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What Is Mastercoin

What is Mastercoin (Omni)?

Alternative coins, or altcoins, were introduced as an improvement to the existing blockchain technology of Bitcoin. They have become quite popular because of the various features that they offer. Whether Ripple’s new network of processing loans or Litecoin’s new mining algorithm, altcoins offer new possibilities to network participants and end users. Mastercoin is one such altcoin that investors are increasingly interested in. Let’s learn more about ‘what is Mastercoin.’ 

What is Mastercoin?

Mastercoin crypto was created with the incentive of creating Bitcoin 2.0. It is designed to facilitate complex financial transactions and trade-offs safely and efficiently. Essentially, Mastercoin uses the original Bitcoin protocol to store transaction information and add blocks to the existing chain. It does not compete with other chains but uses Bitcoin technology to adapt new protocol layers. This improves the transaction speed and also enhances the price of Bitcoin in the process. It also uses a ‘merged mining’ mechanism where miners use alternative currencies to process transaction information. This makes the whole network more secure against 51% attacks.

What is Mastercoin’s Inception Story? 

The first proposal for creating a new cryptocurrency using Bitcoin technology was submitted by J.R. Willett. It was in the first month of 2012 when a whitepaper draft was submitted by Willett suggesting that new protocol layers could be added to the Bitcoin technology. Creating such a blockchain is possible without altering the ground framework of Bitcoin. Willett further added that Mastercoin could provide the following benefits:

  1. Issuing new currencies that have progressed into contracts for modification.
  2. Bitcoin owners can be benefited by adding value to the Mastercoin chain.
  3. It opens up opportunities for finance and software expansion.
  4. It promotes the creation of new protocols for the safer addition of blocks.

Mastercoin crypto was thus meant to evolve the Bitcoin technology and add smart contracts to the chain.

Who Invented Mastercoin?

Who invented Mastercoin
Source: Forbes / JR Willett, the man behind Mastercoin

J.R Willett is the mastermind behind Mastercoin. In January 2012, he proposed the idea for Mastercoin in a whitepaper titled ‘The Second Bitcoin White Paper.’ In essence, Mastercoin can rightfully be called the first-ever altcoin as it uses Bitcoin’s protocol layers. Willett’s initial idea was to make new currencies with new rules using existing Bitcoin technology.

How does Mastercoin Work?

Altcoins mostly compete with Bitcoin, but Mastercoin was not meant for this purpose. It was meant to create new currencies that added to the value of Bitcoin itself. So, Mastercoin works by using the existing protocols of Bitcoin, adding some new protocols to it, and creating a new blockchain. It ensures an enhancement in blockchain adoption through smart contracts and faster transactions with new blockchains that came out of the Bitcoin protocol. Mastercoin also uses Bitcoin’s mining power to add security to the addition of blocks and validation of transactions.

Who Can Use Mastercoin?

Mastercoin.network was the first ever attempt at taking the blockchain technology promoted by the Bitcoin and adding it to projects other than BTC. It was not easy to promote this project as not a lot of people could understand it. Now, every individual or enterprise that wants to turn their real world assets into digital tokens can use Mastercoin crypto. Mastercoin allows users to generate user allotted resources, which is mostly as tokens. The said tokens might stand for anything from various goods and products, data, stock shares, and more.   

Many companies have made use of this network as a method to boost their economy, and some famous examples are Tether and Maidsafe. Let’s now see how Tether and Maidsafe used the Mastercoin crypto network.

Using Tether

Mastercoin crypto could not achieve much popularity due to direct competition with Bitcoin, but it paved the way for other currencies. Tether has been successfully implementing Mastercoin’s principles. Tether offers coins in exchange for fiat currencies, and these coins are thus supported by actual funds that Tether holds. These generated coins can be stored in Bitcoin wallets or other HD wallets. The tether can also be converted to Bitcoin, meaning that it takes Bitcoin’s technology ahead.

Also, one of the biggest advantages of the use that Tether has implemented for Mastercoin.network is their transparency. They are always open for sudden audits and share the information regarding their entire capitals. Users also get to convert their digital tokens into cash using the Tether platform. Combined with the range of highly secure wallets that can be utilized, Tether is one of the safest and most secure use cases of the Mastercoin crypto network.

