Digital Cash 2.0 and a New Method of Issuance
Bitcoin has often been described as Gold 2.0 and Digital Gold (1.0). In his whitepaper, Satoshi Nakamoto, did the world a great service by laying the foundation for a digital cash revolution. However, this foundation isn’t without its flaws.
As we saw during Bitcoin Mania last winter, Bitcoin has issues with scalability. When everybody and their brother rushed to get their hands on some Bitcoin, the network became wildly congested. This led to extremely expensive and slow transactions. This is a major problem for a system that claims to be digital cash (Note: a large portion of the community now deems Bitcoin as Digital Gold instead of Digital Cash for the aforementioned reasons).
Two of the most acclaimed proposals to fix the scalability issues are: Lightning Network and bigger blocks. Unfortunately, both have their own list of issues.
Let’s begin with the fork in the road (bigger blocks). Not only did this fork create the biggest rift the cryptocurrency space has witnessed to date, but it also doesn’t establish a better currency than its predecessor. Why? Because these forked versions of Bitcoin are easily susceptible to 51% attacks because they don’t have the necessary hashrate needed to keep the blockchain secure from large mining farms or even coordinated attacks from smaller farms. (Not to mention Bitcoin Cash is currently being split again into Bitcoin Cash ABC and Bitcoin Cash SV … how many times is this going to happen?)
Next, let’s address the underlying issues with the Lightning Network (LN) in order for Bitcoin to scale. First and foremost, it has yet to be proven that the Lightning Network will even work properly and efficiently — we’ll have to wait and see at this point. Even if it is possible, the entire premise of utilizing the Lightning Network to scale goes against Bitcoin’s fundamental idea of decentralization. I’m going to leave this paragraph short and sweet, but if you’d like to learn more about problems with LN, check out this article.
A third issue unrelated to LN and forks that needs to be talked about is this: what happens to Bitcoin when all of the coins are mined? Will miners stick around to secure the network? If so, how expensive will those transaction fees be? And how much energy will be expended to keep the chain secure and functional?
Alas, the rise of Proof of Stake (PoS). This is the path Ethereum (Not the Digital Cash 2.0 mentioned in the title … wait for it) has chosen to thwart 51% attacks, as well as solve the unsustainable energy issues Bitcoin will eventually face.
However, just like with PoW, PoS has its faults. PoS favors those with the greatest access to the asset (whoever has the money to stake). Utilizing staking in order to keep the chain functional also has a few other flaws including the long-range attack and “nothing at stake” flaws. You can read more about those here and here.
So what do we do when Bitcoin fails to be a digital cash, LN isn’t functional or decentralized, forks run into 51% attack issues and PoS has its own litany of flaws?
How about a hybrid? A PoW token on a PoS platform (EIP-918). This already exists as 0xBitcoin on the Ethereum network. 0xBitcoin is the first mineable token ever created. It uses a hybrid version of SHA-3/Keccak for PoW mining to mint block rewards and will be on a PoS network once Ethereum makes the switch.
So, what issues mentioned above does 0xBitcoin solve? It will scale with Ethereum for incredibly fast and cheap transaction fees. It will be immune to 51% attacks once Ethereum switches to PoS, and once all the tokens are mined it won’t rely on future energy consumption to keep the currency functional.
It also solves a host of other issues in the cryptosphere. It’s a non-monarchy token (the first ERC-20 token to fit this description ever) that can interact with smart contracts (unlike Bitcoin) and it’s the first ERC-20 token that isn’t considered a security fundamentally.
It’s also creating a flourishing new space for developers who are interested in things like merge mining, sidechains, PoW King of the Hill, Nametag tokens, etc. And I saved the best for last: LavaWallet, which was created by the 0xBitcoin deployer, and will allow users to transact 0xBitcoin and use 0xBitcoin (or any other ERC-20) to pay for transaction fees instead of ETH (gas).
Yes, it may seem like creating another new currency and system for issuance may be beating a dead horse at this point, but it’s necessary. Creating more and more flawed “fixes” to the current cryptocurrency models is doing everyone a disservice. Let’s do it right. The future of digital cash depends on it.
If you’re interested in learning more about the 0xBitcoin project, click here.
