Beginner’s Guide to Skycoin: A Blockchain to Fix The Internet ?

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Skycoin is a very ambitious cryptocurrency project that has a lot of different moving parts. Instead of a single coin it is actually a whole ecosystem of solutions to problems that the blockchain aim to solve. It is a complete platform that is powered by Skycoin to perform different functions and contribute to the network of interdependent systems. The foundation of the Skycoin ecosystem begins with Skywire.

Skycoin Website

What is Skywire?

Net neutrality is a contentious issue in the realms of internet providers. What this entails is that Internet Service Providers (ISP) can charge different rates to prioritize content to their subscribers. While they are technically allowed to do this, this practice flies in the face of everything the ethos of the internet stands for.


Skywire presents itself as a meshnet of private services that is decentralized. Skywire clients run a Virtual Private Network (VPN) server that connects users to the Skywire network. These servers are known as Skyminer.

What is Skyminer?

The Skyminer hardware is a custom VPN server that provides the infrastructure to power the Skywire network. The Skyminer is essentially a Linux server with an integrated router and networking capabilities. The unit is pre-built but the specs are also available to anyone who would like to build their own Skyminer unit. The server has a quad core ARM processor, 16 GB of RAM and 128GB of solid state storage space. It also has an 8 core Mali450 graphics card.

Sky Miner

These servers provide the users access to the internet. This forms a second layer of private browsing. The service is cheaper, faster and controlled by the users on Skywire. ISPs do not have control over which content is prioritized. The Skywire network is private so IP addresses cannot be traced. Users are also rewarded for providing bandwidth other users and paid in Skycoin.

What is Skycoin?

Skycoin is a Bitcoin-based cryptocurrency. The total supply of the coin is 100 million and coins cannot be created of destroyed. But wait? How do you mine for Skycoin? Skycoin is not mined like Bitcoin as it doesn’t rely on Proof-of-work (PoW) consensus like Bitcoin where computers spend their energy and processing resources and are rewarded in coins. It is also not a Proof-of-Stake (PoS) currency where users are rewarded for simply holding Skycoin in their wallets, like for instance PIVX. Instead, Skycoin has its own, custom consensus method called Obelisk.


How Does The Obelisk Consensus Method Work?

The idea behind the Obelisk algorithm is that nodes agree based on a Web-of-Trust consensus. Influence is distributed over the network creating this web of trust. To eliminate mining completely each node on the network connects to a list of nodes that it sees as trustworthy.

Nodes are ranked by the amount of connections that they have with other nodes. This is almost like a social proof where nodes are seen as more trustworthy based on their popularity in the network. Interestingly, each node has its own blockchain that acts as a public broadcasting channel. Nodes are identified by the public key but only other nodes that connect to it will know its IP address.


The blockchain on each node is public. This allows nodes to see whether a node acts in favour of the network. Once a node acts maliciously, nodes can disconnect from these nodes. It also allows for a dynamic balance adjustment of power. The network can become more centralized or decentralized based on these trust relationships between nodes.

What Are The Benefits of Skycoin?

Skycoin is very fast. With transaction speeds close to 2 seconds and no transaction fees it can rival any other cryptocurrency on the market as a payment method. The transaction costs of Skycoin are covered by Coin Hours. This is value paid to Skycoin holders for each hour they hold a Skycoin.

Skycoin is against charging transaction costs and mining incentives as it only drives up the costs of the network. The biggest benefit of Skycoin is that it is energy efficient due to the Web-of-Trust social proof. It can even run on a 30-watt cell phone processor making it great for mobile payments. Centralization becomes less of an issue when anyone can participate in the blockchain.

Another way to earn Skycoin is by providing bandwidth to the Skywire mesh network. Users can also spend Skycoin by paying for bandwidth using Skycoin. This makes Skycoin a payment coin.

How Is Skycoin distributed?

