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Blockchain Ecosystem Trends to Watch Out in 2018

July 24, 2018

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Blockchain Ecosystem Trends to Watch Out in 2018

Abstract: The article encompasses information about the most recent blockchain ecosystem trends of 2018, most specifically, decentralized exchanges, blockchain environment, consensus algorithms and finally smart contracts security issues and the role of ZAP in tackling them

On the one hand, the number of ICO’s is growing exponentially in 2018. On the other hand, the amounts raised through ICO’s should reduce, since the investments grow proportionally slower as is opposed to increasing number of ICO’s.  Among global giants filling ICO’s is Kodak, which is building the world’s decentralized network for photographers. Kodak (KODK), one of the ancient players of photography business, is integrating the blockchain technology to solve issues that have been hindering the photography industry. Most specifically, Kodak and WENN Digital cooperate on launching a blockchain-based image rights management platform, known as KODAKOne. In addition, the company issued, photo-centric cryptocurrency, KODAKCoin.

The quantitative analysis of the ICO market over the period of 2017-2018 indicate that the funds raised during the first quarter of 2018 are almost equal to the cumulative monetary funds collected throughout previous years. Table 1 analyses the results of 800 ICO’s completed since the beginning of 2017.


Table 1. Monetary amount of raised funds and number of ICOs

Period Collected, USD million Number of ICOs Average collected funds, USD million
January 3.7 7 0.5
February 35.3 11 3.2
March 7.3 4 1.8
Q1 2017 46.3 22 2.1
April 115.2 18 6.4
May 264.2 21 12.6
June 649.5 33 19.7
Q2 2017 1028.9 72 14.3
July 719.1 36 20.0
August 511.2 48 10.7
September 914.2 68 13.4
Q3 2017 2144.5 152 14.1
October 949.6 91 10.4
November 1109 91 12.2
December 1611.9 87 18.7
Q4 2017 3670.5 269 13.7
Total 2017 6890.1 515 13.4
January 1665.3 96 17.3
February 2731.6 100 27.3
March 3004.2 89 33.8
Q1 2018 7401.1 285 26.0

Source: Overview of the ICO Market and Forecast Amount of Funds to be Collected in 2018-2020. Dima Zaitsev, PhD  / FXSTREET

Decentralized exchanges

2018 is going to be a promising year for comparatively more efficient and user-friendly decentralized exchange platforms. The decentralized exchange is typically a smart contract operating on Ethereum Network, whereby users can directly exchange ETH and any other ERC20 tokens, therefore, eliminating the middlemen. The owners of similar decentralized exchange platforms are improving the user-friendly interfaces and Smart Contracts. EtherDelta and IDEX are the most popular decentralized exchanges by trade volume.

Blockchain

In 2017, Ethereum was the home for all the ICO’s. Nevertheless, the trends of 2018 suggest that some of the ICO’s are happening on other platforms, i.e. EOS, NEO. The developer version of EOS is quite easy  and you can create your own currency through C++. NEO is another possible alternative to Ethereum and EOS. However, it won’t happen soon and Ethereum will be in dominant positions in 2018 as the ICO platform, nevertheless, we will see rising number of alternatives, which will enable to have more flexible development language selection, along with more prompt responsiveness.

Consensus algorithms

The recent trends suggest that Blockchains will be built based on more eco-friendly consensus algorithms. In 2018, Ethereum is going to switch from Proof of Work to Proof of Stake. Nevertheless, cryptocurrencies such as Bitcoin and Dash won’t follow the Ethereum’s decision, since they have a strong community of miners, who would otherwise lose their earnings. Nowadays, new platforms are striving to switch from Proof of Work to Proof of Stake mining.

Here are the main differences between Proof of Work and Proof of Stake

Proof of Work Proof of Stake
Requirement for identifying an expensive computer calculation, also known as mining. The wealth or stake of the creator is a deterministic factor for choosing the creator of a new block.
The first miner solving each blocks problem is rewarded. The PoS system doesn’t provide block reward, therefore, the miners receive the transaction fees.
There is a competition among network miners to be the first to find a solution for the mathematical problem. PoS currencies can be several thousand times more cost effective.

