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Nxt

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Nxt
Nxt Logo
Unit
PluralThe language(s) of this currency do(es) not have a morphological plural distinction.
SymbolNXT‎
NicknameNxtcoin
Denominations
Subunit
 1NXT[1]
 10-8nxtQuant[2]
(smallest unit)
Demographics
Date of introduction24 November 2013[3]
User(s)Global
Issuance
AdministrationDecentralized
peer-to-peer consensus.[1]
 Websitenxt.org
Valuation
InflationDisinflationary.[4] All coins were distributed after IPO (28 September 2013 - 26 November 2013).

Nxt is an open source[6] cryptocurrency and payment network launched in November 2013 by anonymous software developer BCNext.[7] It uses proof-of-stake to reach consensus for transactions - as such there is a static money supply and no mining as with Bitcoin. Nxt is specifically conceived as flexible platform to build applications and financial services around.[8] It has an integrated asset-exchange[9] (comparable to shares), messaging system and marketplace. The recent major release provides users the ability to create new currencies within the system.

History

On 28 September 2013 Bitcointalk.org member BCNext created a forum thread announcing Nxt[7] as second generation cryptocurrency, asking for small Bitcoin donations to determine how to distribute the initial stake. On 18 November 2013 fundraising for Nxt was closed, with 21 BTC raised.[10] The genesis block was published on 24 November 2013. It revealed that 1,000,000,000 coins had been distributed to 73 stakeholders in proportion to their level of contribution.[3] The source code was partially released on 3 January.[11] The full source code was released on 1 March 2014[12] under the MIT License.[5]

Concept

Just as with Bitcoin, the blockchain stands at the core of this currency. But Nxt is completely written from scratch[13] and departed in several ways from existing cryptocurrencies. Most notably, in one of the founding statements BCNext asks the community not to consider the NXT coin as the important part, but rather create currencies on top of it[14] - possibly devaluing the core currency.

  • Nxt is coded in Java.[6]
  • The standard client works as brain-wallet: Instead of storing keys in a wallet file, security works via a secret passphrase. This means it can be accessed from any instance of the Nxt software.
    The standard client is running in web browsers (Russian version pictured).
  • Nxt was the first currency to rely purely on proof-of-stake for consensus. Allowing a block creation rate of roughly one minute.[15]
  • The focus on being a versatile platform for external services, means that there is an extensive API[16] that developers can use. No centralized service is needed, not even a node run by the developer, since named peers of the network can be directly accessed via API calls.[17]

Proof-of-Stake Consensus Mechanism

While Bitcoin uses hashing power as proof for verifying transactions, Nxt works with the stake-size the user owns. Block authors are selected in a practically random manner, with greater amounts of stake increasing the likelihood of adding a block to the chain.[1] While in the former the investment in mining gear serves as incentive not to attack the network, an attacker in the latter would directly hurt the personal coin holdings.
This method effectively removes the security issue of any miner gaining 51% of the hashing power and attacking the network.[18]

Forging

Since Nxt has an unchanging coin supply, no new units are created for block rewards. Instead the transaction fees are passed on. After owning Nxt for about one day (1440 confirmations),[19] the Nxt software will begin to contribute to the block generation process and can earn coins for as long as an account is "unlocked". This process is called forging (referring to the smith that takes existing iron and reshapes it[20]).

At the moment Nxt is open to attacks if any account has 51% of the total coin supply that is forging.[21] As outlined in the founding statements[14] Nxt is aimed at implementing a process of "transparent forging", which allows the software to predict which accounts will forge upcoming blocks. This is basically done by iterating through all active accounts and seeing which one has the highest "hit". Transparent forging rapidly increases transaction processing, since the account that will forge the next block is known. Another benefit of this feature is that accounts that are due to forge, but do not, will be penalized by having their forging power temporarily reduced to zero. This raises the threshold for an attack to 90%.[21]

Energy Efficiency

The Proof-of-Stake algorithm is efficient enough to run on smartphones and small devices like the Raspberry Pi platform.[22] As such there are no additional costs, no expensive mining hardware is needed and no additional energy burned. This makes Nxt use ca. 7000 times less energy than Bitcoin at the same network size.[23]

Features

The core infrastructure of Nxt is complex. This adds risks as compared to the more lean Bitcoin, but makes it easier for external services build on top of the blockchain.[8]

Asset Exchange

Screenshot of the SecureAE Asset Exchange window

A peer-peer exchange allowing decentralized trading of shares. Since the blockchain is an unalterable public ledger of transactions, the Asset Excchange can provide a record of trade for items other than Nxt. To do this, Nxt allows the designation or "coloring" of a particular coin, which builds a bridge from the virtual crypto-currency world to the physical world. The "colored coin" can represent property, stocks/bonds, commodities, or even concepts. These can be transferred between users, which allowed Nxt assets to become the first to be traded on external exchanges.[24]
As of December 2014, the Nxt Asset Exchange is the most widely used among the decentralized exchanges.[25]

Marketplace

NXT has one of the first completely decentralized marketplaces, since the offers are stored directly in the blockchain. Users are able to buy and sell directly to any other user - the ledger serves as unchangeable proof of the transaction.[26][27]

Arbitrary Messages

This feature enables the sending of simple text messages - encrypted or as plain text - which can also function to send and store up to 1000 bytes of data. As a result, it can be used to build file-sharing services, decentralized applications, and higher-level Nxt services.

