A Layman’s Introduction
Lisk, in one sentence, is a cryptocurrency that is used by developers to make their own cryptocurrencies. Normally however, developers do not make it a currency, but rather create a token that can utilise the useful blockchain technology behind Lisk.
Some existing projects plan to revolutionise digital privacy, academic accreditation and music. This makes Lisk not only a valuable cryptocurrency to trade, but a valuable asset relied upon by other cryptocurrencies and blockchain projects.
Sapiens Project is a platform built to help verify and trace academic certifications. Visualise a password instead of a paper certificate that confirms your education and can’t be counterfeited.
In comparison to its competitors, Lisk appeals to the wider developer market with an easy-to-use platform. The industry’s high expectations of the technology has allowed it to become the 15th largest cryptocurrency.
According to the official Lisk website, Lisk’s vision is to “make blockchain technology accessible for everybody by building a blockchain application platform likewise for users and developers.”
With so much potential to spark new projects, let’s dive in and try to unravel exactly what Lisk is.
A Little History
Lisk originally began as an “offshoot” of a platform called Crypti. Critically, Crypti and Lisk hold the same vision of creating an easy to use platform for developers to utilise blockchain technology.
The token icon of Crypti, the platform Lisk worked off of.
Lisk began when two Crypti developers, Oliver Beddows and Max Kordek, saw space for improvement in the platform, feeling there was a “huge lack of progress”. They saw an opportunity to bring the code open-source, introduce forging rewards and make some other technical changes. Feeling resistance against their visions in the Crypti team, they founded Lisk.
Creating a ‘fork’, Lisk was initially a separate, smaller project keeping much of the code. Allowed by the lenient copyright license Crypti was created on, Lisk kept on much of the strengths of Crypti in their first versions. However, Crypti lost traction and has now been overtaken by Lisk. Crypti is currently stagnating in growth and value.
After the formation of Lisk, Beddows and Kordek worked out loose ends with Crypti and begun working completely independently. They implemented the changes they desired and heard a positive response from the community, beginning the Lisk journey.
Initial Coin Offering (ICO)
By offering up the Lisk cryptocurrency to the public, the Lisk team was able to raise some much-needed funding to the amount of $5.75 million dollars in early 2015. This shook the marketplace; at the time, it was the second largest ever initial coin offering. Even more stunningly, the Lisk ICO at the time was in the top 20 all-time largest crowdfunding efforts.
Initial coin offerings work by selling the rights to some of a cryptocurrency at a discounted price to investors. If the launch is then successful, crowdfunders make a profit on their contribution whilst the Lisk team gains access to valuable capital to grow.
The successful funding confirmed to Beddows and Kordek that they were on the right path and soon led to the official launch of Lisk to the public.
Who’s behind Lisk?
Lisk was originally founded by Crypti developers Oliver Beddows and Max Kordek.
Kordek has an extensive background in the blockchain research area, whilst Beddows is an all-round (‘full stack’) developer; making Lisk both innovative and practical.
Kordek is active on Twitter and the broader community, participating in interviews to act as a speaking developer on the state of the project.
The pair frequently publish on the official Lisk blog, keeping the community up to date on the direction of the coin.
Oliver Beddows (left) and Max Kordek (right). Official source.
Since their inception, the Lisk team has grown to over 30, working on developing, marketing and managing the platform. They also hire a large number of official representatives worldwide to help run events, translate and spread the word about the coin.
A slide from one of Lisk’s conferences in Japan, highlighing their organisational structure and international team.
The large team means that Lisk is constantly developing their platform, pushing out frequent updates to improve and supporting developers to grow the community. They’re also able to host live conferences and meetups to discuss the platform.
In summary, the Lisk team does not fall short when it comes to community engagement. If you’re interested in the project, head to the Lisk blog for the latest updates and team changes. Also, make sure you’re following Max Kordek on Twitter for his latest posts on Lisk.
The Lisk project is among the most well-funded cryptocurrency projects out there. They currently have around $100 million USD in funds. Since their initial coin offering raised Bitcoin funds (14,000 BTC) and the price of Bitcoin has exponentially grown in 2016-2017, their initial supply of $6 million has increased more than ten-fold.
Much of this Bitcoin was sold as USD, so Lisk is not overly reliant on the stability of Bitcoin to remain operational.
If you’re worried about the funds being misused, you can actually watch the activity of Lisk’s wallets thanks to the Bitcoin blockchain.
The technical details you need to know
Understanding the sidechain
Each of the projects using Lisk requires a ‘sidechain’ to operate. A sidechain is connected to Lisk on one end, but distinguishable from Lisk in every other way.
