Aeternity Blockchain: Understanding the Meaning and Concept

• Aeternity does not have one particular consensus mechanism; instead, it employs a hybrid of the two widely used consensus mechanisms.
• Aeternity is on par with blockchain networks like Ethereum and Bitcoin in terms of scalability and throughput.

What is Aeternity?

Founded in 2017 by Yanislov Malahov in Vaduz, Lichtenstein, Aeternity is a blockchain platform that aims at providing decentralized services like decentralized oracles, purely-functional smart contracts, high bandwidth transactions, etc. Aeternity focuses on abolishing crypto market inefficiencies by enhancing the scalability of smart contracts and decentralized applications (dApps), off-chain contract execution, sharding, and more.

There are Turing-complete smart contracts on Aeternity’s blockchain network which allow for the execution of transactions without involving any intermediaries or third parties. Aeternity allows for off-chain smart contract settlements with the help of state channels. These settlement contracts only interact with the blockchain if there is any disagreement in the contract. 

Aeternity’s blockchain is built on the latest cryptographic data that provides a robust and efficient structure with complete security and without any Single Point Of Failure (SPOF) issues. 

AE is the utility token of Aeternity that acts as a medium of exchange on the network. In simpler words, AE can be used to pay for operations on Aeternity’s network. 

Before Aeternity’s mainnet launch in 2018, AE was launched as an ERC-20 token. After its mainnet was launched, AE ERC-20 tokens were available to exchange with AE tokens at a 1:1 rate.

Aeternity’s scalability and throughput can be considered to be on par with blockchain networks like Ethereum, Bitcoin, and more. This is because of the combination of on-chain and off-chain transactions. 

Aeternity can be a plausible option if a developer’s project requires a network with higher transaction throughput without getting backlogged. 

What makes Aeternity so special?

Listed below are three components that make Aeternity unique:

1. State channels – smart contracts are large in size and they are built directly on the blockchain which reduces the speed of the network. To overcome this, Aeternity uses state channels. State channels allow the smart contracts to perform their transactions off the chain, and this is done to enhance the privacy of user data. The only use of these contracts is to use them at the time of any dispute. Only the settlement amount is recorded on the public blockchain.
2. Oracles – some smart contracts may require outside information to execute a transaction. Oracles are the entities that are responsible for providing this outside information. Oracles obtain real-world information and infuse it into smart contracts as per the requirement. 
3. Employs a hybrid consensus – unlike many blockchain networks that employ one specific consensus mechanism like Proof-of-Work (PoW), or Proof-of-Stake (PoS). Aeternity employs a hybrid of PoW and PoS consensus mechanisms, both of which have different functions. 

The Proof-of-Work (PoW) consensus mechanism utilizes the Cuckoo cycle, a graph-theoretic approach to adding new blocks to the network. Unlike ASIC mining, this method encourages greater decentralization and does not provide undue advantages to any specific users.

On the other hand, the Proof-of-Stake (PoS) consensus mechanism is used solely for governance. The AE holders have the power to govern the network. Ideally, these AE token holders have voting rights and along with this, they can delegate their votes to any third party. The value of the vote is directly proportional to the number of tokens a user holds. The higher the number of votes, the higher value the vote holds.