What is QTUM?
QTUM (pronounced “quantum”) is a Singapore-based blockchain technology that bridges Ethereum’s smart contracts on top of Bitcoin’s stable blockchain while using proof of stake for verification. By doing so, QTUM hopes to increase the range and interoperability of smart contract applications, especially for business and institutional purposes. In addition, QTUM will implement tools, templates, and other plug-and-play smart contract options to make it easier for businesses to build and execute smart contracts.
The idea behind QTUM is making smart contracts easier and more secure while offering interoperability with leading cryptocurrencies such as Bitcoin and Ethereum. The foundation for QTUM’s code is Bitcoin’s blockchain, but the QTUM developers have abstracted and added layers to the Bitcoin blockchain that allow the Ethereum virtual machine for smart contracts to run on top of Bitcoin. As such, QTUM benefits from new developments in the Bitcoin and Ethereum communities, and smart contracts built on Ethereum can easily be ported over to QTUM as well.
After an initial crowdsale in March, QTUM’s mainnet went live in mid-September, 2017. As of writing, QTUM is the 16th most valuable cryptocurrency by market cap, according to CoinMarketCap, with an overall valuation of $1.1 billion. In this post, we’ll take a look at the technology behind QTUM, its team, and the possibilities it holds for democratizing corporate smart contracts.
Built for business: Corporate smart contracts made easy
Although anyone can use QTUM, the QTUM foundation is focused on business applications of smart contracts. Their goal is facilitating the transition from legacy systems in aging organizations over to blockchain-based solutions that increase automation and decrease cost. This might take the form of a company creating its own tokens to power some of its goods and services. Alternatively, blockchain decentralization might help with self-executing supply chain management. A distributed ledger has immediate applications in risk reduction and cybersecurity, and contracts can be secured and executed autonomously.
These solutions seem promising for businesses, but in practice, many of these options aren’t feasible with the current state of blockchain technology. According to the QTUM team, Ethereum still has stability flaws that are yet to be resolved, and its reliance on account balances rather than unspent transaction outputs makes it incompatible in scenarios where Bitcoin interoperability or certain scaling scenarios are required (see below on UTXO verification).
Even though Bitcoin is the most stable and secure blockchain available, the Bitcoin network poses its own challenges. First, it’s not Turing-complete, meaning programming smart contracts directly on the Bitcoin is not possible. Additionally, according to Patrick Dai, one of the founders of QTUM, enterprise developers may be wary of creating a private Bitcoin blockchain clone because it uses proof of work and requires miners for consensus.
QTUM’s solution provides the best of both worlds. Allowing the ease of programming found on the Ethereum network to combine with the stability and security of the Bitcoin blockchain. In addition, the QTUM developers will provide tools, blueprints, and pre-built smart contracts that will enable the quick construction of new decentralized apps (dApps) and other blockchain-based use cases for businesses.
Ethereum Virtual Machine & Bitcoin UTXO verification
QTUM bills itself as a bridge between Bitcoin’s stability and Ethereum’s technology. Specifically, this means that QTUM runs a version of the Ethereum Virtual Machine (EVM) – the thing that makes smart contracts possible – on top of Bitcoin’s blockchain. The problem is a fundamental incompatibility between the ways Ethereum and Bitcoin store data.
The Ethereum blockchain ledger utilizes account balances, much like a bank in the way that we’re used to thinking about it. However, the Bitcoin ledger uses unspent transaction outputs (UTXOs) as markers of value. Account balances are simpler and easier to write code around, which is why Ethereum uses them. However, according to the QTUM team, with UTXOs it’s more straightforward to validate transactions, and you can process multiple transactions at the same time regardless of sequence. This makes UTXOs more secure and scalable.
So, if the Ethereum Virtual Machine is built on a system that uses account balances, it’s a serious technical challenge to deploy the EVM on the Bitcoin blockchain. QTUM solves this challenge with an Account Abstraction Layer that converts the blockchain’s outputs into account balances and facilitates the transfer of information between the EVM and the UTXO-based blockchain. This abstraction layer is QTUM’s biggest technological contribution.
The consequence of this merger between Ethereum and Bitcoin is the updates developed for either platform will apply to QTUM as well. For instance, QTUM has already implemented SegWit and other Bitcoin Improvement Projects. The shared code also means dApps that run on Ethereum can easily be run on QTUM as well.