RIF: Building a Healthy Economic Ecosystem on Top of Bitcoin
Rootstock (RSK) is a smart contract platform that is connected to Bitcoin´s blockchain through sidechain technology. Rootstock allows you to create applications compatible with Ethereum (the web3/EVM/Solidity model) while still enjoying the security provided by the Bitcoin blockchain. At its very core, Rootstock is a combination of:
- A Turing-complete resource-accounted deterministic virtual machine (for smart contracts) is compatible with the Ethereum’s EVM.
- A two-way pegged Bitcoin sidechain (for BTC denominated trade) based on a strong federation.
- A SHA256D merge-mining consensus protocol (for consensus security relying on Bitcoin’s miners) with 30-seconds block interval. (for fast payments).
Rootstock will also be using its tech stack – the Rootstock Infrastructure Framework Open Standard (RIFOS) to help build a healthy economic system on top of Bitcoin. It’ll facilitate the use of blockchain technology by making it as simple for everyone as possible.
RIFOS – The Third Layer
RIFOS can be visualized as a third layer on top of the Bitcoin blockchain and can be thought of as a decentralized AWS. Keep in mind the following features when it comes to RIFOS:
- As long as a product is compatible with the underlying protocols, developers can seamlessly integrate it within the RIFOS ecosystem.
- All the individual components of RIFOS have been designed to maximize the potential benefits for those who want to offer their infrastructure services within the protocol’s ecosystem.
- All the components are protected by the security provided by the Bitcoin Network.
- Its protocols will include mechanisms to trigger network effects and economies of scale.
- Most of the services running in RIFOS will be consumed utilizing a single token (RIF).
There are three specific areas where RIFOS is currently working on Storage, Payment & RNS. In this guide, we are going to talk about what RIFOS is doing in each of these categories. We will also then compare those with similar use-cases.
Decentralized storage is one of the most compelling use cases due to the following problems with centralized cloud storage:
- Giving Over Control, Hacking Risks & Data Mismanagement: In traditional cloud storage solutions, you will have to hand over your data to a third-party. This means that you will need to trust the third-party not to screw up and hope that their systems and security are up-to-date. Since all the data is stored inside a third-party, centralized server, they are susceptible to hack attacks. This not just some random assumption. Third-party servers have been repeatedly hacked to obtain sensitive and private information. The third-party can mismanage your data because of nefarious reasons or just general incompetence. Look at how Facebook mismanaged user data during the Cambridge Analytica scandal.
- Censorship Resistance: Since the data isn’t stored inside centralized companies, it is not subject to any guidelines.
- Easy Scaling: The Storage System easily scales up has a Content Distribution Network by default.
Potential to Prevent Data Loss if Service Provider Stops the Service: in principle, you should always be able to retrieve your data from decentralized storage even after the app stops working.
- RIF will allow developers to serve their dApps without the need to have a server. The features of RIF Storage are as follows:
- Allow for the encrypted and decentralized storage and streaming of information via its unified interface and set of libraries.
Offers multiple options for different needs, from decentralized swarm storage to encrypted cloud and physical storage.
RIFOS entered into a partnership with Swarm network, a distributed storage platform, and content distribution service, to create a truly decentralized and unstoppable Internet of Value. The partnership between Swarm and RIF storage will also take care of:
- Create a solid incentivization plan which combines Swarm´s Accounting Protocol (SWAP) with a layer-2 (L2) settlement and payment mechanism.
- Build the required accounting functionalities between nodes for provided data and settling.
- Add interoperability and antifragility to allow Swarm to become a multi-blockchain decentralized storage implementation.
How RIF Storage and Swarm Works
To understand how RIF Storage and Swarm works, let’s understand how simple storage function works. There are only two things that users will do with cloud storage – upload and download files. When it comes to Swarm, this is how uploading will work:
- Uploading the file to a node.
- Preparing the file (chunking and encrypting).
- Distributing the chunks to the network.
To upload a file, the user first connects to a Swarm node and uploads a file through a user interface as the RIF Storage UI. Before uploading to the network, the file is split into small parts called “chunks.” The chunks are then mapped into a Merkle Tree:
In this tree, the leaves are populated by the hash of each chunk, while the root of the tree represents the hash of the whole file. Do you want to learn more about Merkle Trees? You can read our guide here.
The downloading process works in the reverse order. The user requests a file by the root hash of the Merkle tree. The chunks are eventually decrypted and the file assembled.
For incentivizing individual nodes to take part in the system, Swarm defined a system called Swarm Accounting Protocol (SWAP). According to their documentation, SWAP is a “tit-for-tat system where nodes account how much data they request and serve. Basically, this means that if you request a million chunks from me, I will serve you one million chunks in return.”
Once one of these nodes reaches a certain threshold ( ~10 MB right now) it will automatically send “cheques” for payment purposes. The nodes are incentivized to pay their debts on time. Otherwise, they risk getting disconnected from the network. From an economic perspective, getting back into the network is a lot more expensive than paying the debt.
