What is Bytecoin – Beginner Guide & Criticism towards BCN

What is Bytecoin?

Bytecoin (BCN) is a crypto currency focused on privacy and anonymity that was developed by an anonymous team of founders in 2012. This makes Bytecoin, after Bitcoin, one of the oldest crypto currencies that can currently still hold its own on the market (within the top 50, as of October 2018). Bytecoin was then developed to address the weaknesses and problems of Bitcoin. Above all, the lack of privacy and anonymity should be realized by the Bytecoin.

While all Bitcoin transactions are public and only pseudoanonymous, i.e. the blockchain can be used to track transaction amounts, addresses and account balances, Bytecoin is a crypto currency that uses CryptoNote ring signatures to perform transactions completely anonymously. This means that neither the transaction amount nor the sender, recipient or account balance of a BCN address can be traced if you do not have the private key.

Bytecoin was the first Altcoin based on the CryptoNote algorithm. The transactions are both untraceable and unlinkable to each other due to the technology. Each transaction uses a unique public key for this purpose. This eliminates the problem of reusing addresses and thus reduces the traceability of transactions.

In addition, the Bytecoin network offers instant transactions that are executed at low fees. You can view the current Bytecoin price on our Bytecoin price page. If you would like to check the price of Bitcoin, Ethereum or 2,000 other Altcoins, you can do so in our course overview.

Technical data and Bytecoin Mining

Bytecoins have a maximum supply of 184.47 billion BCN. As with Bitcoin, the emission is therefore limited. However, the number of coins is significantly higher in comparison (21 million BTC vs. 184 million BCN). It is also important to know that 99 percent of all Bytecoin have already been mined (as of October 2018).

As a mining algorithm, Bytecoin uses CryptoNight, a proof-of-work algorithm originally developed to keep ASICs out of the network. However, after Bitmain published an ASIC Miner for the algorithm in April 2018, the Bytecoin team committed itself to ASIC mining. In a statement, the team stated that Bytecoin will support ASIC Mining at least until the end of 2018 and even referred to the advantages of ASICs for the network, so a further departure from ASIC seems unlikely.

Compared to Bitcoin, Bytecoin has a considerably shorter block time. As a result, transactions are written to the blockchain much more frequently, namely every 2 minutes (instead of 10 minutes at Bitcoin), and miners in the network are rewarded for their work much more frequently. In contrast to Bitcoin, the Mining Difficulty is readjusted with each block to compensate for fluctuations in the mining power in the network if the hashrate of the network increases or decreases. In addition, the Block Reward also decreases with each block. This allows a smoother decrease of the Block Reward instead of reducing it gradually (like Bitcoin every 4 years, for example). The calculation formula for this is as follows:

BaseReward = (MSupply – A)/2^18

Where MSupply = (2^64 – 1) BCN and A = the quantity of BCN already generated.

Since, as mentioned above, 99 percent of all 184.47 million bytecoins have already been mined, it seems less worthwhile to mine BCN compared to other PoW coins.

In addition to the flexible Mining Difficulty, Bytecoin has another variable parameter in the source code, which is a significant difference to Bitcoin. Each Bytecoin miner can set its own soft limit for the block size it wants to mine. The hard limit of the block size is limited to twice the median of all previous blocks. This should enable the BCN blockchain to scale better in times when it is experiencing great growth.  If the transaction volume goes down, the block sizes can be reduced again by the miners if required. To prevent miners from creating blocks that are too large, Bytecoin has introduced a penalty for oversizes.

These flexible parameters ensure that Bytecoin can execute instant transactions at low fees.

Ring signatures

As already mentioned, the CryptoNote ring signatures form the basis for completely anonymous transactions. The ring signatures can be presented as mixers. When a person sends a transaction to another person, that transaction is divided into small pieces. These pieces are assigned to different rings, each of which has the same amount. The transaction is then automatically mixed with many other transactions (“mixer”) and signed equally by all participants in the ring.

This means that it is impossible to find out from which address the payment originated. Due to the division of the transaction amount, this is also no longer comprehensible. In practice, ring signatures make it almost impossible to trace the origin of payments.

Other privacy Coins are the following:

The Bytecoin team

Until July 2017, Bytecoin’s development team decided to remain completely anonymous until four and a half years after its founding, the team decided to change its image and open more transparency in the community through multiple communication channels. Within these channels, however, the team remains pseudoanonymous by providing only names and headshots on its website.

It is well known that the Bytecoin project has been highly fragmented since its inception in 2012. In the early years, several isolated teams worked on the project without communicating with each other. This led to numerous hard forks by Bytecoin, among others Monero was created as part of a Bytecoin Hard Forks in April 2014.

Criticism towards Bytecoin

Bytecoin has a very questionable and unknown mining history. Riccardo Spagni, core developer of Monero, explained that Bytecoin had already pre-mined 82% of all BCN before the public launch. Spagni wrote on Reddit:

Well, not much of a rumour – the reality is that 82% of the coins were already mined before its “public” release. Even if the premined coins weren’t done so maliciously, it still means 82% of the coins in the hands of persons unknown and invisible. It basically centralises a decentralised currency.

The statement is all the more explosive if you remember that Monero is a hard fork by Bytecoin and that’s exactly why he split off. Riccardo Spagni and other like-minded people did not feel comfortable with the questionable mining history and therefore developed Monero.

Conclusion: Is Bytecoin worth investing?

Bytecoin is a crypto currency whose primary goal is to preserve the anonymity of its users. Moreover, it is one of the oldest projects in the crypto-universe that can still hold its own in 2018. However, there are other competitors in the area of privacy coins, such as Monero (XMR) and Dash (DASH), whose development in recent years has been more strongly driven and which have developed better and more privacy features.

For example, Dash can use its InstantSend protocol to confirm a transaction in a few seconds. In addition to ring signatures, Monero has added other privacy technologies such as Stealth addresses, Ring Confidential Transactions, and Bulletproofs. There is a big question mark behind the pre-mining of 82% of all BCN.

Last updated: 05/07/2019

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About Author

Jake Simmons has been a crypto enthusiast since 2016, and since hearing about Bitcoin and blockchain technology, he's been involved with the subject every day. Beyond cryptocurrencies, Jake studied computer science and worked for 2 years for a startup in the blockchain sector. At CNF he is responsible for technical issues. His goal is to make the world aware of cryptocurrencies in a simple and understandable way.

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