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🤔 What is Waves ?

Waves is a layer 1 smart contract blockchain that allows developers to build decentralized applications.

It aims to overcome Etherium’s limitations(scalability trilemma).

Scalability trilemma was first described by Vitalik Buterin, the co-founder of Ethereum. It states that it is very difficult to develop a blockchain that has all the three features:

  • Scalability
  • Security
  • Decentralization

 

A developer can choose at max 2 of the desired qualities.

💡 What role does WAVES token play ?

WAVES is the native cryptocurrency of Waves blockchain. It is used for:

  • Transaction fee: Users pay WAVES tokens as transactions fees to include their transactions on the Waves blockchain.
  • Staking/Delegation:
    • Waves blockchain uses delegated proof of stake consensus mechanism.
    • Users need to stake minimum of 10,000 WAVES tokens to run validator nodes.
    • Users not running validators nodes can delegate their WAVES tokens to other validators in return for a percentage of block rewards.
  • Validator rewards: Validators receive WAVES tokens as reward for adding blocks to Waves blockchain.

📝 Origin of Waves

The Waves project was founded by Russian physicist Alexander Ivanov in 2016 following a successful token sale that raised 30,000 BTC in April/May of that year.

The Waves network was launched in Q3 2016 with the ability to facilitate token creation and the management of digital tokens.

In 2017, Waves started a collaboration with Microsoft Azure and became an official partner of Deloitte. It also implemented a new consensus protocol, Waves-NG, based on Cornell professor Emin Gün Sirer’s Bitcoin-NG proposal. Waves-NG increased transaction throughput up to 100 tx/second.

In 2018, the company released a new mobile application, which made most of Waves’ most popular features available for smartphone and tablet users.

In September 2018, the team made a major upgrade to the network. The upgrade integrated various features such as support for multi-sig addresses, token freezing, atomic swaps, voting, and Oracles.

In 2019, Waves team introduced an on-chain governance system to determine a new mining reward for each generated block. The new block reward shifted Waves away from a deflationary monetary system, which the team believed limited the demand for leasing and using the WAVES token. Increasing inflation has the potential to help boost the demand for leasing WAVES and attract new participants to the network.

👴🏻 Alexander Ivanov -Founder

Alexander Ivanov was born in Ukraine. He graduated from the Faculty of Theoretical Physics of Moscow State University and then pursued postgraduate studies at Leipzig University.

He launched the first instant exchange of cryptocurrencies Coinomat.com, the first fiat token CoinoUSD and the first exchange index of crypto-currencies Cooleindex.com. He also created a blockchain-based venture fund Cryptoasset.fund.

In April 2016, he founded the Waves Platform. He currently works as director at Waves Platform.

🤖How does it work ?

Nodes

The Waves blockchain was initially designed with two layers.:

  • The first is the “core” layer and it is centralized, consisting of ‘full nodes’ which have a complete record of all transactions on the blockchain and provide the computational power to maintain the network.
  • The second layer is the “external” layer and it is decentralized, consisting of more numerous ‘lightweight nodes’ which only hold a record of the most recent transactions and pass them on to full nodes to register them on the Waves blockchain.

Leased Proof of Stake

Consensus on the Waves blockchain is achieved through a novel mechanism dubbed Leased Proof of Stake (LPoS). Like Proof of Stake (PoS), each full node on the Waves blockchain that holds a balance of Waves has a chance proportional to its balance to produce a block.

The L in LPoS comes from the fact that lightweight nodes can “lease” their stake to any full node they want. This increases the chances that the full node will produce a block and receive a reward, which is then shared with the lightweight nodes who leased their stakes.

Although mining rewards are paid out in WAVES, full node operators have the option of paying out rewards to lightweight nodes in other tokenized assets on the Waves blockchain.

Waves-NG

Waves-NG is based on bitcoin’s next-generation protocol that serializes transactions and offers important improvements in the transaction latency(lower latency) and bandwidth(higher throughput) in comparison to Bitcoin without sacrificing other properties.

Waves approach this scalability matter by providing the miner with the ability to farm a block during the time of mining in continuous approach. This block continues increments called liquid block. This liquid block is unchangeable over time once the next block referencing is created and appended.

The main and core idea of Waves-NG is to split the Liquid block into two types, Key blocks and Micro blocks. The process of creating liquid block works as follows:

  • The miner node gets permission to create a block.
  • The miner node creates and sends the key block (which does not contain transactions).
  • The miner node creates and sends the micro blocks (which contain transactions just as in normal block with a reference to the previous micro block or key block) with mining time interval of three seconds.
  • Miners will mine those micro blocks and propagate them directly to the network until the next new key block appears with a reference to the liquid block.

Waves-NG, the key-blocks can be small because they need to contain only the coinbase transaction, which defines the public key that the miner will be using to sign microblocks.


Because a key-block requires proof of stake, miners can not just produce one and expropriate the leadership at will.

Following the key-block, the lead miner can quickly issue microblocks, simply by signing them with the private key corresponding to the public key named in the key-block’s coinbase.

⚙️ Dapps

Popular applications built on Waves:

🏛️ Governance model

Waves is a centralized project. The team runs core nodes and makes changes to the project.

Community can submit proposals as Waves Enhancement Proposals (WEP), however, it is up to the team whether to implement the proposal or not.

😨 Risks and challenges

  • Centralized core nodes: Waves team control all the centralized nodes that validate transactions and add new blocks to Waves blockchain. These are the only nodes that save complete history of Waves blockchain.
  • Competition: There is no shortage of layer 1 smart contract projects that compromise decentralization to achieve scalability.

💰 Tokenomics

A total of 100 million tokens were created at launch and allocated as follows:

  • 85% was allocated to token sale participants
  • 1% was reserved for early supporters
  • 1% was allocated to post-ICO bounties
  • 4% was allocated to strategic partners and backers
  • 9% was allocated to the development team

WAVES tokens will be released as follows:

Waves’ supply was initially fixed at 100 million tokens, all created at launch. But in October 2019, Waves transitioned to an inflationary monetary policy, entirely governed by token holders.

The initial block reward has been set at 6 WAVES. Every 100,000 blocks (approximately 70 days), Miners have a 10,000 blocks window to vote whether to increase or decrease the block reward by 0.5 WAVES or leave it unchanged.

🧐 Indicators to watch out for

  • Number of daily transactions does not seem to be growing:
  • Twitter following is growing:

Further reading