Normally, a cryptocurrency operates off a single blockchain, known as the mainchain. This ledger, or list of transactions, holds all the information detailing every transaction, and hence identifies who owns the currency.
The main chain is continually updated in blocks, frequently verifying new transactions as they occur. One major limitation of only using a single blockchain, however, is that over time the list of transactions becomes so large it’s hard for a developer to use. We can see this in Bitcoin, where the blockchain size makes it an expensive and inflexible system.
Lisk’s solution is the sidechain.
Consider the above image from a Lisk blog post. The mainchain in grey shows the Lisk coin continuing as transactions are continually added. At the moment, new blocks are created about every ten seconds.
To start a sidechain, a developer reserves some Lisk (LSK) and works with the team to create the new chain. The Lisk is then ‘copied’ into the sidechain where it’s then traded freely and independently.
Lisk’s continual creation of soft forks mean new projects don’t have to handle the information on every Lisk transaction to provide verification, only ones in their own sidechain.
One particular sidechain, for example, is Moose Coin. It’s a completely separate cryptocurrency running off Lisk, used to buy and sell music online. The idea is fairly unique, and Lisk is often considered the first ‘modular’ cryptocurrency.
If a sidechain is no longer needed, the developers can stop the sidechain and use the Lisk they reserved. However, the sidechain coins are on a completely different blockchain, so you can’t send a sidechain currency token, such as Moose Coin, back to Lisk. Only the Lisk held by the developer backing the sidechain can be used.
This raises some interesting centralisation issues with sidechains. Many cryptocurrencies and blockchains pride themselves in being trustless, but a Lisk-backed sidechain could be removed at any time by a developer.
Delegated Proof of stake
Currently, the major cryptocurrencies, such as Bitcoin and Ethereum, are using a proof of work system to validate each block.
However, some suggest that proof of stake (POS) systems look much more promising. They don’t take up the huge amount of resources in mining like proof of work, and are also, from an economical point of view, are harder to take over and illegitimately hack.
Proof of stake blocks aren’t backed by a huge network of computers, so they can be processed faster. As a result, Lisk blows Bitcoin out of the water in terms of transaction processing speeds.
The protocol difference between proof of work and proof of stake is that instead of performing a task with POW, POS randomly selects someone to manage the next block based on the amount of Lisk they put up.
However, Lisk is one of the few cryptocurrencies to adopt delegated proof of stake (DPOS). DPOS is different to POS in one way: block creators are elected by Lisk holders instead of being randomly chosen.
From a cryptography point of view, POS, POW and DPOS all have unique advantages and disadvantages. Despite this, many consider Lisk’s system to be modern and well-built.
One minor side point is that the Lisk sidechains actually use POS whilst the mainchain uses DPOS; an important difference to note if you’re going to develop with Lisk.
This is in high contrast with its main competitor, Ethereum, which uses a small specialised programming language called Solidity.
For many tech startups on a low budget seeking to utilise blockchain technology, taking the time to learn a new language isn’t optimal. Thus, Lisk has gained a large part of their traction thanks to this design choice.
Nevertheless, Lisk fills an important startup and accessibility niche out of the coins that use sidechains.
Since sidechain creation is essential to the survival of Lisk, a large part of the marketing is spent targeting the tech audience.
Their official website guides developers in a comprehensive step-by-step process of using the Lisk API. Supplemented with an abundance of system documentation for developers, Lisk could be considered the easiest way to create a sidechain out of all its rivals.
The investor’s guide
In order to encourage participation in validating each block, a forging reward of 5 Lisk tokens is given out per block. This means that the pool of Lisk is slowly increasing over time, just like a regular fiat currency such as USD.
This means that over time, your portion of the existing Lisk will decrease. However, this rate is only one or two percent per year. The rate will decrease each year, but will never reach 0% per annum. Relative to Bitcoin and Ethereum, this is impressive; they hold much closer to 10% p.a inflation rates.
Projected annual Lisk inflation rate. Data source
For Lisk, the worst of inflation is behind it, so you can be fairly certain inflation will have a minimal impact on your investment returns.
Due to the forging system, the creation of new coins goes to rewarding those who assist in validating blocks. Consequently, the inflation is actually beneficial to keeping the Lisk coin competitive in the market, facilitating the fast blockchain speed.
As mentioned earlier, Lisk is currently the 15th largest cryptocurrency by market capitalisation. This means that all the Lisk (assuming it can be sold for the current value) can be sold for the 15th highest amount out of all tradeable blockchain tokens.