Alias System

The Alias System feature of Nxt essentially allows one piece of text to be substituted for another, so that keywords can be used to represent other things – names, telephone numbers, physical addresses, web sites, account numbers or emails. This would for example allow for a decentralized DNS system similar to Namecoin.

Monetary System

Implemented in version 1.4.8,[28] the Monetary System allows the creation of currencies on the Nxt blockchain.[29][30] These coins are backed by a specified amount of NXT, which can be retrieved if necessary. The possible properties range widely - including different models of inflation, exchange and the use of Proof-of-Work as distribution system.

Features Under Testing

More features are planned,[31] several are already implemented in test environments.

Smart Contracts

Smart Contracts allow the creation of scripts that reside in the blockchain - to allow trustless execution of code. There are several completely different implementations in development for Nxt. The Automated Transactions attempt for turing-complete scripting is fully integrated into the Nxt-clone Burst.[32]

Multi-signature transactions

A method (named Phasing for Nxt) for requiring multiple accounts to authorize a transaction before it is sent. Similar to having a "joint bank account" and could also be used to provide escrow and two factor authorization.

Voting System

Allowing holders of the currency or Nxt-Assets to vote. This can be used for future development decisions, or by asset issuers for shareholder voting.[33]

External Services

Web Wallets

There are several websites offering web-wallets. These allow easier access without downloading the full blockchain and running a node. As downside they add various degrees of need for trusting the provider.

SmartContracts

Using the Nxt's data storage capabilities, SmartContracts.com is a website adding smart contract functionality - with the benefit of external data sources (like market prices or GPS signals). These are executed centrally, but the agreements are unalterably stored in the blockchain.[34]

SuperNet and MultiGateWay

SuperNet is an ecosystem build around various cryptocurrencies, to allow the usage of all their features in one application. The interface is build on the Nxt client and uses its features like the Asset Exchange.[35]
The MultiGateWay feature for example, allows the peer-to-peer exchange of various cryptocurrencies, without having to trust any funds to an external exchange site.[36]

FreeMarket

Freemarket is using Nxt's arbitrary messages feature to provide a more comprehensive marketplace. Since the offers are stored in the blockchain and not on servers like other cryptocurrency good-markets, it is resistant to any attempt of shutting it down.[37]

Criticism

Nothing at Stake Attacks

It is proposed that one could attack any Proof-of-Stake currency with zero costs.[38] There are several proposed attack avenues. Cryptocurrency researcher, Andrew Poelstra, argues these attack vectors are all caused by the fundamental flaw that Proof-of-Stake currencies don't consume an external resources.[39]

Peercoin applied centralized check-pointing measures. In the Nxt whitepaper, it is claimed that the Nxt blockchain cannot be re-organized more than 720 blocks behind the current block height, preventing one attack vector.[19]

Distribution

Since Nxt had no mining phase, all initial units were released via a one-time fund raiser. After the announcement of the NXT project in the bitcointalk-forums by its inventor BCnext,[40] it was open to interested parties to buy shares in this new system via Bitcoins. Due to the unconventional offer, only a total of 73 people took advantage of it. Because of this relatively small group of initial stake owners, the distribution has been repeatedly criticized.

As of December 2014 the top 100 NXT accounts contain 73% of the units,[41] which is higher than many other top crypto currencies.[42]

Counter arguments point to the fact that company shares are typically spread in a similar manner - with little complaints about big holders. Considering the young age of NXT it has yet to be seen how the distribution will change over time.

User-generated passwords

To access an account, the user types a password or a pass phrase from which a private key is calculated, unlike Bitcoin, where private keys are typically stored in a wallet file and not directly visible to the user.

On the user-side the NXT account solely consists of a pass phrase with no wallet file in the standard client. That means anyone in the world can access the wallet if they know the phrase. This might lead to user errors, where the user creates accounts with short or predictable passwords. Brute-force attacks on the whole blockchain are possible. To alert users, the NXT client warns when a password has fewer than 30 characters. It also provides an auto-generator for pass phrases.

