Why A Community AMA?
Welcome to the Daily Chain Community AMA where we look to bridge the gap between crypto communities and the core teams of which they support. We are delighted to feature Conceal Network in this episode of the series.
The Daily Chain’s founding members and writers are all from the Twitter community having forged these relationships in the harsh conditions of the 2018 bear market . To us community is everything as I detail in this article on the Importance of Communty in Crypto.
Community can also make or break a crypto company. This is why it’s so important for us to help bring people together and celebrate all of the hard work and achievements of a project, with the loyal fan base of supporters that help drive adoption and spread the word.
The following AMA was ran via Twitter and Telegram using the hashtag #AskConceal. The community could use this hashtag to ask all of the burning questions they wanted to ask Conceal.
Below are the curated questions and responses from Krypt0x, Founder of Conceal Network.
Community AMA: Conceal Network
Q1: What is Conceal Network and which problems are you trying to solve?
Conceal ($CCX) is a community-driven and open source project that solves the lack of privacy protection and coin fungibility verified in other cryptocurrencies. Additionally, Conceal is a censorship-resistant and decentralized blockchain network that aims to provide privacy protection for individuals and to free people from the control of any third party actors. Financial freedom should not come at the expense of users losing their privacy in order to participate. All Conceal transactions are private and untraceable. Our primary objective is to provide a privacy framework for social inclusion through decentralization of financial services.
Q2: Why have you chosen to create Conceal? Where did this idea come from? What are you aiming for?
As mentioned above, our primary objective is to provide a privacy framework for social inclusion through decentralization of financial services.
In September 2017, a small group of us (16 random people) met over the internet with a common interest. We discussed privacy, human rights, cryptography, economy, decentralization and cryptocurrencies. After very long discussions, we realized that there wasn’t a single cryptocurrency project that could fulfill all our expectations, of a truly privacy protected and decentralized cash alternative. After a few months of research we decided to start Conceal Network. In January 2018, we worked on the economic model and by April we had a proof of concept ready. Mainnet went live in May of the same year.
We agreed on four fundamental pillars that serve as the foundation for our community: privacy, social inclusion, decentralization and censorship resistance.
Privacy: A right to privacy is explicitly stated under Article 12 of the 1948 Universal Declaration of Human Rights: No one shall be subjected to arbitrary interference with his privacy, family, home or correspondence, nor to attacks upon his honor and reputation. Everyone has the right to the protection of the law against such interference or attacks. The right to privacy is an element of various legal traditions to restrain governmental and private actions that threaten the privacy of individuals. Over 150 national constitutions mention the right to privacy.
Social Inclusion: Traditional financial institutions often
segregate who can access financial services, like banking. Those discriminated
individuals could be offered free banking services through decentralized
blockchain technologies. In the near future, the majority of low income people
all over the world will do their banking using cryptographic distributed
systems. Traditional financial institutions have completely failed low income
people. Cryptographic distributed systems have significantly lowered fixed
costs, as opposed to traditional financial institutions, and consequently,
allows everyone to benefit from financial inclusion. The poor will be able to
make transfers of value at an extremely low cost. Participating in the Conceal
Network will allow them the added benefit of being able to save and earn
interest on those investments, giving them an opportunity to climb out of
poverty. The effects on poor communities globally will be transformational.
Decentralization: People who see centralized systems as the answer to everything have usually only lived in a stable country for their whole lives. A few days in an unstable country would change their minds very quickly. Imagine you lived in a war zone right now. Your central infrastructure is destroyed, as is your money. You don’t want the war, but there’s nothing you can do about it. Now your house is gone, your friends and family are dead, your banks have been bombed and you’re cast out, adrift, homeless and penniless. Even worse, nobody wants you. The world has shifted from open borders to building walls everywhere. You’re not welcome anywhere, you can’t stay where you are and you’re broke. Now imagine, your money is still accessible and recorded on the blockchain, waiting for you to download and restore your wallet? How much easier would it be to start your life over? A decentralized blockchain technology, offers financial stability to those that live in an unstable world.
Censorship-Resistance: Censorship-resistance implies that everyone can transact with the network on the same terms, regardless of their personal identifying characteristics. If true censorship-resistance is to be achieved, then users should not be able to exclude others from information (amounts can’t be hidden). Censorship resistant money means you can spend your money anywhere, the way you like and without anyone’s approval. A censorship resistant network is a system explicitly designed to resist coercion and control by centralized powers. No one entity or person can freeze or seize your funds.
