Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche


Searching for scalability with Lisk (LSK) White Label Sidechains

The value at Lisk (LSK) comes from the blockchain platform’s focus on white label sidechains.

Essentially, a sidechain is a stripped down blockchain designed for one specific purpose. For example, facilitating payments between blockchain payments, or enabling payment between a blockchain platform and a traditional payment system.

The Lisk platform will supposedly offer users the capability to generate their own white label sidechains. In detail, a solution called Lisk Commander will generate the sidechain. Meanwhile, features called Lisk Core and Lisk Elements will let users tailor the sidechains to their needs.

Unfortunately, none of these solutions is apparently available. Thus, Lisk’s White Label Sidechains are theoretical. However, the potential value of sidechains is great.

Why Lisk’s (LSK) White Label Sidechains could be valuable

The great advantage of white label sidechains is that they offer a partial solution to the blockchain scalability problem.

To elaborate, a traditional blockchain like Bitcoin (BTC) or Ethereum contains a limited amount of space. All the encryption limits the space in the blockchain and the speed it can move.

Thus, the lack of space limits the amount of data that can move through the blockchain In addition, the blockhain’s speed is low. For instance, Coindesk claims Ethereum can only process 15 transactions per second (TPS). Thus, an Ethereum payment solution could crash if it handles 20 TPS.

The advantage to White Label Sidechains at Lisk (LSK)

Conversely sidechain solutions can be much faster. For instance, the Ripple (XRP) creators claim their sidechain can process 1,500 TPS. Thus Ripple can handle high volume payment applications like remittances and cross-border payments.

Thus sidechains have the potential to function as high-volume payment processing networks. For instance, Ripple’s promoters claim to transmit cryptocurrency payments between countries and process them in five seconds.

Unfortunately, Sidechains have a serious problem that promoters like those at Lisk (LSK) and Ripple like to ignore. A sidechain is faster because it has less encryption.

The Vulnerability to Sidechains at Lisk (LSK)

Thus, sidechains are theoretically more vulnerable to hacking, tracking, and malware than blockchain. Effectively, sidechain creators add speed by sacrificing security.

Hence, a sidechain is like a class of warship known as fast cruisers. Fast cruisers were faster because they carried less armor. However, fast cruisers are easier for enemies to sink because they lack armor.

Under these circumstances, sidechain payment solutions are at a greater risk for cyberattack and theft. In fact, I think it is only a matter of time before something like Ripple’s remittance corridor gets hacked. Hackers will target remittance corridors because they move cash between countries

The Risks from Sidechains

Therefore, Lisk’s developer the Lisk Foundation is taking a huge risk with the private white label sidechains.

In particular, Lisk plans to offer decentralized apps (DApps) that operate through sidechains. Sidechain DApps will be faster and more scalable but they will be more vulnerable.

Notably, Lisk claims its sidechains will be endlessly scalable. In addition, Lisk sidechains will work with the most commonly used programming language JavaScript. Thus, it will be easy for both hackers and developers to take advantage of this solution.

How valuable is Lisk (LSK)?

Lisk’s value is hard to determine because there is no evidence that its white label sidechain solution is working. Instead, Lisk offers a proposal for such a solution.

However, Lisk is working on a solution for one of the biggest problems facing cryptocurrency the blockchain scalability problem. In fact, Lisk seems dedicated to solving that problem.

Thus, Lisk is a theoretical blockchain solution with a very practical goal. However, the Lisk Foundation is far from achieving that goal.

The Markets overvalue Lisk (LSK)

Hence, I consider Lisk overvalued at the $1.15 Coin Price it achieved on 13 February 2019. However, Lisk was the 38th ranked cryptocurrency on CoinMarketcap on February 13, 2019. Thus Mr. Market disagrees with my assessment.

In detail, Lisk achieved a $131.955 million Market Capitalization and a 24-Hour Market Volume of $2.446 million on February 13, 2019. In addition, there was a Circulating Supply of 114.5591 million LSK and a Total Supply of 129.705 million LSK on the same day.

Why Speculators should stay away from LISK (LSK)

Speculators should note that Lisk (LSK) is vulnerable to inflation. I think Lisk is vulnerable to inflation because there is no Maximum supply of LSK.

Thus, it is possible to mine unlimited amounts of LSK. Hence, they could destroy the cryptocurrency’s value with over mining.

I think speculators should stay away from Lisk (LSK) until the Lisk Foundation demonstrates that its sidechain solution works. Without, a working white label sidechain solution, Lisk is an interesting proposal for a blockchain solution, not a viable product.

However, Lisk is a cryptocurrency to watch because its creators are working on a solution for blockchain scalability. Unfortunately, their solution is not ready and apparently not compatible with other blockchains like Ethereum (ETH) and Bitcoin.

Thus, Lisk’s value is purely theoretical which means speculators should stay away from it.