Distributed ledgers — the fundamental problem we’re trying to solve
The initial promise of Bitcoin was to become “A Peer-to-Peer Electronic Cash System”, as Satoshi Nakamoto’s original paper states right in the title. Almost a decade later, Bitcoin has certainly become a successful project. But did it fulfil its initial promise?
With the value of Bitcoin soaring in 2017, so did the transaction fees, hitting a maximum of $55 in December:
To be fair, since December the fees dropped back to acceptable levels of a few dollars, but this is just an effect of a general decrease in the number of transactions. Besides the fees, there are also costs associated with running the network. As you can see here, a single transaction uses enough electricity to power 31 US households for one day.
In addition, the volatility has also increased, sometimes resulting in 25% value change over a couple of days. These factors had a major contribution in some platforms’ decision to drop Bitcoin payments all together.
The Bitcoin community doesn’t seem to find a consensus (pun intended) when it comes to major decisions, and last year we already saw two hard forks followed by coin splits: Bitcoin Cash on 1st August and Bitcoin Gold on 24th October. In the meanwhile, the size of a block hasn’t changed, and the promise of a more scalable chain seems more and more unlikely.
Bitcoin is nowadays considered a store of value, or digital gold, and this has become a fundamental property of the currency. Even with all the altcoins launched during the past couple of years, Bitcoin will not be dethroned as the main cryptocurrency to hold your savings. But on the other hand, it’s improbable it will start being used for day to day payments.
Ethereum — the first distributed Turing machine
Technically speaking, Ethereum is also a cryptocurrency, but in practice it’s a platform for writing distributed programs. One of the most important category of Ethereum applications are the ERC20 tokens.
Basically, an ERC20 smart contract allows the creation of a new cryptocurrency on top of the Ethereum blockchain. During the past years we’ve seen lots of projects that took advantage of this amazing feature to launch their own ICOs. These are usually the steps followed by the teams behind these projects:
- Choose a suitable industry/domain
- Find a good use case for a decentralised token
- Create the token on top of Ethereum
- Convince investors or the community to fund them, trading their token for Bitcoin and/or Ethereum
Many people agree that a large number of these projects will never deliver. The tokens are often used for speculation in a pump & dump frenzy. Perhaps we need to further improve the underlying technology before we can unlock the true potential of smart contracts.
Blink — the protocol Blockchain aspired to be
In all this ICO frenzy, many people find it difficult to understand the differences between all these projects that are launched everyday. Some of them are Bitcoin (or some other existing blockchain based coin) forks, some are just ERC20 tokens, and others, a minority of them, are new protocols.
The fundamental problem Bitcoin solved was to maintain a distributed ledger. Basically, in a peer-to-peer network of computers that don’t trust each other, we want to store replicas of the same database and securely update entries. The way Bitcoin achieved this was to batch updates in blocks, and every 10 minutes pick a random node using proof-of-work to decide the contents of a new block and broadcast it. More or less, this is a simplified description of what the blockchain technology does.
The Blink protocol solves the problem of maintaining a distributed ledger. It is an alternative to the blockchain technology itself, not just a cryptocurrency. We maintain the same levels of security and decentralisation, while improving the speed and having lower latency. Blink is fundamentally a technology organisation that builds the infrastructure of the future.
Payments and micro transactions
Building new technology is always exciting for the development team, but the tech itself should be accompanied by a product.
At Blink we believe we have the first protocol that will allow the creation of a cryptocurrency to be used for real life payments. The main characteristics of the protocol are:
- A throughput of 20,000 transactions per second.This number will increase when we optimise the code and especially when we employ sharding. The main limitations are the bandwidth and the CPU power. The protocol is within a constant factor of theoretical limits.
- An initial confirmation step (the equivalent of waiting for a block in blockchain) of 300–600 ms, with a transaction reaching an irreversible state (finality) in about 30 seconds.
- We believe the protocol to be highly resistant to attacks. We plan on getting both the white paper and the codebase audited.
- The protocol is highly decentralised. Transactions are treated independently, there is no single point of failure.
We will integrate with payment processors and we already have a working alpha of a wallet. Hope to pay for that Starbucks coffee with Blink soon!
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