Q3: We have already Bitcoin. Why should someone care about Conceal?
The most critical flaw in Bitcoin is the lack of privacy. If you provide your Bitcoin wallet address for payment, you immediately compromise your privacy. We can see, as a matter of public record, how much money you have in your Bitcoin wallet. The same situation applies even if you are the one sending Bitcoin. Any recipient can then see how much money you have in your Bitcoin wallet, both now and in perpetuity. The Bitcoin community attempted to solve these problems by introducing ‘mixing’ features. However, their solutions have been described as ‘a band aid over a stab wound’. Bitcoin coins can be marked/tagged (tainted) and censored by third parties.
Conceal solves these issues by automatically applying privacy techniques to every single transaction made. Interactions over networks are untraceable, via cryptographic protocols with nearly perfect assurance against any tampering. It isn’t possible to own ‘tainted’ Conceal, all $CCX coins are equal. This is a concept in economics known as ‘fungibility’ and is historically considered an important characteristic for any currency to have.
Conceal mimics the properties of cash. Nobody knows how or where you spend your folding cash. You can withdraw money at the ATM and buy an ice-cream or that pretty old chair at the neighborhood yard sale and there is no record of it anywhere, unlike a credit card (or Bitcoin). This privacy-preserving ability will act as a critical bulwark against the inevitable rise of panopticon digital money. It may be our only hope. As we head towards a cashless society, the end of cash would mean the end of anonymity. That’s where Conceal comes into play.
Conceal enables untraceable, anonymous, and a secure way to transfer funds. Using a distributed public ledger, the sender and receiver are kept private, a key concern in a post-Snowden world. Additionally, Conceal also provides private messaging.
Q4: What distinguishes Conceal from other privacy coins?
We could give you several characteristics that separate Conceal from other privacy coins like a unique economic model with exquisite block rewards scheme and low emission, our cold staking feature, hashed-timelocked-contracts, encrypted messaging, our own mining algo (ASIC/FPGA Resistant), original GUI wallets (desktop, cloud and mobile), powerful API and Cloud services, but we will stick to the basics privacy and transparency.
Conceal has a huge advantage over other cryptocurrencies whose privacy features are only optional, because everyone who uses Conceal automatically has privacy features applied to their transactions. You never have to request and then verify whether other people have enabled the privacy mechanism when sending you funds or messages, because Conceal privacy is always automatically applied to all transactions and messages at the protocol level. Furthermore, the always-on nature of Conceal’s privacy features means that even if the majority of Conceal users are not privacy sensitive, they will still automatically participate.
Conceal is truly decentralized through its trustless setup. Contrary to some of the competition, Conceal users are still able to audit the data (including transaction amounts, total coins in the chain, coins locked through deposits, and interest paid) in the blockchain without compromising privacy and preserving the transparency required by a global economic ecosystem.
Q5: Besides privacy, what other features does Conceal offer?
Decentralized banking services (cold staking, blockchain deposits and compounding interest), encrypted messaging (desktop, cloud and mobile) and an anonymous payment system (Conceal-Pay).
The biggest issue for blockchain technology is its lack of connection to the real economy, largely because there is no crypto banking system, yet. Obviously, a link to the real economy is fundamental to any financial system, and this is the main impediment holding back the entire crypto industry. By decentralizing banking services, holders of crypto assets will need to have the option to link their savings, a store of their value, to productive opportunities in the real economy. Resolving this issue will significantly spur crypto adoption. Decentralized Finance, or (DeFi), will be the new “dot.com” era for the entire crypto space. This will drive the future value of crypto currencies and many existing crypto community projects.
Conceal allows extremely small amounts to be used in its financial system. For example, transfers equivalent to a few dollars can be made. Our decentralized banking allows savers to put very small amounts of value to work, on which people can earn interest. Anyone will be able to hold just a few dollars worth of $CCX.
Conceal Network provides the only viable technological solution to these problems. The traditional banking system simply cannot offer such solutions; they are stuck in an analogue centralized world. We are working to link cryptocurrency to the real economy and challenge the core of banking deposits and, in the future, provide a mechanism for decentralized lending. The Conceal team continues to do extensive research as well in the mobile payments environment using blockchain. We believe we are moving in the right path for global adoption.
Q6: What is Cold Staking and how do the blockchain deposits work? Is it complicated?