If the phrase is 20+ characters - consisting of random symbols. Or it's 8+ random words, not a phrase/quote published somewhere, the password can be considered unbreakable by any existing computing powers (currently and far in the foreseeable future).[43][44]

See also

References

  1. ^ a b c "Nxt Whitepaper". Retrieved 2014-03-09.
  2. ^ "Nxt-Wiki nxtQuant". Retrieved 21 December 2014.
  3. ^ a b "Genesis-Account". mynxt.info Blockexplorer. Retrieved 21 December 2014.
  4. ^ "Ways to Destroy NXT". NxtForum.org. Retrieved 21 December 2014.
  5. ^ a b "nxt - source code MIT license". Bitbucket.org. Retrieved 21 December 2014.
  6. ^ a b "Nxt Source Repository". Bitbucket.org. Retrieved 21 December 2014.
  7. ^ a b BCNext. "[ANN] Nxt :: descendant of Bitcoin". Bitcointalk.org. Retrieved 21 December 2014.
  8. ^ a b "Nxt Wants to Be a Digital Infrastructure of Everything". cointelegraph.com. Retrieved 22 December 2014.
  9. ^ "NxtWiki:Asset Exchange". TheNxtWiki.org. Retrieved 21 December 2014.
  10. ^ "NXT Fundraising Over". bitcointalk.org. Retrieved 22 December 2014.
  11. ^ "Source Code Release 1". bitcointalk.org. Retrieved 22 December 2014.
  12. ^ "Source Code Release 2". Bitcointalk.org.
  13. ^ "Cryptocurrency News Round-Up: Mt Gox Fire Sale as Jamaica Bobsled Rides Again". IBTimes. 2014-02-17.
  14. ^ a b "BCNext Founding Statements". nxter.org. Retrieved 22 December 2014.
  15. ^ Chepurnoy, Alexander. "Nxt forging algorithm: simulating approach". scribd.com. Retrieved 22 December 2014.
  16. ^ "Nxt API". TheNxtWiki.org. Retrieved 15 January 2015.
  17. ^ "Nxtpeers API". nxtpeers.com. Retrieved 15 January 2015.
  18. ^ Eyal, Ittay; Gun Sirer, Emin. "Majority is not Enough: Bitcoin Mining is Vulnerable". Cornell University Library. Cornell University. Retrieved 22 December 2014.
  19. ^ a b "Nxt-Whitepaper (Blocks)". wiki.nxtcrypto.org. Retrieved 22 December 2014.
  20. ^ "Forging Definition". Oxford English Dictionary. Retrieved 22 December 2014.
  21. ^ a b mthcl (pseudonymous). "The math of Nxt forging" (PDF). pdf on docdroid.net. Retrieved 22 December 2014.
  22. ^ "Installing Nxt on Rasperry Pi". wiki.nxtcrypto.org. Retrieved 22 December 2014.
  23. ^ "Nxt Network Energy and Cost Efficiency Analysis" (PDF). Retrieved 21 December 2014.
  24. ^ "Poloniex to List jl777hodl (JLH) in First Ever Crypto-Asset Listing". coinssource.com. 2014-07-18.
  25. ^ "Asset Exchange Statistics". nxtreporting.com. Retrieved 22 December 2014.
  26. ^ "Nxt Marketplace". nxt.org. Retrieved 22 December 2014.
  27. ^ "nxtblocks.info Marketplace". nxtblocks.info goods listing. Retrieved 22 December 2014.
  28. ^ "Nxt Monetary System NRS client 1.4.8". nxter.org. Retrieved 15 January 2015.
  29. ^ "Nxt Monetary-System on public testnet". nxter.org. Retrieved 22 December 2014.
  30. ^ "description of the Monetary System". bitbucket.org. Retrieved 22 December 2014.
  31. ^ "nxt tech tree". nxttechnologytree.com. Retrieved 22 December 2014.
  32. ^ "Burst Automated Transactions Release". bitcointalk.org - Burst Thread. Retrieved 22 December 2014.
  33. ^ "Nxt Voting System Teaser". youtube.com. Retrieved 3 February 2015.
  34. ^ "New Blockchain Startup Brings Contracts into the Digital Age". coindesk.com. Retrieved 22 December 2014.
  35. ^ "SuperNet Wiki - Main Page". wiki.supernet.org. Retrieved 22 December 2014.
  36. ^ "Multigateway".
  37. ^ "Decentralized Markets Kills E-commerce Stars". bitcoinmagazine. Retrieved 22 December 2014.
  38. ^ Houy, Nicolas. "It Will Cost You Nothing to 'Kill' a Proof-of-Stake Crypto-Currency". papers.ssrn.com. University of Lyon 2. Retrieved 22 December 2014.
  39. ^ Poelstra, Andrew. "Distributed Consensus from Proof of Stake is Impossible" (PDF). Retrieved 22 January 2015.
  40. ^ "[ANN] Nxt :: descendant of Bitcoin". Retrieved 20 May 2014.
  41. ^ "NXT Wallet Distribution Charts". nnxtblocks.info - charts. Retrieved 22 December 2014.
  42. ^ "Bit Info Charts - various stats". Bit Info Charts. Retrieved 20 May 2014.
  43. ^ "Teraflop Troubles: The Power of Graphics Processing Units May Threaten the World's Password Security System". Georgia Tech Research Institute. Retrieved 2010-11-07.
  44. ^ "Want to deter hackers? Make your password longer". MSNBC. 2010-08-19. Retrieved 2010-11-07.
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