Can Bitcoin Be Fixed?
The birthing of Bitcoin and other cryptocurrencies has unleashed the next wave of innovation in the technology and fintech sectors but we are not quite there…yet
Bitcoin has just turned 10 years old. 10 years have elapsed since the 2008 financial crisis took hold of the global financial system. Satoshi had indicated that the genesis block and the birth of Bitcoin was a result of people’s loss of faith in the current financial system and the status quo.
The birthing of Bitcoin and other cryptocurrencies has unleashed the next wave of innovation in the technology and fintech sectors. And although Bitcoin and cryptocurrencies in general face several challenges before they are ready for mass adoption, there is no doubt that after 10 years of trials and tribulations, cryptocurrencies and blockchain are maturing and gaining mainstream acceptance.
However, if no one uses digital currency for everyday transactions its use remains pretty limited. That’s the general consensus to those outside the industry. The increase in Bitcoin’s popularity is also aiding and abetting in showing its cracks, high transaction fees, slow transaction speeds and the computer power costs are preventing it and other cryptocurrencies of going mainstream.
Bitcoin has “virtually no acceptance, and shrinking,” adding “if nobody accepts the technology for payment then the value would be 0.”
Morgan Stanley analyst James Faucette, ‘Bitcoin Decrypted’
Although concerns have been raised regarding whether crypto and blockchain technologies are ready for primetime, the general consensus is that scaling solutions like the Lightning Network, Liquid Network, Casper, Sharding, Plasma and sidechain solutions will solve the scalability challenges and allow for billions of transactions per second to happen concurrently, seamlessly and securely.
Blockchain Challenges Slowing Mainstream Adoption of Crypto
Challenge # 1 : Scalability
Visa is the dominant player when it comes to transaction speed. Visa can process up to 24 000 transactions per second and averages 150 million transactions every day. Ripple comes in second at 1,500, PayPal with 193, and so on and so on…
If digital currencies can’t come close to Visa than why would anyone stop using visa? Or cash/debit?
Challenge #2: Interoperability
Banks have the ability to talk to each other even though this incurs high fees and there are time delays. Currently the ability for Ethereum to talk to the Bitcoin Blockchain or the Ripple Blockchain is difficult. The ease in which blockchains interact amongst each other is vital to mass adoption. Currently exchanges are the main communication channels between blockchains for transferring value and exchanges are vulnerable and prone to hacks. Many believe the solving of the cross-chain communication problem is the next ‘Eureka’ moment for blockchain technology.
A main goal behind many blockchain and cryptographic technologies is to try to solve the risks and issues that are associated with fiat and traditional state-sanctioned banking systems. Blockchain developers are currently working on building open-protocols and multi-chain frameworks in order to make blockchains and cryptocurrencies interoperable. The most well known of these open-protocol is known as the atomic-swap, which allows for the exchange of value between blockchains, without using an exchange or an intermediary.
Blockchain Is What Makes Bitcoin Different
Blockchain, or Distributed Ledger Technologies (DLT) is an incorruptible digital ledger which can be programmed to record virtually everything of value. To better understand a blockchain, imagine a spreadsheet duplicated thousands of times across a computer network which regularly updates the spreadsheet — accessible to all participants in real-time, stored across multiple locations. DLT offers an improved, more efficient solution for resource-consolidation and information dissemination,
An example of something similar would be like Google Sheets and Google Docs allowing parties with access to view a document at the same time — like a shared ledger.
Public and Private Blockchains
Public chains are open-source, trust less (no need for trusted intermediaries like banks) and available to anyone who wants to join. No business entity or government should have control over the blockchain — this is what makes them decentralized.
The idea behind public blockchains is that anyone with access to it should be able to use it with no restrictions.
Private Blockchains are the opposite, no one has access without permission and usually the owner is a company or single entity. They control the blockchain which means they also control the entries to the blockchain. They are not decentralized but are being heavily utilized by industry due to the benefit of its speed, time and money efficiencies
2018 the Year of Public Blockchains — Or Was It?
Many in the industry were hoping 2018 would be a breakout year for public blockchains with over 1000 public chains emerging and that cross-chain communication and transaction speeds would now be a ‘thing’ of the past, yet here we are heading into 2019 and this is not the case. Many of these public blockchains are still in the early development phase; others are making major strides but we are still not over the ‘hump’ so to speak.
The Scalability and Interoperability Race
The Lightning Network
The Lightning Network which works by adding an additional layer to Bitcoin’s blockchain, allows for the establishment of off-chain payment channels between different blockchains, allowing users to create micropayment channels between any two parties on that extra layer. These payment channels exist as long as needed to complete transactions, are peer to peer, allow transactions to occur almost instantly and fees would be low or non-existent.
The Lightning network, being mainly used for transactions between Litecoin and Bitcoin, is realized through the establishment of off-chain payment channels between different blockchains, allowing for instant value transfer.
Vitalik Buterin, presented a scalability solution on March 9th in Paris called Plasma Cash. Created by Vitalik Buterin with Joseph Poon, one of the Lightning Network co-creators. Like payment channels in the Bitcoin Lightning Network, Plasma is a technique for improving the limitations of scalability and security while conducting off-chain transactions; relying on the underlying Ethereum blockchain to ground its security.
BUMO is an enterprise Blockchain infrastructure for commercial grade applications. Basically, they provide bridging services for internal and external side chains in a parent/child tree architecture mainly to address scaling and interoperability issues.
BUMO knew it had to tailor individual networks to the individual business needs of those the blockchain needed to serve by integrating various technology to alleviate the current blockchain bottlenecks related to performance, scalability, and application diversity.
As for security, the BUMO core system architecture and code, based on Bubi Blockchain technology, have been vetted for two years for security loopholes and operational failures.
The Scalability and Interoperability Race is On
The race to provide scalability and interoperability to blockchain technology is on and it is likely there will be a few winners. The biggest and the first across the finish line doesn’t necessarily mean it will be the best. The one(s) that ultimately win will be those that provide the best user experience to the end user.
I spoke to Arunabh Das, Founder and CTO of AppLiaison Inc about the hopes we had for 2018 and what did and what did not pan out and here’s what he had to say:
“2018 has been an exciting year for decentralized apps and for the widespread adoption of blockchain and DLT technologies. Blockchain devs all over the world are working hard at creating decentralized exchanges and platforms and the scalability problems are getting solved using various sidechain solutions.
Blockchain and crypto is finding widespread adoption on Wall Street as well as in Silicon Valley. Blockchain solutions combined with AI, ML and IOT are expected to have a transformational effect on the quality of life for human beings everywhere as well as on the on the sustainability of our cities in the Anthropocene epoch.
2019 promises even more exciting advances in blockchain and AI and developers across the world are optimistic about bringing about peace and prosperity for human beings all over the planet by fully harnessing the power of these decentralizing technologies by killing data monopolies and empowering human beings to have greater access to economic opportunity while maintaining control over their data and privacy using self-sovereign identity systems.”
I agree with Das, I think we will see faster adoption in 2019.
Does Bitcoin really need to be fixed at all? Perhaps it is not a question of ‘fixing’ Bitcoin but of enhancing Bitcoin.
Original story published on BlockDelta.io — Can Bitcoin Be Fixed?