Despite the exponential growth of the DeFi ecosystem in recent months there has always been a big obstacle that prevents its maximum expansion, that of Bitcoin. Bitcoin has by far the largest market capitalization among cryptocurrencies leaving a lot of potential on the table. What if it were possible to bring the Bitcoin community to the DeFi world? Well, this is one of the main goals that ChainX has set itself to achieve, it aims to achieve cross-chain asset trading and achieve cross-DeFi Bitcoin. Intro Good morning to all guys and welcome to the section dedicated to the most promising parachains of the Polkadot ecosystem. Today we will talk about ChainX, we will address this topic from A to Z and I will try as usual to be as clear and simple as possible.
Before starting, if you would like to watch other videos like this, I invite you to subscribe to the channel by clicking on the tiny bell, so that you’ll always be updated on the next videos and to leave a like to support my work. To fully understand what ChainX is, it is really important to first understand what a layer is and why it is needed, specifically Bitcoin’s Layer 2.
It will be a little long explanation but it is worth listening because these are concepts that I am sure you will often find in the future. With the increase of the adoption of Bitcoin and consequently with the increase in the number of transactions, the first problems of scalability began to arise, because the Bitcoin blockchain has a maximum limit of transactions per second that it cannot exceed, which leads to a series of negative side effects such as fees increases, queue wait times and bottlenecks. So one of the best known problems of Bitcoin is its inefficiency in scaling. The scalability of a blockchain lies in its ability to handle the increase of volume of transactions, in order to be scalable blockchains must be able to handle a high volume of transactions per second. However, making a blockchain more scalable often means centralizing it, which on the one hand would solve one problem but it would create another, that of limited decentralization, which is not good.
To give you an example, the Binance Smart Chain is very fast because it is very centralized. Why does this happen? I remind you of the famous trilemma of blockchains, that is, a blockchain is able to satisfy only 2 of the 3 fundamental principles: security, scalability and decentralization. Bitcoin is secure and decentralized for its proof of work consensus algorithm but it still doesn't allow it to scale as easily as a proof of stake consensus algorithm. So, in order to find a solution to this problem it was initially decided to make changes to the Bitcoin protocol. For example by increasing the Block Size, that is the size of the block, a clear example is Bitcoin Cash or Bitcoin SV, or to increase the speed with which the blockchain is updated, that is Block Time, i.e.
The average time taken to generate a new block to add to the blockchain, which in the case of Bitcoin is 10 minutes. Examples are Dogecoin and Litecoin. In fact, all these projects are Bitcoin forks (Dogecoin is actually a Litecoin fork, but Litecoin is a Bitcoin fork) Despite all of this, these hypothetical solutions have a big flaw, they want to make changes to the Bitcoin protocol. That is, the reasoning behind these projects was: we copy the blockchain of Bitcoin as it is, but we are going to modify just one parameter, which for example for Bitcoin Cash it was the block size. But apart from that, from my personal point of view, this is not “ethical”, because even if you can copy the Bitcoin blockchain, what really gives value to Bitcoin is its history, its community, but above all the ideology that underlies it.
Beyond that, copying and modifying a blockchain could lead to a number of side effects. So the solution we have come up with over time is quite brilliant and its concept is: we do not make changes within Bitcoin, but we make changes over Bitcoin and this type of solution is defined as a layer or layered There are currently two types of solutions: layer 1 solutions and layer 2 solutions. Layer 1 scaling solutions refer to those solutions that change the blockchain and its own protocol. A very well known example, is that of Ethereum 2.0. Ethereum 2.0 is a layer 1 scalability solution because it will radically change the infrastructure and functioning of Ethereum, more specifically the transition from proof of work to proof of stake while what interests us for ChainX are the layer 2 scalability solutions also called scaling off-chain. Generally, Layer 2 scalability solutions are easier to execute because they do not require a complete rewriting on the underlying blockchain as in layer 1 scalability solutions, rather these are higher layers that implement additional features to the Bitcoin network without compromising or hindering it.
