Lisk is a platform for running decentralized applications (dApps) on sidechains. The team believes that deployment of dApps on sidechains increases the security of the main chain. Lisk uses a consensus algorithm similar to Bitshares, Steem, and EOS.
Lisk does not have an official whitepaper nor does the team provide an explanation of how secure sidechains will be deployed and maintained. Sidechains are difficult to implement successfully, and as such, have proven to be a time-intensive design challenge for many teams. IOHK, for instance, has worked with numerous universities to publish an academic paper for a sidechain solution for Cardano.
Lisk was slow to launch their main net. The project was forked from the Crypti blockchain project in January 2016 (source) and the main net only launched in June 2018. It's unclear whether the Lisk 1.0 release contains sidechain technology.
How does Lisk work?
Like Bitshares, Steem, and EOS, Lisk uses a delegated proof of stake (dPoS) consensus algorithm. There are 101 delegates that will act as block producers. The delegates are chosen through blockchain voting. The number of votes allotted to each account is equal to the amount of LSK it owns. Block production occurs in rounds, with all 101 delegates producing one block for each round. Lisk supports a 10 second block time and will reward delegates with 4 LSK per block produced. With a 10 second block time, this means that there will be more than 12 million LSK rewarded to delegates in a year. With a starting supply of 100 million LSK, that's an annual inflation rate of more than 12%.
As we've seen with Bitshares, Steem, and EOS, this dPoS consensus algorithm has a tradeoff: it is fast and scalable, but at the cost of decentralization.
Lisk plans to lean into sidechains and encourage developers to build dApps in sidechains. Sidechains can "store" main net LSK tokens through a special main net transaction that locks LSK tokens for the sidechain in the sidechain owner's main net account. This means that in the case of a faulty sidechain, all LSK tokens are safe and can be retrieved by the sidechain's owner. However, this also means that any sidechain users are at the whim of the sidechain owner.
Sidechains are fully customisable blockchains. All specifications, parameters, and transaction types for a sidechain can be customized by the developer. Sidechains can use main net LSK tokens or can issue their own custom tokens.
A key challenge for sidechains is to find node operators to keep them "live". According to Lisk, sidechain developers can specify their own consensus algorithm or can opt to use Lisk's consensus algorithm right out of the box. If so, they would need to find their own delegates to keep the blockchain running. The 101 delegates for the main net are not required to be delegates for sidechains.
The technical details for how Lisk's sidechain technology will work are unknown. It's unclear how secure sidechains are, how a dApp can run on a sidechain, and how sidechains can communicate with the main chain.
The team behind Lisk
Lisk was founded by Max Kordek and Olivier Beddows. Both Max and Olivier hailed from Crypti project. According to Lisk’s blog post, they left Crypti in early 2016 after disagreements with the rest of the management team and formed Lisk. Not much is known about Max and Olivier’s respective histories before Crypti and Lisk. Max currently serves as the President and CEO of Lisk and Olivier serves as Vice President and CTO of Lisk.
To build Lisk, Max and Olivier co-founded lightcurve GmbH, a blockchain consultancy, development studio and marketing agency. There are more than 50 people working for lightcurve and its only client appears to be Lisk.
Slow development progress
Lisk was forked from the Crypti project in January 2016. The mainnet would not be launched until two and a half years later in June 2018. Not only did it take a concerning amount of time for Lisk to develop its blockchain, Lisk launched without smart contract functionality. How can Lisk compete for any adoption when smart contract developers cannot program smart contracts on its platform?
Lack of technical details
Lisk does not have a whitepaper which is unusual for a cryptocurrency project. Usually, teams dive into the technical details of the project’s high level goals and walk through the proposed architecture to achieve those goals. In lieu of Lisk's missing whitepaper, I combed through the documentation found on the website to understand the technical details of Lisk. The website has noticeably omitted information around Lisk’s technical implementation and maintenance of sidechains.
Centralized and in-secure sidechains
According to Lisk, sidechains owners can withdraw the LSK they committed to a sidechain any time they want. This means that users of a sidechain are at risk of sidechain owners unilaterally withdrawing all LSK from the sidechain. This is a centralized situation that puts the funds of users at risk.
Here's an excerpt for a Lisk blog post:
"That means in the case of a badly written sidechain or blockchain application, all LSK tokens are safe and can be retrieved easily by the sidechain owner. However, this also means that you have to trust the sidechain owner."
This risk can be mitigated by using a sidechain with a custom token but this depends on how centralized its consensus algorithm is. Centralized sidechains can easily be manipulated.
Questionable claim in a blog post
In the same blog post, Lisk makes the claim that the cryptocurrency can generate income for "everyone in the world". They claim that in the future it's possible for a user to "secure 50 niche blockchain applications" with a Raspberry Pi "generating a monthly income of $50". This makes little economic sense. Most niche blockchain applications will either have worthless tokens, or prove to have a high entry barrier for validators. Most users will not be able to generate a monthly income that's close to $50.
Lisk is a cryptocurrency that aims to be a platform for decentralized applications (dApps) running on sidechains. It uses an EOS-style dPoS consensus algorithm for speed and scalability. There are many concerns with Lisk, such as its slow development time, lack of technical details, centralized sidechains, as well as its questionable claims and omissions on its website.