The Qtum project is a hybrid-type blockchain project that is built by uniting Bitcoin and Ethereum technology.
EThis is possible because Qtum uses the Bitcoin UTXO transaction model, together with the Ethereum account system. And, at the same time, it includes a system capable of executing smart contracts. The idea behind this technological merger is to take advantage of the best of both worlds and thereby create a new network with unique capabilities. In this sense, Qtum is a unique project for following this process, and not only that: it has proven to be a project with growing relevance in the crypto community.
Origin and history of Qtum
Qtum developers are Patrick Dai, Jordan Earls and Neil Mahi, who in 2016 joined forces to start this project. As was common at the time, these fellows decided to create an ICO (Initial Coin Offering). The goal was to raise funding that will help them achieve the goals they wanted with the Qtum project. Thus, on March 19, 2017, the Qtum ICO began, which ended five days later, with a cumulative total of 15,5 million dollars raised.
The terms of the ICO were simple, the proceeds would be transformed into 100 million Qtum tokens that would be distributed as follows:
- 51% was allocated to ICO investors (51 million tokens).
- 8,0% was allocated to angel investors of the project (8 million tokens).
- 12% would be gradually distributed among Qtum team members over a period of four years (12 million tokens).
- 9,0% was allocated to a marketing budget and would be released over a period of two years (9 million tokens).
- 20% was reserved for development and will be released gradually (20 million tokens).
In addition to this, the project established that the maximum number of tokens would be 107.822.406 Qtum tokens, which made clear the limited and deflationary nature of the system. With this clarified, the project began its design phase in the hands of the Qtum Foundation, who were in charge of coordinating the work between developers, investors, and the community.
The work paid off on June 25, 2017, when Qtum finally put the mainnet of this project into operation, beginning with the allocation of tokens and the start of its block generation system using Proof of Stake, the protocol chosen for this project. Project.
How does Qtum work?
Now, one of the most striking things about Qtum is its hybrid construction using the UTXO model (derived from Bitcoin) and Accounts (derived from Ethereum). This makes the Qtum platform have a very particular operation that we will study below.
Uniting the best of Bitcoin and Ethereum
First of all, Qtum seeks to be a network with a level of security as close as possible to Bitcoin, especially those related to its transaction model. UTXO, but at the same time, have account capabilities and smart contracts like those of Ethereum. Said in this way it may sound easy, but the truth is that it leads to quite important complexities.
First of all, the UTXO model, although it has proven to be very secure and useful for keeping an orderly ledger, has serious limitations in the implementation of advanced smart contracts and the performance of certain advanced operations with tokens (such as creating different tokens that can be associated with an address, something that colored coins they did it in a rather rudimentary way). However, Qtum decided that these difficulties could be overcome by means of an abstraction layer, which would serve as a bridge between the account system (allowing the creation of these structures) and the prevailing UTXO system in the Qtum blockchain.
The result of this commitment was the construction of Account Abstraction Layer or Account Abstraction Layer (AAL). The AAL would be the interpreter between the UTXOs of the Qtum blockchain, and its account model necessary to apply all the advanced smart contract functionalities that the team wanted within the project.
Facing a scalability problem that not many know about
But why this disparate design in the Qtum design? Well, the reason for this is that, although the accounts model is effective in allowing advanced modes of control, it also has a serious problem: it has more scalability and security limitations than the UTXO model, due to its greater complexity. For example, Ethereum transactions and their validation are limited by the capabilities of Gas that can be included in a block.
But, one limitation that is often overlooked is the size of the transactions and their total weight within the Ethereum P2P network (both in bandwidth and storage). Let us remember that each TX in Ethereum has two weights: one in Gas (the computational cost of that TX in the EVM) and one in bytes that represents the information that is transferred, processed and stored in the Ethereum network.