Sia is a blockchain-based, cloud platform that aims to provide a solution for decentralized storage. Peers on Sia’s network can rent hard drive space from one another, for storage purposes instead of renting it from a centralized provider. Not only does this decentralized approach make Sia more secure, but it drastically reduces the overall cost as well. Simply put, if you have unused space on your hard drive, then you will be able to rent it in Sia and earn money from it, in the form of Siacoins (SC). Sia uses a dual token system – Siacoin and Siafunds.
The creative forces behind Sia are David Vorick and Luke Champine of Nebulous Inc, a VC-funded startup in Boston.
How does the Sia P2P storage work?
There are two main components in Sia’s ecosystem – the renters and the hosts. The renters can pay hosts in Siacoin to lease storage capacities. They are also free to determine the storage fees directly from the hosts.
Since the hosts play such a vital role in the network, they have the freedom to:
- Promote their storage resources and the quality of service that they provide.
- Have the right to refuse rent storage to a particular client if they feel that the data is too sensitive, ethnically unacceptable, or illegal.
The renters, for their part, have the right to:
- Protect the flies by splitting them up and having them copied between various hosts. This will help ensure the safety of the file.
- Pay the hosts more than the asked fees to ensure preferential treatment, such as faster upload speeds and granting storage requests.
Uploading and Downloading Files
As long as funds remain in the allowance, renters can upload and download their files as many times as they want. The current contracts will not be affected if the host decides to change their pricing mid-operation. Regarding data transfer:
- Done by direct connection between the renter and the hosts.
- The Twofish algorithm encrypts data and stored with the redundancy algorithm Reed-Solomon among the hosts.
The biggest issue with the blockchain space is its lack of scalability. Bitcoin is currently working on the Lightning Network, a second layer network built on the concept of payment channels. We are also pretty sure that you must have heard about SegWit, which removes the signature data and puts it in a sidechain. While they are both pretty amazing innovations, they both suffer from the same issue: they are both constricted by the limits of the original Bitcoin protocol.
RIF Lumino – Adding the Third Layer
RIF Lumino is a third-layer solution to Bitcoin’s blockchain that enables payment channels for every token built on RSK. Overall, it increases transaction throughput and reduces costs by orders of magnitude. RIF Lumino Network is going to be the heart and soul of RIF’s Payment Protocol, which will allow interoperability with the Lightning Network and cross-token payments.
What is Lumino?
Lumino uses the LTCP (Lumino Transaction Compression Protocol), which removes unnecessary signatures and also compresses transactions using user-defined presets. Quite like the Bitcoin blockchain, the signature data can be very bulky on RSK as well. RIF Lumino Network allows parties to transact off-chain using payment channels. While it functions similarly to the Lightning Network (LN), they have both been designed to work side-by-side with each other. Lightning Network works on the main chain, while Lumino works on the RSK sidechain.
To understand how payment channels work, read this guide. However, this infographic of the lightning network should give you a small idea of how the process works.
What are the advantages of using payment channels?
- Fast payments: Payments are almost instantaneous.
- Not dependent on miners: Transactions don’t need to be approved and verified by miners for it to go through.
- Micropayment friendly: Earlier micropayments were extremely inconvenient on the bitcoin blockchain. Now they are possible thanks to the lightning network.
- Multi-signature friendly: The transactions will go through if and only if everyone present in the channel approves. In Lumino, the channels are between only 2 members solely.
- Reduces blockchain load: With so many transactions happening of the chain, it dramatically reduces the load that the main chain has to take.
- Decreases waiting time: Since the transactions are happening off-chain and without miner intervention, there is little to no waiting time.
- Scalability: Helps in scalability since it will increase the number of transactions happening per second.
Why use Lumino when you already have LN?
As already mentioned, the LN is specifically for the main Bitcoin chain, which has been built purely for payment purposes. The RIF Lumino Network, on the other hand, is for RSK. As such, all the RRC-20 compliant tokens (tokens of the applications built on the RSK platform) can use Lumino to scale up.
Raiden Network – Ethereum’s scaling solution
Raiden Network, which will allow Ethereum users to conduct instantaneous transactions via state channels, is the closest thing that comes to Lumino. The Raiden Network can be used by users to send all ERC-20 compliant tokens.
Raiden will be structured like a mesh-type structure running on top of the ethereum main chain:
So, how does Raiden work?
Suppose Alice and Bob want to interact with each other using Raiden. This is how they will go about it:
- Alice and Bob open a payment channel between them which will be off-chain and they deploy a smart contract.
- Both parties make a security deposit in the smart contract.
- Suppose Alice wants to send 3 tokens to Bob, she signs the message “3” and sends it to Bob. Bob now has proof of Alice sending him 3 tokens.
- Now, suppose Alice wants to send Bob 4 more tokens. She will update the state of the message to “7”. This shows that the message is conveying the previous and the latest transaction as well.
