Centralization Of Bitcoin Due To The Use Of Commercial Nodes

It is really more convenient for different services to work with cryptocurrencies nowadays.

Now, when the size of bitcoin blockchain reached almost 180 Gb, and the size of Ethereum is over 1TB, downloading them yourself and constantly updating has become a real hassle. Therefore, several years ago “commercial nodes” has appeared — the intermediary firms, that can be conveniently presented by the most famous and also the first one — BlockCypher platform. For the record, BlockCypher website has a solid client list, that includes such giants as Coinbase, Xapo, OKCoin and others. On the one hand, it is really more convenient for different services to work with cryptocurrencies.

Nowadays, you don’t need to keep your copy of the blockchain but simply make an automated request to an intermediary firm and get the necessary answer in automatic mode. Here is an example: the owner of a certain online crypto wallet “Wallet.X” wants to transfermoney into it, WalletX makes a request to the commercial node Bitcoin.API.X (a fictional analogue of BlockCypher) and gets an answer that this bitcoin address has received a particular amount of Satoshi, WalletX credits them to the account of that user, and after that he can exchange or withdraw his money.

Before the services like Bitcoin.API.X made their appearance, WalletX has been receiving information from several independent on-commercial bitcoin nodes and could verify that the information it had obtained was correct. Now, WalletX is forced to rely on just one single commercial node — Bitcoin.API.X.

Why is that bad? Cryptocurrency industry already knows a lot of hacking stories (forexample, a major theft with BitFinex). What if hackers, perish the thought, break a commercial node? Then all the bitcoins exchangers and wallets that use it can potentially be robbed. In our example, a hacker can convey in accurate information to WalletX, claiming that he allegedly transferred money into it, and immediately transfer them to an external wallet.

To counteract centralization of bitcoin and to reduce the risk of hacker attacks, cited in the example, it is quite reasonable to use several commercial nodes to double check the information. But each node has its own unique query language (API), and the use of e.g.only three nodes causes significant price hike for developing and supporting the software product.

After all, you need to be able to use 3 languages at once. In addition, the commercial API can be changed and this matter should be constantly monitored … I have been thinking about this topic for a while, and recently came across one ICO from Eastern Europe — Hashbon, a new generation blockchain framework. I must say, these guys set pretty ambitious and global goals, although I won’t describe it here in detail. What’s interesting is that one of the key points of this project is to create a single language for all the popular commercial nodes.

Another words, by adding their open-source library, you can address a large number of commercial nodes directly and re-check the information, received from them, in just one line of code. In conclusion, I would like to add that bitcoin blockchain was born as an excellent child, decentralized, independent of any commercial or governmental structure. As an adult, it runs the risk of turning into a trivial SWIFT by becoming dependent on banking-like structures. I am very excited, that there are teams, that want to preserve the original image of bitcoin -wayward and uncontrollable.

Originally published at www.theodysseyonline.com on August 7, 2018.