This leads us to the following data: an average block in Ethereum occupies about 90 KB of data, a far cry from the 1,4 MB of Bitcoin blocks. It may sound like this is an advantage for Ethereum, but the truth is that it is not. To understand this, we must remember that on average an ETH block takes about 20 seconds to produce, so about 10 blocks are produced in 30 minutes. Knowing this, to calculate how much data (in KB) is generated in Ethereum every 10 minutes (the same time that a Bitcoin block takes on average), we just have to follow this formulation:
Total KB ETH = 90KB * 30 = 2700KB (2,7MB)
This is almost 2 times more than the average number of Bitcoin blocks (1,4 MB), and knowing that Ethereum is capable of achieving an average of 12 TPS with this, we clearly see the problem, since Bitcoin with SegWit is capable of having 33% performance with the same space (16 TPS). Although both scalability are small, Ethereum has another problem with this and its account model: an excessive growth in its blockchain, something that becomes clear when we compare the almost 8 TB of data of the Ethereum blockchain, against less than 360 GB of data from the Bitcoin blockchain, the latter accumulated over a much longer period of time.
The Qtum developers understood this problem and their solution is to create a hybrid model that enables the potential of the accounts model but on-chain maintains the UTXO model, which is much simpler and more scalable in terms of data storage and data processing.
Proof of Stake, further optimizing the Qtum network
The above is an example of why the developers of Qtum decided on their hybrid model, betting on an on-chain format of transactions using UTXO, a praise to Bitcoin technology. However, not everything is good within this blockchain, since its PoW consensus protocol is known for its limited scalability and high energy consumption. So, to solve this other detail, the Qtum developers decided to replace this protocol with Proof of Stake, thereby generating a much faster and more energy efficient network. In fact, the protocol chosen exactly is MPoS (Mutualized Proof of Stake).
As a result of this operating model at the consensus level, Qtum has two very interesting properties:
- First of all, Qtum staking does not have a minimum. That is, the staking that you can carry out in a generator node can be whatever you want. Of course, the higher your stake, the higher your chance of being the validator of the next block. This could be considered a security problem except for the existence of the second particular property of this system.
A node can generate a block and receive the reward for it. But, the reward will not be available for use until the maturity criteria of those new coins are met. This is the known Coinbase Maturity of Bitcoin, becoming present in Qtum. In fact, the rewards of a newly generated block are divided into two parts: one that is received immediately, and the other that is unlocked once an additional 500 blocks are generated on the network.
QTUM token, its beginnings and its arrival on the Qtum mainnet
The first issuance of QTUM tokens curiously was made as an ERC-20 token after the ICO of the project. However, with the arrival of the Qtum mainnet network, the token became native and all its holders received their allotted amounts. The existence of QTUM tokens is limited to 107.822.406 tokens, which will be released until the year 2045. The Qtum model for the generation of tokens follows a halving model similar to Bitcoin. In fact, Qtum's first halving took place on December 1, 2021, and brought the Qtum block reward from 4 QTUM to 2 QTUM, and from here every 4 years another halving will take place to further reduce the issuance until it reaches 0 in 2045.
In addition to this, Qtum also has an equivalent to ERC-20 tokens that are known as QRC-20. These tokens can be used for DApps and for compatibility of applications ported from Ethereum to this network.
Smart contracts over x86 and EVM
One of the most striking features of Qtum is that its smart contracts have two possibilities. The first is that they can be compatible with EVM, with Qtum having a VM that is fully compatible with this specification. And your second possibility is to program these smart contracts using C, C++, Rust and Python programming languages. These are then compiled into x86 code, more specifically i686.
This means two things:
- DApps developed for EVM are fully functional on Qtum, with a few small changes.
- If you want to build native DApps for Qtum, you can use the project's SDKs to generate x86 code. This will allow you to take full advantage of the hardware of the nodes running the network. The latter means that smart contracts will be much faster and more versatile.
QTUM Governance
Qtum has implemented an on-chain governance system that receives the name of Decentralized Governance Protocol (DGP). DGP allows network participants to vote to approve different adjustments or changes that are made within the Qtum network. One of the advantages of DGP is that its changes can be applied over the network via soft forks. This leaves out the use of hard forks and their dangers. This is possible, because DGP acts at the level of system contracts, which have control over the different functionalities of Qtum. Also, since Qtum is a PoS network, any staker can cast a vote, which denotes a high level of decentralization.