Smart Contracts Security

Smart Contracts Security issues are closely associated with Transaction Ordering Dependence (TOD), Timestamp Dependence, Reentrancy, Forcing ether to a contract, DoS with Block Gas Limit.

Oraclize and ChainLink provide services for linking existing APIs to the blockchain, but are limited in that each requires data to pass through a single aggregator. They are acting as oracles, resting on their own reputation and the resulting potential for profit loss. Zap’s system includes this model in its set of economic incentives, but only as one of several techniques. Ultimately Oraclize and ChainLink could be individual oracles on the Zap platform.

Speculation, however, introduces other security concerns. The door is now open for market participants to have the opportunity to profit without providing any data. This risk for exit scams is mediated by the fact that each oracle is tied to a unique ethereum address. Speculators and subscribers (and indeed, all participants) bond to a relatively new oracle at their own risk. Zap Oracle Marketplace indicates a more elaborate function of the oracle contract by providing a mechanism for a third type of actor to insert themselves within the ecosystem.

Transaction Ordering Dependence (TOD)

In Ethereum blockchain ecosystem, miners can control the order of transactions, consequently, transactions can be executed earlier by paying more gas as is opposed to others’ transactions (the priority of your transaction depends on the amount of gas). In  other words, only the block closing miner decides the transaction order, the latter is the vulnerability and is known as transaction ordering dependence.

In TOD there can be an unexpected behaviour initiated by miners. For example, a smart contract, which intends a certain fee for offering the correct solution to some task. The contract price can be updated by contract owner prior to be claimed, and users can submit their solutions to the task to receive the payment.

Timestamp Dependence

The miner can manipulate the timestamp provided by a few seconds, therefore, altering the output of the contract for his own benefit. The procedure works as follows: the smart contract generates random numbers by using the timestamp, moreover, the miner can post a timestamp during 30 seconds of the block validation, therefore, enabling to predict a more beneficial option and increase his/her chances of winning.

There are several important considerations related to a 30-second rule:

If the smart contract function can tolerate a 30-second time period, it’s safe to use timestamp;

If the scale of a time-dependent event can vary by 30 seconds and maintain integrity, it’s also safe to use a block timestamp.

Reentrancy

The initial version of reentrancy vulnerability included functions which could be repeatedly recalled prior to the finalization of the first function call. Therefore, different function calls could interact in cataclysmic ways. Take a look at the code below:

// INSECURE

mapping (address => uint) private userBalances;

function withdrawBalance() public {

  uint amountToWithdraw = userBalances[msg.sender];

  if (!(msg.sender.call.value(amountToWithdraw)())) { throw; } // At this point, the caller’s code is executed, and can call withdrawBalance again

  userBalances[msg.sender] = 0;

}

The conclusion we can draw from the above code is as follows: the balance isn’t equal to zero until the very end of the function and the later calls will still succeed and withdraw the balance over and over again. An identical smart contract vulnerability was one of the bugs identified in the DAO attack.

A simple explanation to this bug was described in a Reddit comment to the DAO in 2016:

“It’s like the bank teller doesn’t change user balance until she has given you all the money you requested. “Can I withdraw $500? Wait, before that, can I withdraw $500?”

Forcing ether to a contract

Ethereum based Smart contracts are characterized by two main features. On the one hand, they have a self-destruct function, a solidity function that destroys contract. On the other hand, a modification enabling to receive ether on the contract.
A self-destruct function has two main peculiarities:
makes a smart contract obsolete, by successfully eliminating the bytecode at the target address;
sends all contract funds to that address.
However, it is important to understand that once the receiving address represents a contract, its fallback function won’t be executed. Thus, in case a function is characterized by a conditional statement, which depends upon the balance of this contract (I.e. below the necessary threshold), you can skip this statement in the following way:

contract ForceEther {

 bool youWin = false;

 function onlyNonZeroBalance() {
     require(this.balance > 0); 
     youWin = true;
 }
 // throw if any ether is received
 function() payable {
   revert();
 }


DoS with Block Gas Limit

Sometimes you might encounter the following risks: by simultaneously paying out to everyone, there is a probability of reaching the block gas limit.
Given the fact that Ethereum Blockchain network can process only a specific computation amount, therefore, if you exceed it, your transaction is destined to failure. The latter might result in some problems, even if there is no an intentional attack and gas manipulation by the attacker.