Conceal offers the ability to earn compound interest (from 2.9% to 6% pa.a.) on held funds through a process called Cold Staking. Cold Staking is not related to Proof of Stake or any consensus mechanism. Cold stakers have no rights in generating blocks or confirming transactions. They simply receive interest for holding/locking their coins. Think of Cold Staking as a form of passive income on your investment without the need to have an open wallet online all the time. It mimics a Certificate of Deposit (CD), a financial product typically offered at a bank. You make a time deposit and you earn interest when the deposit matures.
Conceal deposits are based in Cold Staking and privacy-protected Hashed-Timelock-Contracts (HTLC) technologies. In essence, with Conceal deposits you are lending your funds to the network on a short-term basis and rewarded in $CCX, proportionate to the period of time you stake your funds and the amount of $CCX locked. The process is governed by a time locked contract, where the required parameters are length of staking period and amount of $CCX to be staked.
Complicated? Not at all. In fact, our blockchain deposits are even simpler than making a deposit at a traditional bank. In practical terms, this means that you can begin staking $CCX from a wallet that can be offline. No need to keep a computer, mobile phone, or Virtual Private Server running for 24/7 wasting energy and money. You set up your own terms for the contract privately and anonymously, in a trustless environment and without any third party involved. Yes, that’s it. Nothing else is required.
Q7. Conceal seems to have an unusual economic model. It’s quite different from anything I have seen. People keep talking about “Economic Equilibrium” in your chats. What is special about it?
We will try to keep this short and simple. This topic can be very complex.
According to Investopedia, “Economic equilibrium is a condition or state in which economic forces are balanced, a concept borrowed from physical sciences, where observable physical forces can balance each other.” The incentives faced by buyers and sellers in a market, communicated through current prices and quantities drive them to offer higher or lower prices and quantities that move the economy toward equilibrium. The term, economic equilibrium, can also be applied to any number of variables such as interest rates or aggregate consumption spending. The point of equilibrium represents a theoretical state of rest where all economic transactions that “should” occur, given the initial state of all relevant economic variables, have taken place.
Economic equilibrium is a theoretical construct only. The market never actually reaches equilibrium, though it is constantly moving toward equilibrium. Economic equilibrium per se, would not solely solve our problem unless we applied game theory principles. In game theory, the Nash equilibrium, named after the mathematician John Forbes Nash Jr., is a proposed solution of a non-cooperative game involving two or more players in which each player is assumed to know the equilibrium strategies of the other players, and no player has anything to gain by changing only their own strategy. In terms of game theory, if each player has chosen a strategy, and no player can benefit by changing strategies while the other players keep theirs unchanged, then the current set of strategy choices and the corresponding payoffs constitute a Nash equilibrium.
Stated simply, Alice and Bob are in Nash equilibrium if Alice is making the best decision she can, taking into account Bob’s decision while his decision remains unchanged, and Bob is making the best decision he can, taking into account Alice’s decision while her decision remains unchanged. Likewise, a group of players are in Nash equilibrium if each one is making the best decision possible, taking into account the decisions of the others in the game as long as the other parties’ decisions remain unchanged. Nash showed that there is a Nash equilibrium for every finite game.
Q8. Where do all these concepts imported from traditional economics fit in your model? How can you achieve “Economy Equilibrium”?
To be honest, we found that these traditional concepts work fine in theory, but are not completely practical for use in blockchain. Remember that these concepts were developed over long periods of time as economies matured slowly. On the other hand, cryptocurrency markets mature at a much faster pace. One year in a cryptocurrency market you can experience several economic cycles.
Finding the optimal economic equilibrium model was no easy task. We kept running into bottlenecks and other issues in our economic simulations. If traditional models can’t be entirely applied to the new digital economy, we took the best parts of those traditional concepts and applied “outside the box” thinking to develop our own. In the end, we created our own model of economic equilibrium that we internally refer to as “Economic Harmony”.
One example of this “outside the box” thinking, is the structure of our block reward model. It uses an innovative approach where block rewards start small, but increase over time. Why would we do that? At the beginning of every blockchain, usage is relatively low. Only a small number of transactions occur per day and block data is still small. With time, the network matures and block data size and resources will also increase.
Securing a blockchain at the beginning of a network requires fewer miners, because of the smaller numbers of transactions. However, as the blockchain network matures, more miners will be needed to secure the network because the number of transactions will continue to increase. Likewise, the block reward will continue to increase as an incentive for miners to continue to secure the Conceal Network.
