Cryptoassets Explained: Digibyte – DigiByte USD (Cryptocurrency:DGB-USD)

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Introduction Welcome to Cryptoassets Explained, the new article series in which I give you a short but meaningful snapshot of some of the most popular cryptocurrencies and blockchain projects. This is the first article in the series, and I will be starting by explaining the projects that my readers have asked about in the comment…

Introduction Welcome to Cryptoassets Explained, the new article series in which I give you a short but meaningful snapshot of some of the most popular cryptocurrencies and blockchain projects.
This is the first article in the series, and I will be starting by explaining the projects that my readers have asked about in the comment section and in direct messages. If you would like a certain project covered, just reach out and I’ll add your request to the queue.
In this series I’m going to analyze cryptoassets by focusing on these key areas listed below. This list is not necessarily in the order of importance.
Purpose and classification Age, history and current state of the project Software development Market capitalization Exchange liquidity Token issuance model Security model Whitepaper Community Criticism I will attempt to remain neutral as I explain these cryptoassets.

My primary aim is to give you a place to start your journey. If you find the project interesting, then you can use the links that I provide to dig deeper.

Purpose and Classification Digibyte ( DGB-USD ) is a UTXO based cryptocurrency, in much the same vein as Bitcoin ( BTC-USD ), but with a few key differences.
A side note about UTXO
In case you’re not familiar, UTXO refers to Unspent Transaction Output . UTXOs are similar to physical dollars and cents. If I have a $20 bill in my pocket, and I want to pay $4 for an americano, I have to hand the $20 bill to the cashier, who makes change for me.

In terms of a digital currency this means I send you more than I need to, and you send me change back in the same transaction. We both sign off, you get your amount and I get mine.

This approach differs from the model that Ethereum ( ETH-USD ) uses, in which I can “slice” you off any amount I want to and we don’t have to worry about the change address for you to send back to me.

Purpose
From the Digibyte website:
DigiByte is a More Secure, Faster & Forward Thinking Blockchain Technology – Digibyte.io
Clearly this statement is meant to differentiate Digibyte from Bitcoin. Digibyte claims to be more secure, forward thinking, and to process transactions 40x faster than Bitcoin.
Digibyte gets its speed advantage in the same way that Litecoin does, by simply dropping the block time. With Bitcoin blocks are issued every 10 minutes, Litecoin has 2.

5 minute blocks, and Digibyte has 15 second blocks.
This approach does speed up the process, but it also has implication for distributed consensus.
Taxonomy Classification
Digital Currency
Source: Github assets
Age, History, Current Status Digibyte was launched in January of 2014, which makes DGB quite old in terms of the cryptocurrency space. If we look at the price action and volume, we can see that despite the downturn in the market, DGB has been traded more actively since around July 2017.

Image Source: coinmarketcap.com
Software Development Digibyte has wallets for multiple devices, which is really a nice feature. It may sound simple, but many cryptocurrency projects are still command line only, or only have a client for Linux, making them unlikely to be used by mere mortals.
Source: Digibyte.io
Digibyte is open source, which is another good sign. You can see their code on Github, here .

Let’s take a look at their activity levels for the last 30 days.
Source: Github.com
At first glance, this looks bad. One author pushed one commit in the last month? However, we need to realize that Digibyte is a UTXO based cryptocurrency, so they can share certain portions of their code with Bitcoin. This means that new code being written to the Bitcoin repository can be integrated after the fact, making the present look more “dead” than it actually is. I made this mistake when reviewing Litecoin’s ( LTC-USD ) code base, and I resolved not to make that same mistake again.

Let’s compare Digibyte’s contributors to those of Bitcoin.
Source: Digibyte Github and Bitcoin Github
What a coincidence! The same contributors in the same order, the same start date, and strikingly similar charts of contributions. I think it’s safe to say Digibyte is actually a fork of Bitcoin, although it doesn’t say so on their website. There’s nothing really wrong with this, after all Bitcoin is open source.

But I think that perhaps the marketing team may be spinning this like it’s an independent project when in fact it relies heavily on code being written for Bitcoin. In other words, if Bitcoin was to fail, Digibyte would have nowhere to import their code from.