- The moment Bob wants to redeem the 7 tokens, he will go the blockchain and close the channel. He will get the 7 tokens from the deposit that was initially made in the channel.
- The information will be relayed to the blockchain and the only record that will be stored is the final 7 token deposit made to Bob.
What are some features of the Raiden Network?
- Usable and simple application programming interface (API).
- Enables Ethereum scalability.
- Can be used to send any ERC20 token.
- Enables fast and simple transfer of money.
- Will decrease the load on the Ethereum blockchain.
#3 Naming Services
Quick question: What are the two things that are preventing the blockchain space from gaining mainstream adoption?
One of those things is scalability. In the section above, we have looked at how payment channels can help secure scalability. The second thing that will significantly aid in achieving mainstream adoption is “abstraction.”
Abstraction means that anyone can use any system or protocol without completely knowing the ins and outs and all the technical details. Eg. When you use your iPhone, you don’t need to be a programmer or an engineer to operate it. You simply press on the screen to activate an app, or press on the call button to call someone. You don’t need to know how pressing certain apps activates the circuit inside the phone or how certain apps were programmed. Abstraction makes a sophisticated technology accessible to the masses by hiding the complexities.
So how complex is the crypto space?
If you ask a newcomer to send you some ETH at your public address you’re probably going to scare the poor soul away. Public addresses and private keys are random hexadecimal gibberish, which will intimidate any newcomer. However, what if they sent you the ETH to “Blockgeeks.eth.”
That will be a lot simpler and straightforward, wouldn’t it? This is where naming services come in. A naming service personalizes your public address and helps in removing unneeded complexity.
RIF Name Service
RIF Name Service (RNS) was designed to make the user experience more friendly. It does so by providing an architecture that enables the identification of blockchain addresses by human-readable names or aliases. RNS used only to support addresses that were built on RSK Network, but the fact is that blockchain users manage multiple types of coins and assets. To accommodate for this, the RIF Name Service has upgraded itself to RIF Name Service MultiCrypto. This is crucial for interoperability since it allows users to manage tokens built on top of any platform, facilitating the mass adoption of crypto-assets.
Advantages of RNS
- Used to identify personal resources such as payment or communication addresses.
- Improve user experience by centralizing access to multiple resources associated with a human-readable name.
- Reduce the probability of errors. As resource names may change over time, the system is flexible enough to support frequent changes.
- Increases interoperability by allowing users to move assets across different networks/tokens.
Ethereum Name Service
Ethereum Name Service (ENS) is an entirely decentralized naming system. It allows users to register their public addresses under the “.eth” domain name and link them to ethereum resources such as smart contracts, wallet addresses, and more. As of April 2019, more than 270,000 domain names have been set up using the ethereum domain .eth, according to Brantly Milegan – the developer coordinator for ENS.
Auctioning for names
New names are allocated using auctions which can proceed in three stages:
- Someone opens an auction for a name and places a bid. This also starts a 3-day timer for other people to place bids on the name.
- After three days, there’s a two-day reveal period where all the bidders reveal their bid.
- If your bid is not the highest, you are refunded your bid, and a less than 0.5% fee is charged.
- After the two-day reveal period, the winner is the one with the highest bid, but they only have to pay the amount of the second-highest bidder.
*The auctioning process on RNS is expected to be removed in the short term with a more direct approach that will simplify the process.
The RIF Token
The RIF token is a pure utility token used for the payment of various services. This way, dApp developers don’t need to hold ten different tokens for ten different services that they are offering in their dApp. These services include third party-developed infrastructure services and any other apps that might be deployed on the RIF protocol. These third-party service providers will be required to accept RIF tokens if they want to be integrated with RIFOS. This makes sense because having a universal token across all these platforms will allow for simple interoperability across the services.
Rootstock CEO Diego Zaldivar also pointed out two very interesting RIF use-cases during his AMA:
“We also envision that in the not so distant future, other uses of the RIF token will arise surrounding the RIF marketplace. Two of the most relevant ones are the use of RIF token as collateral for the issuance of counterparty risk-free stable assets (ie: $RIFUSD, $RIFARS, etc) which can be used to denominate service prices in stable assets and the use of RIF token to settle transactions between RIF Payment Hubs without assets in common or sufficient liquidity.
We envision RIF OS in the long term, as a unified Marketplace for off-chain infrastructure services that can be consumed by every major Smart Contract enabled crypto-economy so although the RIF Token was initially created on the RSK Network, in the future, it will be portable to other platforms like Ethereum or EOS. This will create economies of scale and strengthen the antifragility of the Decentralized Ecosystem as a whole, bringing our vision of the Internet of Value one step closer to realization.”
Along with having an ambitious vision, RIF Labs is supported ably by one of the best teams in the crypto space. This team has been active since 2011 and has a proven track record of success. Building innovative economies that are leveraged by Bitcoin blockchain’s security and community is going to be essential for the future growth of the crypto space.
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