13 August, 2018
Qtum is a Singapore-based project founded by Patrick Dai in March 2016. It completed its ICO in March 2017, raising $15.6 million in 117 hours. On September 13, 2017, the Qtum mainnet was launched, and users had to swap their Qtum ERC20 tokens for the newly released Qtum Ignition Tokens on the independent Qtum blockchain.
Revolutions come from combining what exists into what has never existed before, which is the inspiration behind Qtum. The project is trying to improve the existing blockchain technology. Basically, it allows the Ethereum Virtual Machine to work on the entire Bitcoin ecosystem.
Qtum implements the advantages of Bitcoin and Ethereum in order to build a hybrid, industry-oriented decentralized applications platform. Its main goal is throw a bridge between the blockchain world and the real world. As of August 2018, more than 50 decentralized applications have been built on the platform.
Qtum believes that its team is one of its key advantages over similar blockchain projects. It states that it currently has over 150 developers contributing to the project and over 2.5 million coin holders.
Qtum is intended to be something like a mediator between Bitcoin and Ethereum. It uses the Bitcoin Unspent Transaction Output (UTXO) model as its core infrastructure. The main reason is to be Bitcoin process-compatible, meaning that when BTC announces an upgrade to its network (like the Lighting Network), it will be easier for Qtum to adopt it.
A really simplified explanation of how a Bitcoin transaction works will make it easier to understand how the UTXO model works.
Let’s say John has 5 BTC and wants to send 2 BTC to Anna. When he makes the transaction, his wallet creates four outputs. The first output is with 1 BTC, and the receiver is Anna.
The other three outputs are with 1.5 BTC, 0.5 BTC, and 1 BTC. Those three are unspent transaction outputs. Then, they return to John’s wallet and become unspent inputs, and he now has change of 3 BTC in three different inputs. Think of it like having $3 in the wallet in your pocket - you can’t have them in one bill.
Let’s say three days later John wants to send 2 BTC to Maria. His wallet then creates the same three unspent inputs as outputs.
The unspent inputs of 1.5 BTC and 0.5 BTC become spent outputs that go to Maria’s wallet. The third unspent input of 1 BTC becomes an unspent output. It is what remains in John’s wallet. When the unspent output of 1 BTC returns to his wallet, it becomes an unspent input ready for the next transaction.
This is how the UTXO model works. Its key advantages are that it is safer, traceable, scalable, and capable of parallel transactions (you can send value to multiple people at the same time).
How did Qtum improve the existing blockchain technology?
Qtum x86 Virtual Machine is considered one of the project’s greatest achievements. Qtum supports the new Virtual Machine which lowers the barriers for developers to use the platform. The x86 Virtual Machine supports smart contracts written in mainstream languages such as C, C++, Python, and Rust.
Now the doors are open to a bigger group of developers because EVM supports only Solidity - the programming language specifically created for writing smart contracts on the Ethereum network.
Both Bitcoin and Ethereum use proof-of-work (PoW) as a consensus mechanism, while Qtum has been using proof-of-stake (PoS) from the very beginning. It is still debatable whether PoS is a better alternative than PoW, but considering that Ethereum is also moving to PoS, we may say that Qtum is one technological step ahead of its competitor.
Qtum created DGP to have better governance than Bitcoin and Ethereum, where conflicts within the community led to the launch of Bitcoin Cash and Ethereum Classic.
The main purpose of DGP is to guard Qtum against hard forks. The protocol provides a mechanism allowing more people to make a decision and vote for upgrades of the network.
Qtum has designed some smart contracts with initial parameters like block size (currently 2MB), gas price, and gas limit. These smart contracts monitor the Qtum blockchain, and if they detect that the block size is too small, the coin holders will be notified and can propose a change, which will then be voted on. If, for instance, Qtum holders decide that the block size should be increased to 4MB, the change will be implemented automatically.
Qtum has entered the highly competitive field of decentralized blockchain application platforms. It is the first major up-and-running platform and uses PoS as a consensus mechanism. This may be considered as an advantage over projects like EOS and Cardono, each of them aiming to become a leading smart contracts platform.
However, EOS and Cardano are bringing a whole new mindset when it comes to decentralized computing, and it may be far more disruptive than the mainstream technology Qtum is utilizing.
The biggest threat to Qtum and all similar projects is the current number two among cryptocurrencies – Ethereum. Despite some of the technological differences, there is one thing that puts Qtum in a very disadvantageous position to Ethereum – the Enterprise Ethereum Alliance.
Members of this alliance are corporate giants such as Microsoft, Intel, ING, and Santander, among many others. All of them are exploring the possibility of implementing Ethereum’s technology and are assisting in various ways with its development.
It will be really hard for Qtum to build such a strong supporter base. Being the pioneer in the smart contract field, Ethereum has a far larger community and, at the end of the day, the most widely adopted platform will be the winner in this battle of the decentralized application platforms.
The average price of one QTUM during the Initial coin offering in March 2017 was around $0.30. When it hit the exchanges at the end of May, it was trading between $4 and $6. Qtum’s value spiked at the end of 2017, starting on December 10, 2017 with a surge to $11 and ending on January 7, 2018 with the all-time high of $106.90.
As of August 2018, the price of 1 QTUM is $5.50, which means the coin is around 95% off its peak. Currently, Qtum ranks at number 22 among all cryptocurrencies by market capitalization, with a circulating supply of 88,802,268 units and a market cap of $483 million.
Qtum has the ambition to become the biggest and most influential cryptocurrency platform in the world. Some would say this is quite a lofty goal, but most would probably agree it is quite unrealistic.
The founder of Qtum, Patrick Dai, claims that the ecosystem is growing extremely fast, but 50 or 60 decentralized applications don’t sound like solid evidence for that, in my opinion.
The rivalry among the decentralized application platforms is intense and in order for one of them to become mass-adopted, it should offer some disruptive technology solutions that support tens of thousands of transactions per second.
Being a hybrid solution probably increases Qtum’s chances of surviving in the near future, but I don’t think it has too much to offer in the long term. In my opinion, neither the DGP, nor the x86 Virtual Machine are such innovations as to make Ethereum users abandon ship and defect to Qtum.
Smart contracts are here to stay, and it is probably reasonable for any cryptocurrency investor to have a stake in one or more of the main players. However, the lower the market cap of your competitor, the riskier your investment is.
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