Market capitalization Digibyte is the 36th cryptocurrency on Coinmarketcap.com , with a total market cap of $261M. The maximum supply of DGB is 21B, compared with 21M in Bitcoin.

The circulating supply is just north of 10B as of October 2018.
Exchange liquidity Digibyte is listed on many exchanges, but the trading volume is relatively thin. The most popular exchanges are Huobi and Bittrex , which account for about 68% of the daily exchange volume.
In the last 24 hours, only $1.

8M worth of DGB have changed hands across all known exchanges.

Source: coinmarketcap
Token issuance model Digibyte is mined with Proof of Work. However, the Digibyte project has a unique approach to how they manage their block reward reduction and supply. With Bitcoin, the block reward halves every four years, but with Digibyte there are more frequent drops of 1% each month.
The 21,000,000,000 tokens will be completely issued by 2035, 21 years from their launch.

Security model Digibyte claims to be more secure, but why is this exactly? Well, one thing they have going for them is their five-algorithm mining process.

DGB allows blocks to be mined with Sha256, Scrypt, Groestl, Skein & Qubit.
They explain the security implications by saying:
You can mine DigiByte on one of five separate mining algorithms. Each algo averages out to mine 20% of new blocks. This allows for much greater decentralization than other blockchains. In order for an attacker to hardfork DigiByte the attacker would need to control 93% of the hashrate on 1 algo, and 51% of the other 4 making DigiByte much more secure against PoW attacks than other blockchains.

– Digibyte FAQ
We already talked about how the project was open source, so that’s a benefit from a security standpoint, since coders working in the open are often more cautious about code that can be viewed by everyone.
Whitepaper Digibyte doesn’t appear to have an actual whitepaper, but they do have an announcement post on the Bitcoin talk forum, which will do well enough for our purposes. You can find this thread here .
I found the thread to be somewhat lackluster, as product differentiation seems to come from just mixing and matching existing code and algorithms.

For example, if the main advantages come from a few, easy to make changes, then what’s stopping Bitcoin from implementing those same changes and completely destroying the value add of Digibyte?
This handy video link was included.
Source: YouTube
Community Digibyte is active on Twitter and on Reddit, so let’s look at the user activity on these platforms.
Source: Twitter
As we can see they have 156k followers, which is not bad.
Source: Reddit
Digibyte has 19.5k subscribers on Reddit, which is tiny compared to Bitcoin (961k) and Ethereum (400k). However, comparing a small coin to Bitcoin and Ethereum isn’t really fair, so let’s compare it to the number 35 and 37 cryptocurrencies by market cap – Bitcoin Diamond ( BCD-USD ) and Siacoin ( SC-USD ) respectively.
Source: coinmarketcap
As you can see from the table below, Digibyte has the most Twitter followers when compared to the next larger and next smaller cryptos listed by market cap. It has the second most subscribers on Reddit, and the most combined followers/subscribers overall.

Twitter Followers Reddit Subscribers Total Bitcoin Diamond 24k 249 24.2k Digibyte 156k 19.5k 175.5k Siacoin 108k 31.5k 139.5k Criticism As I mentioned earlier, Digibyte relies heavily on code written by the Bitcoin core team. At the same time, they’re trying to compete against Bitcoin and say that they’re more advanced. But I have a hard time swallowing this.

Conclusion While I do have my reservations about this token, it does have some interesting properties. The multiple algorithm approach may indeed have the effect of making the mining and token distribution more decentralized. When compared to other cryprocurrencies of the same size, Digibyte does have a more active community and also has the advantage of being around for several years.
So, I would say the jury is still out on this project. Maybe they will gain an advantage from being easy to use, or maybe their faster transaction times will allow them to capture spillover effects from the next crypto bubble. What do you guys think? If you have thoughts, please post them below.
If you have feedback on this new article series please reach out as well.
Cheers,
Hans
This article was published first in Crypto Blue Chips .

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Disclosure: I am/we are long BTC-USD, ETH-USD.
I wrote this article myself, and it expresses my own opinions.

I am not receiving compensation for it (other than from Seeking Alpha).

I have no business relationship with any company whose stock is mentioned in this article..

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