At present, that market capitalization is hovering around 2.5 billion USD. In comparison to more popular coins such as Bitcoin, Ethereum and Ripple, Lisk certainly has room in the market to grow.
However, Lisk is a highly volatile coin. It was caught in the exponential cryptocurrency growth in 2017, as well as the crash leading into 2018.
Their late 2017 drop occurred with reduction in confidence of the cryptocurrency market in general at the time, in combination with the announcements to delay the public release of their SDK.
Where it’s headed
The future of Lisk relies on the adoption of the platform by successful businesses utilising the blockchain technology. Whilst there are currently thousands of sidechains working on applications and other platforms, Lisk needs more of them in order to grow.
The price of Lisk will rely heavily on the developer adoption rate. A key event to look for is the Lisk source development kit (SDK) relaunch in 2018.
A publicly released SDK will let anyone create their own Lisk sidechain, completely independently and without a direct partnership with the Lisk team.
In a late 2017 conference, co-founder Max Kordek explained that the team is “hiring like crazy” and is working hard to perfect the SDK before release.
The Ethereum project is currently behind the second largest cryptocurrency by market capitalisation, well in front of Lisk at fifteenth.
The large community following and solid technical infrastructure makes this not only a solid cryptocurrency to use, but it also sees many decentralized applications (dapps) built on its blockchain. They operate a similar sidechain system, which already is more popular than Lisk for developers.
The sidechain system is a response to the scalability issues of the Ethereum mainchain, which is becoming increasingly less useful. As such, the Ethereum team is using decentralized applications to stay competitive. However, their sidechain system isn’t fully independent and external projects still somewhat rely on the main chain.
Additionally, Ethereum is still currently using a proof of work system, whereas Lisk is on the faster and lighter proof of stake system. Ethereum has announced their desire to transition to proof of stake but is still in the process of migrating between the systems.
This fact does not make Lisk uncompetitive, but limits its potential growth. In a similar manner, the limited but easy and quick to use programming language Ruby appeals to startup website developers, and even ran the first versions of Twitter. However, projects such as Twitter eventually shift to more developed languages; in Twitter’s case to the more comprehensive Scala.
The key differences are that:
- Ethereum has a more developed economy and developer community
- Lisk appears more to the startup developer market, whereas Ethereum is superior in a technical sense
- Ethereum is still transitioning to the proof of stake blockchain system, which Lisk is already on
Waves and Stratis
The Waves coin icon (left) and Stratis coin icon (right)
Both coins also appeal strongly to developers rather than to consumers for use as a regular currency. Waves uses the programming language Python, whereas Stratis takes up the share of C# developers.
Both Waves and Stratis are top 50 coins by market capitalisation, hovering around the $500 million USD mark. They both have significant potential to overtake Lisk’s market share.
Lisk falling to one of these coins is something to worry about. With enough market share to shake up the market and strong development teams, the minor differences they put up could be enough to push Lisk out of the market.
Although Lisk has a head start, any Lisk investor should keep an eye on the status of these coins. The technical details vary slightly between each, in aspects such as fees, programming languages and platform speed.
The key differences are:
- Waves and Staratis use different programming languages for application development
- The pair are smaller and less developed, in both technically and in marketing
Each exchange will provide a different rate for Lisk, so you should definitely look around to find a platform for the best deal. Make sure you consider all fees in transferring the Lisk to your Lisk wallet.
CoinMarketCap provides a useful lists of the exchanges by trade volume so you can identify which sites are likely to get you the most reasonable price.
In order to send, receive and hold Lisk, you should use the official Lisk wallet.
The interface is incredibly easy to use. From it, you can:
- Send Lisk to another address
- See your Lisk address (public key) so you can receive Lisk
- Create a secure passphrase formed with multiple words, like a password
- Send encrypted messages to other Lisk users
- Vote for delegates as part of the delegated proof of stake system (optional)
- Register as a delegate
The delegate system is what secures Lisk. If you don’t understand the system and just want to use Lisk like Bitcoin, you don’t have to touch it.
This will eventually change with the Lisk relaunch, where all Lisk functionality will be done through the Lisk app.
Lisk is an incredibly innovative platform, for the most part the first of its kind. The Lisk platform has the potential to support millions of projects that can benefit from blockchain technology.
They also plan to rebrand, potentially giving them an opportunity to take a step up and take on more of the market. Their handling of the rebrand, as well as their SDK release, will be the Lisk team’s big test.
The project is in a good state. With a strong team, good funding and a solid technical foundation, the future for Lisk is bright.