Topics Blockchain
Bybit Learn
Bybit Learn
Beginner
Sep 1, 2022

What Is Ergo Crypto: Combining the Best of Bitcoin & Ethereum

Deciding which crypto is right for your portfolio can be challenging when there are hundreds of options from which to choose. One project you might want to consider is Ergo, which is designed specifically to bridge the gap between Ethereum and Bitcoin. Investors have shown substantial interest in this altcoin, and it’s currently at a healthy price. If you’d like to place some of your money into ERG, it would behoove you to have a solid understanding of the Ergo platform and its many features.

What Is Ergo?

Ergo is a type of secure blockchain based on decentralized finance (DeFi) functionalities. Its purpose is to combine the best features of Ethereum with those that Bitcoin has to offer.

The project is outfitted with a proof of work (PoW) similar to the consensus protocol that Bitcoin uses to ensure its network is secure and smart contracts are available to accommodate DeFi. The security features were taken from Bitcoin, while the smart contracts and decentralized features came from Ethereum. If you want to mine Ergo tokens, this platform uses a protocol referred to as "Autolykos," which is a substantially modified version of the Bitcoin mining protocol.

History of Ergo

Lead developer Alexander Chepurnoy created this crypto project. As a blockchain veteran who has been developing crypto-related software, Chepurnoy has written and published numerous papers on blockchain technology over the years. Prior to creating Ergo, he worked as a researcher at IOHK, an engineering and research company best known for creating Cardano.

In 2019, he partnered with Dmitry Meshkov, a fellow researcher at IOHK, to develop Ergo, which was officially launched at the beginning of July 2019. When this project first began, Chepurnoy stated that it was made to deliver extensive smart contracts as well as ample security features.

How Does Ergo Work?

Ergo works by combining the top features of Ethereum and Bitcoin. The platform was designed to be a more efficient and secure financial contracts platform that offers comprehensive DeFi functionalities. Keep in mind that “decentralized finance” refers to applications that remove centralized banks from financial transactions.

Mining Model

The platform’s mining model is similar to that of Bitcoin and allows for the creation and validation of new coins. However, computer size is limited for mining operations, meaning that large mining farms that consume high amounts of carbon aren’t developed.

Programmable Blockchain

The Ergo platform also exists as a programmable blockchain similar to that of Ethereum. Since it’s programmable, the blockchain's able to host various decentralized applications (DApps). Ergo provides this functionality without charging transaction fees.

Developing DApps on Ethereum is challenging, since transaction fees differ, depending on current network congestion. This issue makes it practically impossible to estimate development costs. In comparison, developers know the exact amount they need to pay to develop an app on Ergo.

Smart Contracts

Smart contract features, as well as ErgoScript smart contract language, allow for the creation of more complex and secure financial contracts, which Ergo’s team believes is necessary for the DeFi industry to advance in the coming years.

Every token that's hosted in a smart contract comes with an added layer of protection detailing when the token can be used, who can use the token and what conditions must be met before it’s used.

ErgoScript makes smart contract development simple with sigma protocols and light nodes. The light nodes don't need to hold the full blockchain copy, or run on a 24/7 basis, which allows the platform to use less computing power and storage space. Because of these features, the platform is mobile-friendly.

Be aware that this platform doesn't use general-purpose programming languages, such as Python or JavaScript. Instead, ErgoScript makes code specifically for decentralized finance, which ensures the code is simplified and relatively easy-to-use.

Features of Ergo Platform

Ergo offers an array of features that makes the platform a worthwhile investment. Along with the PoW model, Ergo also comes with no gas fees and a crowdfunding service known as ErgoRaffle. We discuss the latter below.

Proof of Work Model

Ergo uses the PoW model to mine new coins and validate transactions. When it comes to this consensus mechanism, anyone who mines ERG can use multiple GPUs on a single Ergo node. While the PoW model is effective, it also consumes a lot of energy, Bitcoin’s main issue.

Ergo, however, has mitigated this issue somewhat with its Autolykos mining algorithm. This algorithm is resistant to ASIC devices and large mining pools, which makes the PoW model more efficient. In fact, anyone who wants to mine Ergo can do so with a standard computer and graphics card.

Ergo Mining

Ergo is set to mint its entire supply in the eight years following its initial mainnet launch in 2019 — in other words, by 2027. Mining Ergo tokens is simple and straightforward. All that's required is for the mining to configure a standard node, which is possible if your graphics processor has at least 4GB of VRAM. However, 8GB of VRAM is recommended.

Since Ergo is based on the PoW consensus mechanism, miners are able to use multiple graphics processors on just one node. It's also possible to benefit from mining pools. However, the Ergo team recommends that miners select only small pools.

At the moment, there are four primary wallet types with full support. Two of them — ViaWallet and Yoroi — are web-based. Only Yoroi supports native assets. The official Ergo Mobile Wallet is likely the best one, since it provides multisig functionality, as well as scripts and native-asset support. A mobile version of the wallet can be found on Google Play.

No Gas Fees

Even though Ergo is a programmable blockchain that allows for the development of decentralized applications, its platform doesn't collect transaction fees. This feature has made Ergo popular among developers who create DApps.

