Qtum: A Hybrid Blockchain Merging Bitcoin and Ethereum
Affectionately dubbed the “Bitcoin-Ethereum Frankenstein,” some see Qtum as successfully melding the best of the Bitcoin and Ethereum networks, and combining on- and off-chain network operability.
Updated February 10, 2021 • 5 min read
Qtum is an innovative UTXO-based blockchain that is smart contract-capable and compatible with the Ethereum Virtual Machine (EVM). Qtum’s innovative technology is well-suited for DeFi applications and internet-of-things (IoT) applications, while its native QTUM coin enables users to take part in network governance.
Launched in 2017, Qtum (pronounced “quantum”), is a hybrid blockchain that combines aspects of various leading blockchain networks into a new protocol. The most notable feature of Qtum is its use of an Account Abstraction Layer (AAL) to integrate its Unspent Transaction Output (UTXO) model — as found on Bitcoin — with the Ethereum Virtual Machine (EVM) and Ethereum’s account model. This integration makes Qtum compatible with both Bitcoin and Ethereum, and allows for UTXO-based smart contracts.
Qtum’s ecosystem is powered by its native coin, QTUM. Qtum uses a mutualized proof-of-stake (MPoS) consensus mechanism, an innovative virtual machine (VM) middleware translator (Qtum Neutron) to facilitate connections between blockchains, and a hybrid on-chain and off-chain governance system. Promising use cases for Qtum include smart contracts, internet-of-things (IoT) applications, decentralized finance (DeFi), and decentralized applications (dApps). Examples of projects that Qtum hosts include Bodhi, a decentralized prediction market platform; Robin8, an influencer search engine; and StormX, a crypto rewards and microtasking marketplace dApp.
Qtum: An Amalgamation of Bitcoin and Ethereum
Qtum offers powerful solutions that enable blockchain interoperability between the Bitcoin and Ethereum networks. Bitcoin’s UTXO model and Ethereum’s account model are two approaches to transacting on the blockchain that are naturally incompatible. In Bitcoin’s UTXO model, wallet balances are measured through transactions into and out of a node, while Ethereum’s account model creates a balance held within an account, which is more akin to a traditional bank account. Qtum connects the Bitcoin and Ethereum transaction models using an account abstraction layer, or AAL. The AAL serves as a translator for the UTXOs (Bitcoin’s account mechanism) that normally wouldn’t be compatible with an Ethereum-style smart contract. The AAL, in essence, allows UTXOs to be processed by Qtum’s virtual machine and converted into a spendable Qtum transaction, which is itself compatible with Ethereum-style smart contracts.
This innovation enabled Qtum to create the world's first UTXO-based smart contracts. Proponents say this combines the best of the two blockchains: the rock-solid security of the UTXO model and the modular and capable smart contract framework of Ethereum. Qtum claims its approach has resulted in faster speeds, lower costs, and a higher degree of smart contract flexibility when compared to Ethereum. Qtum also borrows Bitcoin’s Simple Payment Verification (SPV) system, which allows smart contract execution on mobile devices.
Qtum’s Answer to EVM: x86 Virtual Machine
Qtum is able to run smart contracts on the Ethereum Virtual Machine (EVM), as well as its own virtual machine, x86. This means the network can be used to build dApps and platforms and build out its own ecosystem. Like EVM, x86 runs smart contracts for a fee to prevent “junk contracts” from spamming the network. Qtum is able to simultaneously run x86 and EVM while maintaining a high degree of scalability. In order to further improve the project’s network interoperability, Qtum developers are working on enabling any virtual machine to run on Qtum. Additionally, Qtum allows dApp developers to pay the smart contract fee as opposed to the party executing the contract, which normally pays this fee. This flexible fee structure may encourage QTUM crypto protocol use if dApp developers effectively implement this feature.
