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As discussed regularly throughout the cryptocurrency world, scalability is a massive hurdle that both Ethereum and Bitcoin are struggling to clear. Due to their inherent on-chain updates for every transaction, they have had trouble enabling enough free space and processing power to support the thousands of transactions per second that would be required in order for mass adoption to take place.

Ethereum is currently trying to improve their network scalability and the core devs have been hinting at a launch of a new protocol that involves sharding and offchain smart contract execution. While Ethereum has yet to launch this update, Aeternity is already offering a testnet with instant transactions backed by smart contracts using a similar sharding technique.

Aeternity is yet another in the tree of Ethereum competitors such as EOS, Cardano, and Nano. They are offering a new solution to the scalability issue, one that involves elegant smart contract architecture and efficient off chain usage through what they call “state channels.” Aeternity offers a better alternative to security, scaling, privacy, and the cost of running an entire blockchain.

Market Cap and Trading Volume

In February 2018, Aeternity was sitting at a price of $2.18, having grown from being valued at just over $0.30 USD just a few months prior. Aeternity has a lot of hype behind it, particularly because of the revolutionary research and breakthroughs their team has accomplished so far. With the demand for scalable smart contracts growing due to the innovative developers that are creating platforms based on this type of technology, Aeternity is entering a highly competitive, but lucrative market.

The Aeternity Team

Aeternity launched their coin sale in May of 2017, and the project is run by a group of international blockchain developers that have experience building blockchains and analyzing the scalability and overall efficiency of previous design attempts. Yanislav Malahov, the founding member, is better known as the “Godfather of Ethereum“, having worked with Vitalik Buterin on coin development and smart contract protocols in 2013.

Zack, the technical officer, is now leading æternity’s technical implementation. His first creation was the attempt to write the most compact blockchain that was more lightweight and efficient than the likes of Ethereum or EOS. Previously, he worked for Augur and built blockchains from scratch for various businesses.

Jack Pettersson previously worked for Synereo to develop the language and virtual machine that aeternity is utilizing.

John Tromp, the consensus algorithm advisor and Cuckoo Cycle pioneer, recently has been perfecting his design for the Aeternity platform, which the æternity blockchain is the first to implement.

Founding partner of the mighty FinTech Blockchain Group, Vincent, the Chinese Advisor, is an expert on digital currency trading and an active investor in the blockchain industry.

How Does Aeternity Work?

In order to understand Aeternity, we must look deeper into what makes their design unique compared to the likes of Ethereum and other smart contract and dApp development platforms.

State Channels

Commonly, smart contracts that are executed are stored on every node in the network to maintain a total decentralized ledger. Aeternity saw this as a flaw and one of the major reasons why Ethereum is struggling to scale. The smart contracts on the Aeternity platform exist only off chain, and are only brought to the main chain for disputes and verification purposes when called for. A network of state channels enables the trustless exchange of value between anyone in the world. Participants interact privately with each other, and this activity does not hinder the network as it is all conducted under user-controlled blockchains.

Businesses maintain their records offchain and make them unavailable to the public, unless expressly consented by them. This is a more efficient way to handle data called pseudonymous identity, where sensitive information is only made public at the owner’s discretion and for specific purposes. Aeternity believes in real privacy and doesn’t allow a business’ data to be openly available on a public blockchain. Participants have access to infinite instant transactions, with no limit placed on them due to parallel traffic. Participants in the Aeternity blockchain can handle use cases that require high volumes of transactions.


A crucial feature for most contracts, whether encoded as text or as code, is the ability to refer to values from the environment, such as the prices of different goods or whether a certain event occurred or not. A smart contract system without this ability is essentially a closed system and arguably not very useful. Oracles are tools used by smart contract ecosystems to act as trusted validators and neutral third parties to help provide a fair environment for smart contract users. They act as a dispute center for transactions that were made in error or unjustly acquired.

The user who launched the oracle can supply an answer for no charge,and counter-claims are made using small payments of aeon. Once the oracle launcher has supplied an answer or until a certain amount of time has passed, any other users can submit counter-claims by depositing the same amount of aeon. If no counter-claims have been submitted by the end of the timeframe, the answer supplied by the user that launched the oracle is accepted as truth, and the deposit is returned. If any counter-claims are submitted, then the consensus mechanism for blocks will be used to answer the oracle.

“Cuckoo Style” PoW and PoS Hybrid

Unlike any other platform, Aeternity uses a hybrid of proof of stake and proof of work for their consensus protocols. This mechanism is a branch of the work of one of the team member’s projects called the Cuckoo Style hybrid consensus mechanism. It has been called an “indirectly useful Proof-of-Work”, as it requires less electricity to run. In addition, this also makes it feasible to mine aeon with a smartphone.

This unique style of consensus is an instantly verifiable memory bound Proof of Work protocol that is made up primarily of latency instead of computation. In this sense, Cuckoo is a form of ASIC mining where DRAM, or less complex chips, serve the application by randomly reading and writing billions of bits. When even phones charging overnight can mine without any loss in efficiency, the mining hardware landscape will see vast expansion, benefiting adoption as well as decentralization.

The consensus mechanism has an essential but limited role in Aeternity. In addition to agreeing on new blocks for the blockchain, it also agrees on both answers to oracle questions and the values of the system’s parameters. In particular, the consensus mechanism can change itself based on user and founder voting protocols and value held, similar to how proof of stake functions. However, it should be noted that this is not entirely unproblematic. For example, if a simple proof-of-work mechanism was used, it would be rather cheap to bribe the miners to corrupt the oracle. This is one of the main reasons why Aeternity is going to use a hybrid Proof-of-Stake and Proof-of-Work algorithm, as it allows them to leverage the benefits of both.

Scalability and Sharding Trees

As far as the backend goes, Aeternity is another platform that is planning on utilizing the ever-popular concept of offchain processing of data sets. Ethereum has done research on this same technology, referred to as “Merkle Trees” and sharding commonly. The architecture that is being used is highly scalable due to the proportional spread of data throughout the infrastructure of independent blockchains. It is possible to run the blockchain even when each user only keeps track of the part of the blockchain state that they care about, while ignores everyone else’s. At least one copy of the state is needed for new users to be certain about the information that they care about. But, Aeternity “shards” this data across many nodes so that each node’s load is smaller. These Merkle Trees are used to prove that each individual node is part of a larger entity, maintaining a supportive community mindset.

Aeternity is an exciting project that seems to be one of the first to begin to crack the code of scalability. While it remains to be seen if their mainnet will work as well as they claim, the testnet is showing promise and functioning very well. The Auternity testnet is already displaying many of these assertions and unique functions in action. Aeternity is a new entity, with a strong team and a unique identity. With plans for a more easily adaptable product and an unprecedented mobile-first launch, Aeternity is poised to be a major player in the years to come.