Intro to Radix

/ Chris Collins / 4.1.2019 /

Radix is another protocol that is proposing a solution to the scalability challenges that popular blockchains today face. Unlike other smart contract platforms such as Ethereum, EOS, IOTA or Hashgraph, Radix is not a blockchain nor a Directed Acyclic Graph (DAG). Rather, it is a Distributed Ledger Technology (DLT) that proposes an alternative consensus algorithm that has been in development since 2011 by Dan Hughes, and is now led by CEO Piers Ridyard. Radix was also part of YC’s summer 2018 class.

Below, I’ll provide an overview of how its tech works, without getting into obscure minutae in order to explain it in the simplest, most digestable way possible.

Technology

Radix’s distributed ledger depends on sharding (splitting a database into various pieces that specific groups of nodes process) in order to allow for higher throughput – in fact, it is aiming to separate the network into 18 quintillion shards. It uses a consensus algorithm called “Tempo”, in which nodes transfer “atoms” (messages that communicate data in the network) via a “gossip protocol” (the first node that confirms a transaction passes it on to the nearest node, and the process repeats until the entire network is reached). It is currently building its own block explorer to help query transactions, something that has been a big challenge for sharded blockchains.

A major differentiator is Tempo’s “passive” approach – it only seeks consensus in cases where there is conflict, such as a double spend attempt. In contrast, popular blockchains today seek consensus for every single block (set of transactions) that is added to the ledger. The Radix protocol seeks to decrease the potential of centralization by avoiding staking, masternodes, or any centralized entity such as mining farms in the case of Bitcoin.

To incentivize cooperation in its ecosystem, Radix will implement a native token called Rad (XRD). It has designed its currency to be slightly deflationary (50% of every transaction fee gets “burned” or is donated to the Radix Community Fund). It is also meant to be low-volatility similar to a stablecoin in order to do away with rampant speculation that was on display most notably in the 2017 ICO boom. To reduce volatility, XRD will be algorithmically pegged to the Index Token (XRI), which will be a basket of several fiat-backed tokenized currencies. For a more detailed explanation on their token economics, check out the Economic Paper.

Progress

According to its website, its testnet is currently processing approximately 2,300 transactions per second with 20 nodes. It is still working to launch a node runner client, asset-backed tokens, and utility token toolkit on its testnet.

The protocol is currently set to launch in Q4 2019.

Assessment

Radix’s vision is very ambitious (which I definitely applaud!). The vision outlined lies squarely in the holy crypto grail of decentralization, security, and scalability.

However, it will have to surmount a couple big challenges to achieve its vision. First, sharding is core to its scalability approach – managing this as the ledger scales will be no easy task. The effectiveness of its query tool will be very important – as the amount of data the DLT holds increases, the complexity of clearly organizing the data will undoubtedly increase as well. Second, while I agree with the rationale behind its stablecoin, maintaining its peg to a low-volatility basket will be a challenge (like it will be for every USD-pegged stablecoin over the long-term). Third, it is unclear exactly how secure / immutable the protocol will be as it is a clear departure from secure blockchains like Bitcoin’s, for example.

Lastly, Radix plans to launch as a closed-source protocol and open up over time. While controversial, I think this is a good move if it keeps its word in becoming more open over time. Its closed nature should allow it extra agility to make critical adjustments in the early days as it get valuable market feedback which is an important success factor for any new venture. How and exactly when it would open up its source code remains to be seen.

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