MaidSafe

With MaidSafe, users can exchange their excess storage for Maidsafe tokens in exchange for hard drive storage. They make use of the Mastercoin.network for the transactions, and the sale unit is SafeCoin. The founder of MaidSafe, David Irvine, played it well with the crowd sale of Mastercoin. He generated 400M MaidSafe through the sale value of $8M for Mastercoin. 

However, this move was an alien concept back in that time, and faced a lot of problems as well. The sale announced purchasing Safecoin with Mastercoin instead of Bitcoin guarantee rewards, which meant a lot of early adopters of Mastercoin dumped their assets here and left the founder of MaidSafe with a lot of illiquid Mastercoin. However, about $3M worth of Bitcoin was still accumulated, which funded MaidSafe operations. At the base level, Mastercoin still controls MaidSafe.

From Mastercoin to Omni: Rebranding & Competition

After the initial backlash faced by Mastercoin due to reasons like competition from Bitcoin, misinterpretation of its message, and weaker efforts, Mastercoin was rebranded to Omni in 2015. It was launched with the primary motive of promoting its initial ideas to a larger audience. Now, Omni is focusing on using Bitcoin technology to create new layers of TCP and IP protocols. 

What is Mastercoin Omni’s Future Planning?

Mastercoin (now called Omni) has partnered with data transferring technology Factom to use Factom’s storage technology. The whole technology relies on sending a hash every ten minutes, which means it keeps solving complex equations for adding new blocks at regular intervals. This would enable the storage of several transactions and various kinds of information on the blockchain. Omni is planning on using this technology to send network trading data to the Bitcoin blockchain. This is expected to help in reducing transactional costs and blockchain bloating.

The Key Feature of Mastercoin

Mastercoin was the first cryptocurrency designed to challenge Bitcoin. Although it failed then, it still has some key features that make it useful today. Some of these features are as follows:

  1. Users have the feasibility to create their currencies using the existing Bitcoin protocols on the Mastercoin network.
  2. It offers trading of all currencies on the Mastercoin network without requiring approvals. Anyone can place transactional orders on the blockchain.
  3. Mastercoin offers price feeding of various assets, like portraying the price per ounce of gold in USD.
  4. Mastercoin was one of the first networks to offer futures that traders could leverage upon price dip or the rise of Mastercoin.

What makes Mastercoin special?

One thing that makes Mastercoin special is that it is a self-stabilizing currency. In simpler terms, buyers can bet on the price falling or rising of Mastercoin. Suppose you have 5 Mastercoin currently that cost $10. You can then bet on price changes of Mastercoin to compensate for any losses. This means you can leverage Mastercoin’s price fall and earn profits.

Another special feature is that if you create a cryptocurrency using the Mastercoin network, it helps stabilize the price. When the new currency prices start to fall, Mastercoin creates a new unit from scratch and searches for investors offering a higher price for it than the market price. Thus, it offers some stabilization to the currency price.

Advantages of Mastercoin

  • Mastercoin offers the flexibility to store any currency on the network without any central body to regulate or put charges on the transactions.
  • It is a self-stabilizing currency, meaning its price can be optimized through futures or options.
  • It can be used as a legitimate payment option in any industry.
  • Mastercoin was the first one to take a step toward bringing together centralized and decentralized finance.

Disadvantages of Mastercoin

Creating a new currency on the Mastercoin network risks running out of money when the currency fails. You have to provide buybacks for your currency, incurring even more loss. Such a threat makes it hard for new participants to entrust their funds to create new currencies. However, market dynamics similar to stop loss can be used here to be saved from losses.

Conclusion

We hope that the question of ‘what is mastercoin’ has finally been clarified. J.R Willett’s originsl idea of creating a partner for the Bitcoin technology rather than competition was a smart move. Though the market misinterpreted this motive and Mastercoin suffered a severe backlash, Mastercoin (Omni) is now trying to make a comeback, and it will be imperative to see how this will be done. As the first altcoin ever, Mastercoin has certainly paved the way for many advancements in blockchain technology. 

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