A clear example is the Lightning Network. More simply, the layer 2 scalability solutions have the goal of reducing the load on the lower level the native blockchain, by reassigning part of the data processing from the layer 1 main net to layer 2, this improves the scalability of the entire blockchain. So in conclusion, layer 2 protocols allow us to add new features to Bitcoin without having to change the Bitcoin protocol, which in some ways helps Bitcoin to be more scalable Perfect! After you have understood what a layer is and what it is for, we can finally start talking about ChainX. ChainX is a blockchain platform built on Substrate that interacts with other decentralized platforms to facilitate inter-chain assets sharing. So more simply it is an inter-chain platform that makes traditional cryptocurrencies cross onto chains with different structures and it’s built on Substrate, which is a framework for building upgradeable and efficient blockchains the ChainX blockchain can easily interact with Polkadot, in fact, ChainX has been the earliest project to be launched in the Polkadot ecosystem What are the goals of ChainX? The ChainX project is focused on the development and expansion of Bitcoin’s Layer 2, on the digital asset gateway and on the layer 2 relay chain on Polkadot For those who do not know what a gateway is, it is a system that allows communication between two networks.
Each of these systems will allow ChainX to achieve its main goal. The expansion to Bitcoin’s Layer 2 will allow it to promote the flow of value of bitcoins, increase opportunities to create financial derivatives and improve hedging assets. ChainX main mission is to bring Bitcoin into the Polkadot ecosystem and to become the largest Bitcoin’s Layer 2 financial platform in the world while the ChainX asset gateway will allow users to deposit and collateralize bitcoins to get X-BTC to use them in transactions with other cryptocurrencies that can be exchanged and traded on the same chain. So its main goal is to become the first parachain to offer a gateway to all of Polkadot's assets And finally, in the future, ChainX could evolve into a second-level relay chain of the Polkadot ecosystem since parachains themselves have been developed using different types of blockchains, inter-chains such as ChainX are responsible for safeguarding the network’s co-sharing consensus and facilitating inter-chain transactions among parachains.
Therefore, Polkadot's focus on efficient inter-chain connection within its ecosystem advances the entire blockchain development to a new level and this appears to be destined to create blockchain 3.0 ChainX will run as a second-layer network to Polkadot , this will happen after the 2.0 version which has already been released. In fact, ChainX goal is to become the first parachain to offer a gateway for all of Polkadot's assets. More simply, ChainX will be the interconnection bridge between all the parachains. Why could ChainX become the first parachain of the Polkadot ecosystem? The answer is simple. First of all because ChainX is essential for the full functioning of the Polkadot ecosystem as it is also Acala.
Furthermore, the Chinese development team of ChainX was in close collaboration with Polkadot and was the first Chinese team to be officially linked to the Web3 Foundation, an organization that ensured its initial development and operation and was the earliest Chinese team to make Polkadot technology become popular in China. The initial version of ChainX was based on Substrate 1.0 but after Polkadot 2.0 was officially released, ChainX updated its main-net and launched version 2.0 at the end of November 2020. As of now the new version of ChainX 2.0 combines and coordinates various functions such as hybrid proof of stake consensus, on-chain council governance, WebAssembly Virtual Machine which is similar to Ethereum Virtual Machine but more functional and higher performance and will facilitate native execute smart contracts, introduce an efficient light-client protocol and multi-signature which, as we all know, increases its security and is highly compatible with Polkadot. Now what are the main components of ChainX? Mainly there are 4 and they include: the PCX module: it is the operating program based on the native token PCX which mainly performs functions such as staking, paying fees, on-chain governance, distributing inter-chain mining rewards and backing Bitcoin financial derivatives.