DApps

As we previously stated, Ergo supports the creation of DApps that extend platform functionality. One DApp that was built on the Ergo platform is SigmaUSD, which was developed with the AgeUSD protocol and is considered to be a decentralized stablecoin.

ErgoMixer is a noninteractive and noncustodial crypto mixer that effectively secures the privacy of each user by sending and receiving tokens in large batches before mixing them up. With this approach, tracking transactions is practically impossible. Another DApp built with Ergo is the Ergo Auction House, an NFT marketplace that runs hundreds of auctions.

Spectrum

Spectrum, previously known as ErgoDEX, is the decentralized exchange that exists on the Ergo platform. However, that’s not all: Spectrum is also meant to be a native cross-chain ecosystem with new offerings. This specific DEX allows users to transfer their liquidity between Cardano and Ergo. Remember that Spectrum uses the EUTXO model to ensure that liquidity sharing is possible between these platforms.

Spectrum was made with an automated market maker (AMM) protocol as well as an order book protocol. When a user performs a transaction on this exchange, they’re provided with incentives. The ecosystem’s various users include user-interface (UI) providers, liquidity providers, traders, miners and off-chain executors.

Ergo Storage Rent

Over the years, the Bitcoin platform has lost more than four million coins as a result of wallet addresses that have either been misplaced or lost altogether. Other projects have issues with token flow, since tokens can remain in wallets for an extended period of time without being touched, which means there aren't as many tokens on the market.

Ergo aims to mitigate this issue with a feature known as storage rent. This feature recycles unused and lost tokens so they can be placed back into circulation. When tokens remain untouched for a period of four years, miners can collect fees, which are considered to be incentives for effectively securing the Ergo network when block rewards reach zero.

With this form of rent collection, unused data is no longer a problem. Users can remove or transfer tokens before being charged fees. If they don't, users would pay the fee every four years to allow unused tokens to be mined.

ErgoRaffle

Briefly mentioned above, ErgoRaffle is a type of crowdfunding service created by Ergo, which allows users to raise money for a wide range of different projects. Examples of these projects include a charity donation, an academic study or a business plan. Once a raffle takes place, a lottery will occur, which results in one of the participants winning a portion of the raffle.

EXLE

EXLE, formerly known as ErgoLend, is a platform designed to accommodate P2P lending and borrowing via the Ergo blockchain. Still in development, the team behind EXLE is raising funds to assist with the progression of the decentralized application. When the platform is in place, anyone who contributed to EXLE’s development can fund a loan, making it possible to enter a pool of lenders and earn returns from interest on the loan. Lenders are set to receive returns of 5% for every loan they assist in funding.

Already, EXLE has started providing loans with funds from ErgoRaffle. The recipient of one loan, Margaret Mama Gibby, received $2,500, which she will repay over a period of 12 months beginning in September 2022. 

An additional loan of $3,000 recently reached that amount with funds remaining from the initial loan. The borrower, Grace Lotoom, is establishing a cyber cafe with the funds, and will also start to repay the funds in September on a 12-month term. The team behind EXLE believes that nearly 20,000 borrowers will seek loans in the coming year.

Use Cases of Ergo

Ergo has many distinct use cases, the primary being the creation of DApps. As mentioned previously, DApps such as SigmaUSD, Ergo Auction House and ErgoMixer all have different uses. For instance, SigmaUSD is a decentralized stablecoin that has been pegged to the U.S. dollar. On the other hand, the Ergo Auction House supports NFT auctions. By allowing different types of DApps to be created, Ergo's use cases will expand over time.

ERG Tokenomics

ERG is the token for the Ergo platform and is considered to be deflationary. It has a hard cap of 100 million tokens. Block rewards have consistently been decreasing ever since 2021 — two years after the token was launched. At the launching of this platform, block rewards were at 75 ERG. Once eight years have passed, these rewards will reach zero. The current ERG price is around $3.17, which is up significantly from the $2.0377 price on August 10. The current market cap for this coin is approximately $101 million. More than 32 million ERG are in circulation today.

Ergo Road Map

Ergo, an ever-evolving crypto platform, is currently developing a crowdfunding platform as well as a decentralized exchange. Additionally, the platform wants to continue growing for the foreseeable future. Ergo's road map is a lengthy one, with potential refinements that include refundable ICOs, private swaps and an ErgoPay feature. Because of the large number of features the platform is adding on a regular basis, the Ergo team believes that new users will be attracted to the platform, which could result in the value of ERG increasing.

Is Ergo a Good Investment?

There are many reasons why Ergo can be considered a good investment. The platform takes its strongest features from both Bitcoin and Ethereum, which helps it minimize potential problems. If your main goal when investing in cryptocurrencies is to use a platform that offers transaction privacy, Ergo could be a great investment. It’s not supported by venture capitalists, who prefer transaction transparency, which indicates that the platform offers ample privacy.

The growth of its token largely depends on community engagement and support from DApp developers. If you're unsure about the future growth potential of this token, the somewhat low price of ERG means you can add it to your portfolio without needing to make a sizable investment.

The Bottom Line

Ergo is a unique platform that offers valuable features and functionality that aren't readily available with other crypto projects. While Ethereum is also a programmable blockchain, it comes with high gas fees, a problem that Ergo deftly avoids. Whether you want to make trades with or mine ERG, the Ergo platform has plenty of existing use cases — with more to come.