Neutron: Qtum’s Virtual Machine Middleware Connectivity System
During the first half of 2020, the Qtum team finalized Neutron, a newly designed universal virtual machine (VM) translator that acts as middleware for the software development stack. Neutron was built to translate various VM coding languages into an easily readable framework that the Qtum blockchain can process simultaneously. This is intended to streamline the execution of smart contracts and their ability to be upgraded, while placing the Qtum network as a connective layer between all smart-contract enabled blockchains.
Neutron uses the Rust programming language for smart contracts in order to provide enhanced performance and security. The Neutron Application Programming Interface (API) also allows the various layers of Qtum’s architecture to communicate with each other. Middleware plays a vital role in providing advanced functionality for lower-level protocols such as the network layer, blocks, and transactions.
QTUM Coin: A Hybrid On-Chain and Off-Chain Governance Model
Qtum’s hybrid blockchain also has a hybrid governance protocol that aims to employ the optimal aspects of both on-chain and off-chain structures. Qtum’s Decentralized Governance Protocol (DGP) is all on-chain, meaning it lives on the blockchain. Staking QTUM coins gives users voting rights on proposed changes to the Qtum protocol. Qtum has the ability to change the block size and smart contract fee structures without a hard fork. Other protocols have struggled with hard forks and Qtum’s DGP is positioning itself as a better way to enact these types of changes. However, hard forks would still be necessary to implement more drastic protocol modifications.
Qtum’s off-chain governance is run by Qtum’s own non-profit, the Qtum Chain Foundation. Qtum claims that its hybrid model of on-chain code governance and offline human governance combines the best of both worlds: allowing for both decentralized Qtum code governance and practical, human-led development decision making.
The Qtum Crypto Network’s MPoS
Unlike Bitcoin, which uses a proof-of-work (PoW) consensus model, Qtum uses a mutualized proof-of-stake (PoS) mechanism. Usually, PoS protocols immediately allot block rewards to miners or stakers who contribute to the generation and confirmation of new blocks. However, Qtum allocates a current block producer and the previous nine block producers only 10% of the total block rewards immediately after a new block is created. The remaining 90% of the rewards are delivered after a 500-block waiting period. This delayed block reward system disincentivizes attacks on the network by collectivizing rewards shared among its node community.
Qtum stakers that confirm block transactions receive compensation in the form of newly minted QTUM coins, as well as an equitable portion of that block’s transaction and smart contract fees. Qtum block times are among the most rapid — approximately every 128 seconds — while block rewards halve every four years, much like Bitcoin.
Qtum’s Adoption Potential
In addition to its ability to migrate Ethereum smart contracts to its own protocol, Qtum supports a variety of popular programming languages and code libraries, which may encourage more development on the Qtum protocol itself. QTUM also offers proprietary wallet options and hardware wallet support. Qtum is compatible with Bitcoin gateways, Ethereum contracts and dApps — and its growth model is contingent upon maintaining this interoperability, even as the Qtum ecosystem evolves. This may encourage some Ethereum developers to engage with the Qtum ecosystem in years to come.
Qtum is also targeting enterprise adoption with Unita, a permissioned blockchain variation of Qtum with ten-second block times. Unita would allow companies to store proprietary data on a permissioned blockchain while allowing specific data to be sent to and interact with Qtum’s main permissionless blockchain. This is just one example of how permissioned and permissionless blockchains can synergistically work in tandem on an enterprise level.
A Qtum Leap Forward?
Affectionately described as a “Bitcoin-Ethereum Frankenstein,” some see Qtum as a combination of the best aspects of Bitcoin and Ethereum. As the first UTXO-based smart contract blockchain, Qtum combines some of blockchain technology’s most innovative features into one protocol. Additionally, its compatibility with the EVM gives it the potential to play a central role in DeFi, the IoT ecosystem, and more. It also offers an improved user experience, with low transaction fees, high transaction throughput, and the ability to participate in governance — a quantum leap forward for the crypto ecosystem.
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