In short, the PCX token is obviously related to most of the programs running on ChainX. Then we have the DEX module which is a cross-asset transaction module that promotes the circulation of assets on different chains while minimizing transaction costs. An inter-chain module that mainly includes an inter-chain transaction verification system, on-chain mintage program, a trusteeship program and a deposit and withdrawal program for X-token. Finally a relay module that mainly includes information exchange and verification between ChainX and outside chains, chain information update program, chain monitor program and finally inter-chain collection and transmission program. Having said that, let's move on to the economic model of ChainX which as you will see is very similar to that of Bitcoin. The PCX cryptocurrency whose P stands for Polkadot issued by ChainX has a maximum supply of 21 million coins, no ICOs, no airdrops or pre-mining, none of that, production started from scratch just like for Bitcoin. In fact, as with Bitcoin, ChainX also halves its production every 210,000 blocks but instead of taking place every 4 years it takes place every 2 years. The first ChainX halving will take place on June, 5th 2021 In the first cycle of ChainX the initial production was ca.
14,400 PCX per day or 10.5 million issued in the first 24 months and only for the first cycle the founding team receives 20% of the coin mined which in total is equivalent to 10% of the total supply, therefore 2.1 million coins. The mining model adopted by ChainX is “one asset one vote” which is made of two forms: inter-chain asset mining and voting mining. Both parties compete with PCX as the computing power unit. Inter-chain asset mining means that various assets such as eg. bitcoins and ethereum that enter ChainX through depositing, mapping or other means participate in mining with virtual computing power calculated for each. I will not go into details of the calculation method, but I will tell you this is mainly determined by community vote, clearly PCX as the native coin of the blockchain comes with greater computing power which encourages users to hold more PCXs. Of course PCX as a native coin of the ChainX blockchain has more mining power which encourages users to own more PCXs.) While voting mining refers to voting or staking real PCX to certain nodes to participate in mining.
In simple terms, thanks to ChainX it is possible to get interest from staking by using different assets, for example I can stake my Bitcoins to get a reward in PCX. it is possible to stake and get rewards from assets that it is normally not possible to stake, such as Bitcoin that uses a proof of work consensus algorythm. Furthermore, ChainX generates a block every 6 seconds, so a transfer of X-BTC will only take 6 seconds and the transaction fee is less than 0.1 USD cents which is actually offset by cross-chain mining rewards making effectively making the transfers cost-free.
The throughput it is able to achieve is 1000 transactions per second while when connected to Polkadot it can reach up to 100,000 transactions per second. In practice, thanks to ChainX we have the possibility of having extremely fast cross-chain bitcoins at practically no cost. And finally, let's move on to the governance of ChainX. Since its creation ChainX has had the same philosophy of the Bitcoin community by creating a purely decentralized community within the structure of Polkadot the governance structure is tricameral for better decentralized community governance, we have a Referendum Chamber, the Council and a Technical Committee. In addition to the three, Treasury and X-Association are introduced to enrich the framework of community authonomy. The X-Association is a non-profit organization fully committed to the development of ChainX while Treasury is a funding tool that provides financial support to projects that promote the development of ChainX and contribute to the growth of the ecosystem.
Will there be ChainX for Kusama? Absolutely yes and it will take the name of SherpaX with the native KSX token, in addition all PCX stake holders, that is to say all those who staking the ChainX token, will receive an airdrop of the native SherpaX token with a 1: 1 ratio. This means that if you hold 100 PCXs you will receive 100 KSXs. In conclusion ChainX is a very forward-looking project that is trying to benefit from the growing DeFi market by increasing interoperability between chains, seeking expansion to Bitcoin’s Layer 2 and all the advantages that it will provide and functioning as a second level network of Polkadot In my videos I rarely expose my point of view on the value of the token, this time I will make an exception and honestly speaking for me ChainX is one of the most underrated projects in the Polkadot ecosystem with at the moment a supply of only 10 million (of tokens) and a value still close to 10 dollars.
This is not financial advice but it is certainly worthwhile to keep an eye on PCX. Thanks for the vision, subscribe to the channel leave a like and we'll see you at the next video Song.