The way Skycoin is distributed is open. The more Skycoin currency is released to the public, the slower it will be distributed. This puts Skycoin in the hands of the community instead of miners or traders. The majority of the coin supply (75%) is locked until the first 25 million has been distributed. For every year after the first 25% is unlocked only 5% of the remaining coins will become available. This distribution rate is programmed into the coin’s code. This will ensure that the coin is distributed exactly as the team intended. In this way, the distribution will never overtake user growth. Skycoin is also deflationary and will increase in value.

How Does Coin Hours Work?

Each Skycoin transaction costs Coin Hours and not Skycoin. To earn Coin Hours users simply have to hold Skycoin and they are paid the equivalent amount in Coin Hours per hour.

Apart from transaction fees, Coin Hours also increases privacy and acts as collateral for CoinJoin transactions. CoinJoin is Skycoin’s coin mixing service. This service mixes coins from different transactions to ensure privacy. Using CoinJoin transactions are combined and are indistinguishable from each other. Users are protected and privacy ensured. With this collateral, users will lose their Coin Hours if they back out of slow down CoinJoin transactions.

Only 100 million Coin Hours can be produced each hour. This is regulated to prevent inflation and fair use. Each transaction will destroy 50% of the Coin Hours spent on the transaction. There is also an initial Over The Counter (OTC) Buy Back Program.

What is the OTC Buy Back Program?

To regulate a healthy economy around Coin Hours, Skycoin will initially fund this OTC Buy Back Program. Users who earn Coin Hours through, for example hardware testing and who will not need to spend their Coin Hours, the company will buy them back. This is funded from the pool of undistributed coins. The company will buy back Coin Hours and give users Skycoin instead. It will in turn destroy the Coin Hours to increase the value and limit the supply.

How to Buy Skycoin

You are not able to purchase Skycoin with “Fiat” currency so you will need to first purchase another currency – the easiest to buy are Bitcoin or Ethereum which you can do at Coinbase using a bank transfer or debit / credit card purchase and then trade that for SKY at an exchange which lists the token.

Make sure you use our link to signup you will be credited with $10 in free bitcoin when you make your first purchase of $100.

Coinbase Website

Skycoin is available to purchase directly on their website in exchange for Bitcoin, Ethereum, Litecoin or Bitcoin Cash.

Buy Skycoin

Skycoin is also available on the following exchanges:

What Does the Roadmap Look Like?

Phase 1 or Testnet is already in motion where the first actual Skywire units have shipped to users. The network now functions as an overlay and the traffic will travel over the internet unless the nodes are connect via LAN or WiFi directly. For Phase 2 (Mainnet) of development nodes will connect directly to each other using WiFi. Nodes can also connect to peers using antennas over distances of 5 – 15 km. During this phase the income will not be sustainable for nodes and Skycoin will subsidize node operators. A daily allowance of Skycoin will be distributed equally to all node owners. As the amount of nodes grow, the incentive will decrease as rewards and payment from usage grows. Eventually the subsidy will stop and income will be entirely from the payment for bandwidth. The most exciting development is Phase 3 (Backhaul) where the Skywire network connects directly to the fiber backbone of the internet at a data center and essentially becomes a virtual ISP.


The Skycoin project is more than just a cryptocurrency. It is a reinterpretation of the entire internet for the cryptocurrency era. It aims to solve the issues of net neutrality, decentralization, privacy and online payments through its ecosystem of products. It also takes a moral stance against censorship, abuse of power and improving on the processes of governance. There is a lot of discussion online about the cost of Skywire units. It is estimated at around 1 BTC. A lot of the users question whether these are profitable to invest in. Self-building the unit is also an option the reduce the outlay costs.

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Web developer, blockchain builder and blog poet. Contact Louis@blockonomi.com

1 Comment

  1. Avatar
    Padruig MacPheidearain Reply

    Nice guide!

    Concerning the price of a Skyminer, you don’t pay 1 BTC for just a miner. The Skyminer itself costs about $600,- to make, which means you get an additional 1 BTC – $600 in Skycoin in return. It’s a way of funding hardware development that’s somewhat similar to doing an ICO.

    (This applies only to the first batch of miners. The price of future batches is currently unknown, but they might be sold at cost-price)

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