Skycoin (Sky)

Skycoin (Sky)

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May 24, 2018 by matthewrobinson
What is Skycoin? Skycoin aims to reinvent the internet with a decentralized, faster, and more secure network that uses Skycoins to pay for broadband within the network. The best place to learn about Skycoin is its whitepaper but BlockWolf will summarize it in our video and text guide. Problem The internet relies on central parties, which have

What is Skycoin?

Skycoin aims to reinvent the internet with a decentralized, faster, and more secure network that uses Skycoins to pay for broadband within the network. The best place to learn about Skycoin is its whitepaper but BlockWolf will summarize it in our video and text guide.


The internet relies on central parties, which have the power to control accessibility and voluntarily or involuntarily share data. The Skycoin team claims that there have been some potential solutions with Bitcoin and Ethereum, but those projects do not have sustainable characteristics to offer a comprehensive solution to the internet’s problems.


Skycoin aims to build a fast, scalable, and truly decentralized blockchain. It will achieve this through Skywire, Fiber, and Skycoin. Skywire is a privacy protocol that provides users with a cheap, faster, and a user-controlled internet. With Skywire, users are rewarded for providing bandwith to other users and it includes untraceable private browsing. Fiber enables anybody to access and create fast decentralized applications. Skycoin will be used within the network to make quick and free decentralized payments. To add stability to Skycoin, Skycoin holders receive Coin Hours, which can be used to pay for Skycoin transfers and services within the network. Skycoin, Skywire, and Fiber are described in more detail below.

Some Skycoin features listed from its white paper:

1. Fast

2. Zero fees (fees are paid in Coin Hours)

3. Secure transactions with no tampering, 51% attacks, reversal, duplication, nor malleability.

4. Privacy through CoinJoin

5. Sustainable – does not require excessive energy

6. Incentives – Users earn and spend Skycoin for providing and consuming network resources

7. Backed by utility – Skycoin is backed by a real asset (bandwidth).

So how does it work?

Skycoin has a unique consensus algorithm called Obelisk that replaces Proof of Work and Proof of Stake. It is intended to be more decentralized because anybody with a normal computer can equally contribute and it is supposed to be faster and more secure. Obelisk uses what is called a web-of-trust, which reminds BlockWolf of Delegated Proof of Stake. With web-of-trust, nodes (any connected computer in the network) subscribe to a list of trusted nodes. Nodes with more subscribers have more power within the network. Each node has its own blockchain that publicly records all its actions. Their public record let other users see if the nodes are acting honestly, and if they act dishonestly, they will presumably lose subscribers. Centralization could occur if nodes end up subscribing to a select few set of trusted nodes, but if the network feels like that is a threat, they could decide to subscribe to other nodes to avoid that centralization.

Zero Skycoin fees but there are Coin Hour fees?

Skycoin transactions require Coin Hours. For each Skycoin somebody owns, they receive one Coin Hour every hour. Beyond transaction fees, Coin Hours can also be used for VPN services and additional bandwidth on Skywire. To prevent inflation, each transaction will burn 50% of the Coin Hours associated with each transaction. There will be a maximum supply of 100 million Skycoins, which means that there will also be a maximum supply of 100 million Coin Hours.

Skyminers and Skywire

Skyminers is designed to provide an incentivized mesh network that is faster, cheaper, more accessible, and higher quality than the existing internet. To achieve this, Skywire will need an innovation communication protocol, payment protocol, hardware platform, and application ecosystem. Its whitepaper claims that current TCP/IP protocols are not well suited for mesh networks, it needs a payment protocol that can incentivize nodes for their resources, it needs hardware than can support its network, and it needs an application ecosystem that drives demand and adoption for its network’s resources.

Communication Protocol

The Skycoin whitepaper claims that TCP is not well suited for mesh networks and that IP-based routing is slow and expensive. Instead of TCP/IP, Skycoin uses Multi-Protocol Label Switching (MPLS), which they claim enables highly scalable and performative transport of data by providing packets of information with routes through the network before being sent.

Payment Protocol

With Skywire, every node acts as a micro internet service provide capable of metering, billing, and settling. When nodes process network traffic, they are rewarded with Skycoin and Coin Hours.


Fiber will be used so that 3rd parties can launch their own decentralized applications and blockchains, similar to ERC-20 tokens. In contrast to ERC-20 tokens, each third party has their own blockchain that uses the same characteristics of Skycoin (Low energy requirement, fast, low fees)

What purpose does the Skycoin have?

SkyCoins are used to generate Coin Hours. Coin Hours are used to pay for bandwidth and transaction fees within the Skycoin network as well as some other services within the network like for VPNs.


The Skycoin team has three founders. Synth is an early contributor to Bitcoin. Houwu Chen was an Ethereum contributor , and Steve Leonard has experience in eCommerce, software development, math, and chemistry. It is unclear if this is the Steve Leonard associated with Skycoin. He is not an easy man to research.


The Skycoin mission creates a new internet and replaces the status quo of internet service providers. The general idea for Skywire seems valid but in reality, it is hard to tell if it will ever be possible. The Skycoin ecosystem includes its own programming language called CX that we imagine will create a barrier for developers to work for the project.

BlockWolf Summary:

Skycoin is the most ambitious cryptocurrency project we have ever examined, which raises questions about its possibility for ever succeeding. Their new protocols seem thought out from a birds eye overview but it is hard to examine if their goals could ever be possible without an opinion from an internet protocol expert. There are a couple of infant projects within the Skycoin ecosystem (Sky-Messenger, Skycoin Bulletin Board System, and Kitty Cash), but we would feel more comfortable in believing in Skycoin’s future if more applications were built on its ecosystem and if there could be convincing evidence that Skywire would work with many decentralized nodes.

If you would like to learn more about other cryptocurrencies please visit our other coin research as well as research for particular coins that BlockWolf likes.