To fairly reward miners, we started the block reward at 5 $CCX. We will continue increasing the block reward by 0.25 $CCX every month until we reach a 20 $CCX block reward. In 5 years, we will reach our max block reward. Once we reach the max block reward, we will begin decreasing the block reward because the number of transactions processed by the network will be much bigger and the fees collected by the miners will balance the block reward decrease.
With this simple and logical approach we avoided the unfair enrichment of early miners during the initial stages of the project where mining difficulty is low and successfully reached one of the lowest coin emission curves throughout the crypto space without affecting the mining profit.
Due to this low mining block reward emission curve we were able to introduce a new feature – blockchain deposits paying interest. These deposits help the economic ecosystem by taking coins out of circulation for a self-designated period of time. As $CCX gets staked, it directly increases demand, scarcity and, subsequently, market value. The interest paid by these deposits will add new coins to the network balancing the ecosystem with coins locked by new deposits. This model not only rewards people for taking $CCX out of the markets but benefits the miners too (higher market value for $CCX).
There is another quite interesting detail, several studies show that there is a direct correlation between good hashrate (CPU&GPU – ASIC Resistance) and market value. So, in practical terms, more miners will generate more hashrate but bigger hashrate brings a better market value and liquidity, keeping the mining activity profitable.
Every detail has been carefully studied and tested. Conceal has been cited in a few external reports of having one of the lowest inflations in the crypto space without affecting the mining profitability.
Q9. Conceal seems to have a solid community of miners. What mining algorithm are you using?
Miners are a fundamental piece of our ecosystem, they do all the PoW (Proof of Work) needed to validate every transaction, generate new blocks and secure the network. They are an important part of our community too. Some of the most participative users are miners. We have an entire section of our discord dedicated to mining. Miners are so important to us that we have invested a lot of time and resources developing the best mining algo possible – Cryptonight Conceal (CN Conceal).
CN Conceal is a variant of the original Cryptonight mining algorithm designed to achieve maximum PoW hash function for egalitarian CPU & GPU mining and ASIC/FPGA resistance. Conceal is the most energy efficient of the FPGA-Resistant algos. It uses a scratchpad of 2MB with FPM (Floating Point Math) that makes programmed FPGAs inefficient. The FPGAs don’t have any advantage over high-end GPUs. Another main advantage is the performance efficiency across multiple generations of GPUs. It is extremely efficient on all GCN architectures from multiple cards across the last 8 years. As an example, the compute core of a 7950 is almost equal to the performance of an RX580. Additionally, CN Conceal can also be used to mine on a CPU. All these qualities allow CN Conceal to be one of the most decentralized mining algos in the crypto space.
Q10: One of the biggest concerns of the PoW projects are the 51% attacks. Some people are so worried about it that turned their consensus mechanisms to PoS (Proof of Stake). What do you think about it? Is Conceal able to solve this problem?
We agree that 51% attacks are one of the biggest concerns in the crypto space but we disagree that moving to PoS will provide you more security.
At Conceal we helped alleviate concerns with 51% attacks by creating Conceal-Keeper – a 51% Attack Protection Mechanism.
The purpose of a 51% attack is often to use an
alternate chain that the attacker is mining in private, to double-spend or
cancel an existing transaction to an exchange. The attacker runs a private
chain that has more than 51% of the current network hash rate and reveals the
chain to the public after spending already spent funds again or removes a
deposit transaction sent to an exchange, in an attempt to get all nodes to use
the alternate chain. To that end, we use a multi-pronged approach to prevent
the success and viability of a 51% attack.
Conceal has four different layers of 51% attack protection:
Increased confirmations for exchange deposits: Since an attacker will use a 51% attack to send money to an exchange and undo that transaction in an alternate chain he is mining, the longer the exchange confirmation window, the longer the alternate chain will need to be in order to be able to replace the chain. That means n confirmations at an exchange, will need a privately mined chain larger than n to succeed.
Limit chain reorganizations to the mined money unlock window: To make the above restrictions more effective, we also restrict chain reorganizations to the mined money unlock window, which at present is 10 blocks. Now any node will not switch to an alternate chain that is longer than 10 blocks. With almost all exchange confirmations at higher levels than this, if an attacker attempts to switch to a chain that is longer, both chains, the main and the alternate chain will remain in a permanent split, with the attacker’s private chain remaining split from the main chain.
