Understanding RSK: A Comparison to Ethereum & EOS
On this post, we analyze the main differences between RSK, Ethereum & EOS.
On its paper entitled A Next-Generation Smart Contract and Decentralized Application Platform, Vitalik Buterin was already mentioning the possibility to explore blockchain technology for many different uses besides acting as a mean to store value through Bitcoin. Quoting from his whitepaper: “However, another – arguably more important – part of the Bitcoin experiment is the underlying Blockchain technology as a tool of distributed consensus, and attention is rapidly starting to shift to this other aspect of Bitcoin. Commonly cited alternative applications of Blockchain technology include using on-blockchain digital assets to represent custom currencies and financial instruments (“colored coins”), the ownership of an underlying physical device (“smart property”), non-fungible assets such as domain names (“Namecoin”), as well as more complex applications involving having digital assets being directly controlled by a piece of code implementing arbitrary rules (“smart contracts”) or even Blockchain-based “decentralized autonomous organizations” (DAOs). What Ethereum intends to provide is a Blockchain with a built-in fully fledged Turing-complete programming language that can be used to create “contracts” that can be used to encode arbitrary state transition functions, allowing users to create any of the systems described above, as well as many others that we have not yet imagined, simply by writing up the logic in a few lines of code.”
Ethereum was not originally designed to be a cryptocurrency or digital gold. Instead, it was designed to allow developers to code smart contracts using the benefits of blockchain technology through the EVM (Ethereum Virtual Machine). Within Ethereum’s ecosystem, the token that is used to pay for computational costs is known as Ether (ETH).
Which are the main differences between Bitcoin and Ethereum?
Bitcoin was originally designed to store value and that’s why we usually compare it to a form of “digital gold”. Ethereum on the other hand, was designed to simplify the process of developing decentralized applications (dApps) on a blockchain. Unlike Bitcoin, which has a max supply of 21 millions since its inception, Ethereum is inflationary and the issuance of Ether was set to 18 million per year according to the terms agreed by all parties on the 2014 presale. Here are some other relevant features that make the Ethereum proposal different than Bitcoin at the time of writing:
- 3 ethers are created every block (roughly 15 seconds) to the miner of the block so the coinbase reward is completely different (currently 12.5 BTC on Bitcoin’s network).
- 0.625-2.625 ethers are sometimes sent to another miner if they were also able to find a solution but his block wasn’t included (called uncle/aunt reward).
- While Bitcoin runs under a POW protocol using the SHA-256 algorithm, Ethereum plans to control the inflation rate by transitioning into a full POS (Proof of Stake) algorithm. On POS protocols, holders of a cryptocurrency/token can be rewarded, by staking their own funds. Basically, you can contribute to the verification process by becoming a validator.
Ethereum final goal is to transition to a full POS protocol known as CBC Casper. If you want to get the full details, you can check this video featuring Vlad Zamfir.
Ethereum, has also been widely used in the blockchain space for crowdfunding through crypto-assets. Many projects raised millions of dollars during 2017 & 2018 with their ICOs where token holders received on exchange (in almost all cases) the typical ERC-20 utility tokens. Bitcoin was not originally designed with the intent to use it as a platform to raise capital but RSK will make this possible using BTOs (Bitcoin-Backed Token Offerings). We´ll get back to this later.
So now that we know which are some of the key differences between Bitcoin and Ethereum, let’s have a quick look at the EOS blockchain. We already know that on Bitcoin´s network, miners are in charge of processing transactions under a POW protocol. We also know that Ethereum is working on a full migration from POW to POS and token holders will have the option to become validators. When it comes to EOS though, a DPOS (delegated proof-of-stake) protocol is used. Under this protocol, there are 21 block producers (BPs) that are chosen by vote and anyone that holds EOS tokens can vote on who the block producers should be. Block producers are incentivized to act honestly because they can be voted out by the users on any given cycle and there always are other BPs standing by. Another key difference compared to Bitcoin and Ethereum, is that EOS runs on an ownership model similar to an operating system. The amount of tokens you own is related to the amount of the network that you can use.
So now that we have a basic idea of some differences between Bitcoin, Ethereum and EOS, let’s analyze the RSK sidechain. It all begins with one simple question: What is RSK?
As stated on the FAQ section, it’s the first general purpose smart contract platform secured by the Bitcoin Network. RSK is built upon Bitcoin capabilities, enabling smart contract execution. So just like developers can develop dApps for Ethereum and similar projects, RSK enables them to create smart contracts using the security of Bitcoin´s network while at the same time using the Ethereum’s toolchain and standard community tested & reviewed code.
On RSK, there’s a native currency known as the smartBitcoin (RBTC), that is tethered to BTC 1 to 1. Just like you use ether to pay for computational cost on Ethereum’s blockchain, you use RBTC when you use the RSK network. As previously explained, the only way to create RBTC is by sending BTC to a multisig address in Bitcoin’s blockchain that is protected by the RSK Federation. This is a key difference with Ethereum and EOS tokens, as the RBTC creation process depends entirely on this exchange between BTC into RBTC and no RBTC is created from “thin air”.
Now, what about transactions on the RSK network? The number of transactions per second executable on the RSK platform is determined by the block gas limit and the average block rate. The current average block rate is one block every 30 seconds. At each mined block, the miner can vote to increase the block gas limit. Transactions on RSK have historically been much cheaper than in Ethereum.
Why could mining pools be interested on contributing with RSK? Because merge-mining enables Bitcoin miners to earn money with the existing infrastructure and pool without the need to add more equipment. RSK directly plugs in to allow for merged-mining and to ensure that cryptographic work, that would otherwise be discarded in Bitcoin mining, is reused for securing the first smart contract open-source platform secured by the Bitcoin network. The RSK smart contract apportions 80% of the mining rewards paid to the RSK protocol to Bitcoin miners.
What about scalability on RSK? RSK has its own proposal for scalability, which’s called Lumino. As described on the original paper by RSK & RIF Chief Scientist, Sergio Lerner, Lumino gets a scalability boost from the Lumino Transaction Compression Protocol (LTCP). LTCP removes unnecessary signatures and also compresses transactions using user-defined presets. Having in mind that signatures take 70% of the transaction space on RSK, it’s really easy to understand the great value of this protocol. So just like Ethereum explores Sharding and Plasma for scalability purposes, RSK has its own approach with LTCP and Lumino protocols.
At this point, we’ve covered many of the differences between RSK and other platforms designed to develop dApps. If you have any further questions, please do not hesitate to get in touch with us and we’ll be glad to help! We highly encourage you to submit your questions only after reading our recent AMA sessions with Diego Zaldivar & Sergio Lerner. In the meantime, we invite you to visit the following link to get started: https://github.com/rsksmart/tutorials/wiki