments below.

Images from XCurrency and Shutterstock.

Last modified (UTC): October 22, 2014 12:52

John Weru Maina @bitmaina

John Weru is a Kenya-born writer who has been writing since his teenage years. He believes that digital currencies hold the key to unlocking the potential of e-commerce and m-commerce globally, and powering Africa's participation in international trade.