Ensure that the alternate chain contains all transactions in the main chain: Another protection is that, regardless of the length of the alternate chain, the node will not switch to the alternate chain if it does not contain all the transactions of the main chain. This also prevents switching to an attacker’s chain that is trying to undo a transaction on the main chain. This check comes into effect if the alternate chain is larger than the regular reorganization of two to three blocks.
DNS Checkpoints: We also use DNS Checkpoints to ensure that all nodes are on the correct main chain, in the event of a chain split as a result of an attack. All nodes load checkpoints from DNS during startup or whenever there is an attempt to switch to an alternate chain.
We will follow up this article with an in-depth look at how each of these components work, along with the risks and mitigation. A special thank you goes to Aiwe from Karbo who pioneered some of the techniques described in this document and took the trouble to answer all my persistent questions.
Q11: How do Conceal users interact with your network? How can one could participate?
Conceal is mainly used as a store of value due to its particular advantages (privacy, fixed income, security and simplicity of cold staking) but the amount of people using it for censorship-resistant encrypted communications and payments is increasing every month. Users can participate in securing the network by mining and getting rewarded. A few people are testing Conceal-Pay implementations through merchant integrations. Others are translating documentation, writing articles, coding, expressing themselves through some artwork, etc.
Our Discord server provides and easy forum to participate and interact with all members of the Conceal family. We are a community-driven project; anyone can become part of the decision-making process and development. Any community member can contribute, collaborate and step up to become part of the team if his/her skills can help the project.
Q12: The deposit revamp has been the most voted option in the last consensus. If your blockchain deposits technology is so perfect, why change it? What could people expect from the next release?
We aim for perfection, but in real life nothing is perfect. Initially, with the 1st generation of blockchain deposits, we implemented a normal interest rate model (without compounding). People ended up depositing low amounts of $CCX for the minimum period of time allowed. There was no incentive in keeping the coins locked for longer periods or locking larger amounts of $CCX. The original model did not produce any overall benefit to our economic ecosystem, but did provide an opportunity to improve it.
For version 2nd generation, we introduced a standard compound interest model similar to what traditional banking offers. This version provided a better incentive for larger amounts of deposits being made. This second model proved to work better than the previous one and people locked larger amounts. Although, even with people locking larger amounts per deposit, the duration of the contracts did not improved much. The majority of the deposits kept being locked for lower periods of time favouring big bag holders. The difference in the effective annual interest rates between short and long term deposits was minimal.
For our 3rd generation, we redesigned the deposits model from scratch. There were two primary objectives. The first was simplicity. We wanted to reduce the complexity and that meant merging the existing weekly Deposits and quarterly Investments. Second, as the value of Conceal has increased since the launch of Investments, we also wanted it to be more socially inclusive, and more accessible to everyone, so we were determined to reduce the staking requirements for better rates.
After several months of research and testing, we realized that we needed something better than the traditional compound interest models (Standard, Monthly, Continuous), which typically rely on longer periods of time (10, 20, and 30 years or more). They work great for traditional financial systems, but not for cryptocurrency markets. As mentioned above, the pace of cryptocurrency markets defined its own economic cycles. Therefore, we needed to apply our “outside the box” thinking again and develop our own compounding interest model.
This new compound interest model developed completely in-house, takes cryptocurrencies’ data analytics, markets, volatility, and shorter time-frames into account.
The three main differences comparing it with
its predecessor are merging the old deposits and investments in a new deposit
system (savings), converging the term unit (time) in 1 month intervals and
lowering the minimum amount needed to achieve maximum rewards to 20,000 $CCX
(instead of 50,000 $CCX).
In practical terms, there are 3 levels (tiers) of compounding interest with different effective interest rates:
– Tier 1: < 10k $CCX pays up to 4% p.a.
– Tier 2: >= 10k & <20k $CCX pays up to 5% p.a.
– Tier 3: >=20k $CCX pays up to 6% p.a.
Q13: What does Conceal offer?
Conceal Network offers a high relevance beyond breaking existing censorship mechanisms. Conceal offers a way for us to control our own destiny. To achieve financial freedom without losing privacy in order to participate. For the very first time in history, Conceal offers a way to generate and distribute money, earn compounding interest, communicate, all anonymously and without a central power.
We’re fighting for a world where technology puts users in control. Not corporations, not governments, not advertisers. People will have control over the money they rightfully earned with privacy protection. $CCX mimics the properties of cash. Nobody should know or interfere how or where you spend your folding cash. That is freedom. Conceal restores freedom back to people.
A huge thank you to the Conceal team and the community for participating in this AMA.
Find more information on Conceal Network below:
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