Æternity | Scalable Smart Contracts Interfacing with Real World Data

Æternity is a blockchain based smart contract platform designed to solve some of the most pressing issues found in current solutions like Ethereum. It leverages several concepts and technologies previously employed in projects like Truthcoin, Augur, Namecoin and Factom, to provide an general purpose platform with advanced governance, scalability, scripting safety and cheap access to real world data.


“the platforms are limited in their abilities to update themselves, in order to adapt to new technological or economical knowledge”

Æternity uses a hybrid Proof-of-Work and Proof-of-Stake consensus mechanism. The PoW algorithm used is a variant of the “Cuckoo Cycle”, which requires less electricity to run but has another limiting factor, the memory latency availability. This algorithm makes it possible to mine with a smartphone without losing considerable performance, making mining a truly decentralized and accessible practice.

The governance model is included in the consensus mechanism itself, using on-chain prediction markets to reach an agreement regarding the variables that define the protocol. This means that the current scaling debate scenario found in Bitcoin would not exist in Æternity since the consensus mechanism agrees on new valid blocks and on answers to oracle questions/values of the system’s parameters.

Scalability and scripting safety

“the currently prevailing stateful design makes smart contracts written for the platform hard to analyze, and statefulness combined with sequential transaction ordering complicates scalability”

One of the most defining innovations in Æternity is the implementation of state channels. These provide multiple advantages in terms of functionality while also allowing the the Æternity blockchain to scale efficiently by keeping most of transaction history out of the blockchain.

In Ethereum, for example, blocks contain information regarding the entire state of the system, including all account balances, contract storage, contract code and so forth. Although this makes applications that require a custom state to be under consensus possible, it requires nodes to store large amounts of data and makes smart contracts hard to analyze.

“We believe that storing the application’s state and code on-chain is wrong for several reasons.” Æternity white paper

According to the Æternity team, keeping state on-chain is often not necessary, which means information can be stored in state channels. So, what are state channels exactly?

State channels resemble payment channels although their applications are broader. A state channel is basically a two-way channel in which users communicate transactions to each other. State Channels have a predetermined lifespan that can be configured by time or amount of tokens exchanged.

These channels are private and off-chain. They are then introduced to the blockchain for settlement, where the tokens (Aeons) will be distributed according to the outcome of the channel. So, if two users open a channel and send Aeon to each other, they can then close the channel and introduce the transactions to the blockchain, where only the final outcome will be registered. To ensure that the transactions and contracts within the channel are trustless, they are signed with the participants’ private keys, which allows the transactions to be verified by the network in case of dispute, ensuring that said dispute is always resolved in favor of the honest user.

Since smart contracts are “stateless”, they are independent of each other. This means that contracts can only be created between two parties that have an open state channel and that only the parties involved in the contract know about it. These contracts, however, can still interact through hashlocking, making it possible for users that don’t share a state channel to trustlessly send each other aeon, as long as there is a path of channels between them.

The advantages to using channels are evident. Not only does it allow redundant information to be kept out of the blockchain, it also allows transactions within the channel to be instant and private. They also present disadvantages such as being unfit for applications that require a custom state to be under consensus (like DAOs). Furthermore, hashlocking requires users to pay a middleman fee to the user that operates the common channel.

Cheap access to real world data

“the high cost of bringing realworld data into the system in a decentralized, trustless and reliable way complicates or outright prevents the realization of many promising applications”

One of the most crucial feature in smart contracts is their ability to act on information that is not present on the blockchain itself through the input of Oracles. Several projects are already attempting to bring data into the blockchain in a decentralized manner, like Augur. However, these projects require the implementation of a second consensus mechanism that is built into the smart contracts on top of the blockchain consensus mechanism. This approach is not the most efficient or secure one. Instead, Æternity reuses the same consensus mechanism to agree both on the state of the blockchain and in the state of outside information, which means that a second consensus layer does not need to be written in the smart contract.

Use cases

These characteristics make it easier to build applications like toll APIs (where users pay for every call to the API), insured crowdfunding, cross-chain atomic swaps, prediction markets and more. Thanks to the implementation of state channels, these can be built in a more efficient and cost-effective way.

Crowd Funding

The Aeon token will be mineable through the Proof of Work algorithm previously mentioned. However, anyone can acquire the tokens in the first or second investment stages. which will take place in April and June, respectively. Click here to learn more about the  crowdfunding campaign.

To learn more about Æternity, visit the official website and read the whitepaper.