We gained some more insight into the working of VSC, the sidechain that is being developed to work with Hive.
This is going to provide developers with the ability to develop smart contracts tied to Hive. They will run on their own node system yet settle using the Hive blockchain. At the same time, all nodes will be collateralized using the Hive Backed Dollar (HBD). This potentially offers an enormous sink for that coin, expanding the use case greatly.
We also heard about another interesting feature: staked HBD providing the ability to interact with the network.
In this article, we will cover some of the highlights regarding this project.
Wrapped Tokens
The first thing that jumps out is the ability to create wrapped tokens on this chain. That means that bitcoin, ethereum, or any other token can be generated.
Obviously, this goes a long way to closing the gap between Hive and the rest of the cryptocurrency world. This provides interoperability between chains, allowing value to move between them. In short, HIVE and HBD both could be paired with something like BTC or LTC. It makes swapping in and out of these coins much easier.
This creates an interesting situation regarding the movement of bitcoin. We know that one of the drawbacks to that network is the time it takes for a transaction to settle along with the transactions fees.
Hive offers 3 second block times along with feeless transactions. This is the settlement layer for VSC. With the staking of HBD providing the ability to interact with VSC, the movement of the wrapped BTC could also be feeless.
Suddenly, we have the ability to provide the same service as Lightning Network with a lot less headaches.
NFTs
Another feature of smart contracts is the ability to create NFTs. This is something that most have discussed yet, so far, we are lacking.
VSC is going also provide the same services to NFTs as it does to the fungible counterparts.
One of the drawbacks to Ethereum is the fees. This is bad enough when moving hundreds of dollars (or more). What happens when one has 30 NFTs, worth a few dollars apiece. It gets to the point where they are basically locked up.
VSC solves this since moving anything around reverts back to the original premise. There are basic fees that can be countered simply by staking HBD.
Hive Backed Dollar (HBD)
It appears this network is based upon HBD.
Staking of HBD provides something similar to the resource credit system on Hive. It allows for the ability to operate without having to pay fees on each transaction. Essentially, we are looking at another feeless system.
This becomes another sink for this stablecoin. People who are engaging with the network have incentive to stake the coin. It is something that could hold great appeal to traders.
At the same time, we are dealing with a collateralized system. Node operators will be required to hold an amount of HBD equal to the transactions being processed. This means that a node cannot make off with the funds.
In other words, if the nodes are going to process a transaction of a NFT worth 10K HBD, that much must be put up as collateral. Over time, we can see how this system could really grow and require millions of HBD.
The key is that this is turning HBD into an access token. It is required to engage with VSC, just like Hive Power (HP) is needed to write to Hive. We also should mention that, since all transactions are settled on Hive, a bit of HP is also required to write to the database.
Anything You Can Do
VSC is bringing the same capabilities to Hive as other blockchains have. Right now the EVM chains has an enormous advantage. Ethereum brought the smart contract to the table and this is still the dominant player.
Hive made the decision to forgo smart contracts at the base layer. This means we need sidechains to offer that service. Ultimately, the plan is to roll the EVM into VSC, giving developers another option there. By doing so, anything tied to any of those chains can be incorporated into VSC.
One of the main difference with this set up is the scalability. Each smart contract will have its own node system. Unlike Ethereum, where nodes have to run all contracts, VSC infrastructure will be segmented. That does not mean, however, it is isolated.
A node system could handle a smart contract for a particular application that was designed by the developer. This is a contract that is specific to that project. However, while it runs on its own nodes, the ability to access other parts of the system are present. If, for example, it needed exchange capabilities, it could access that even though it isn't running those contracts itself.
This means that scalability is basically infinite. Smart contract growth is coupled with increasing nodes.
Business Back Ends
One of the potential use cases for smart contracts is for companies. So far, it is not something that was adopted to any great degree. Perhaps the drawbacks to Ethereum was the reason.
Nevertheless, businesses can run their back end operations in these contracts. The business logic could be written to run on these node systems. This would allow for automation of the processes while moving away from their exiting system. As the network grows, the ability to seamlessly access other features present are available.
Just like individuals, it starts to give more control back to these companies. At present, they are under the thumb of Amazon or Google. Since they are often the providers, there is no way around it.
Once again, the centralized format causes problems. Google has their own algorithms while Amazon theirs. Microsoft operates with a completely different set. This results in each offering something different. There is no cross pollination since these entities are separate.
Smart contracts operate differently. Developers who use VSC could access smart contracts that are already written. Hence, the expansion of features should grow at a faster pace since an addition can benefit the entire system.
Potential
VSC has the potential to change a few key areas.
The financial implications are obvious. This is the system that will allow for most financial services to be built out. It could incorporate HBD as the main coin for transactions. Since it is a medium of exchange, this could suffice for most financial transactions.
There is also enormous potential for gaming. With both fungible and non-fungible capabilities, we could see developers build an assortment of features into their games, all using the smart contracts supplied by VSC.
Eventually, it will provide the ability to interact from many different wallets. Linking to something like Metamask opens up a huge user base within cryptocurrency. We are moving beyond social media with this system although that can still be utilized. Ones with an Ethereum account (wallet) will be able to write to engage with many of the applications, just like people do with a Hive account.
All of this adds up to a major leap forward for Hive.