The Daily Decrypt is a daily weekday video broadcast covering a wide variety of cryptocurrency and blockchain technology topics and news stories. At CORE Media we’ve found the broadcast to be an invaluable and entertaining resource in cryptocurrency news and provide a weekly summary of The Daily Decrypt episodes. Welcome to the Weekly Decrypt!
In recent weeks the Bitcoin blockchain has been experiencing issues with pending transactions piling up in its mempool waiting to be confirmed and processed into blocks. Bitcoin users have reported waiting in excess of 24 hours for transactions to be confirmed and many have posted in online forums pleading others to not use Bitcoin until the mempool is cleared. Also becoming increasingly common are posts from Bitcoiners announcing they’re diversifying into some of the major altcoins which have over the past several years developed technology far superior to that of Bitcoin.
Up until now Bitcoin has reigned as the king of cryptocurrency primarily due to it having been the first to the table and to the resulting network effect. It remains apparent, however, that Bitcoin is one of the least developed cryptocurrencies. It has the slowest confirmation times, no clear governance structure, unrewarded nodes, no privacy features at the protocol level, alphanumeric addresses, little to no double spend protection and a development process funded primarily by fiat venture capitalists.
Despite many of the major altcoins having better technology than Bitcoin, most also lack a clear governance structure and so it is likely that if any of them were to expand their user base to the size of Bitcoin’s user base some of the same bottlenecks in development would arise.
As the cryptocurrency competition continues to heat up, it is becoming increasingly clear just how important it is to have a clear governance structure at the foundation of any cryptocurrency network. The network can operate at its best only if all parties involved are clear on what participation in the network means and what can be expected upon choosing to participate. Perhaps contrary to what one might expect, governance is just as important in the decentralization movement as it has been in the centralized systems of the past and it is likely that the cryptocurrency which best governs itself will emerge on top.
In an effort to determine the feasibility of any cryptocurrency network reaching the transaction processing capabilities of the payment networks such as Visa which can process over 40,000 transactions per second, Amanda sat down with technologist and writer Eric Sammons for a chat about sidechains and whether they would be preferable to altcoins.
Sidechains are separate blockchains pegged to Bitcoin functioning to remove some of the load from the Bitcoin blockchain. Sidechain technology is currently under development primarily at Blockstream. Sidechains can be considered altcoins with their independent volatility removed by their being pegged to Bitcoin. So why use sidechains instead of altcoins?
Sammons argues that altcoins are likely to be a better solution than sidechains because they are a product of the free market. Anyone can create an altcoin and so, yes, some of them will be scams or just poorly developed, but over time the free market should weed those out in favor of the altcoins with the best technology and usability.
Anyone who has been following cryptocurrency for several years will recognize that this is already happening. Scam altcoin launches, although they are still out there, are becoming less common and the best-developed altcoins are the ones sitting directly under Bitcoin at coinmarketcap.com.
Alternative Bitcoin reference client Bitcoin Unlimited, which aims to scale Bitcoin with bigger blocks and guide it with a solid governance model, recently announced that they’ll be placing a relaying node in Beijing as a means of distributing their latest development, ‘thin blocks’, more easily to Chinese Bitcoin mining operations that exist behind China’s internet censorship mechanism which has been dubbed the Great Firewall of China.
Amanda reached out to Bitcoin Unlimited developer Andrew Stone for more information on thin blocks. There are two separate protocol layers operating within the Bitcoin network. One is the transaction layer and the other is the block layer. Upon noticing that all Bitcoin transactions are distributed to all nodes in the network almost instantaneously through the transaction layer, Bitcoin Unlimited developers began to seek a way to pass important information about transactions into the block layer without actually including all the transactions in the block layer.
What they came up with is thin blocks, a mechanism by which a hash referencing the transactions in the transaction layer is passed into the block layer. Thin blocks can save an enormous amount of block data and are likely to be very effective in transmitting information through the difficult Great Firewall of China to Chinese mining operations.
One of the strongest selling points for Bitcoin since its inception has been that its network has no single point of failure. Within the greater cryptocurrency ecosystem, however, Bitcoin itself is emerging as a potential single point of failure due to its developers having failed to keep its transaction processing capacity in line with the demand for Bitcoin transactions and the fact that Bitcoin is the primary gateway between fiat currencies and the altcoins that comprise the rest of the ecosystem. Also to note is that very few goods and services are currently available for purchase with any cryptocurrency other than Bitcoin.
If we as cryptocurrency users and advocates are tired of waiting for Bitcoin development to turn things around and want to take the health of the entire ecosystem into our own hands, it is imperative that we begin building out the infrastructure for which early Bitcoiners so fiercely fought. Aside from building out the services and infrastructure needed to bring fiat currency directly into altcoins, we must speak with the people with whom we trade and do business and seek to increase the number of people and businesses accepting altcoins as payment for goods and services.
Co-founder of SlockIt, Christoph Jenztsch, joined Amanda for a discussion on his Ethereum-based project which is developing smart property and “Internet of Things” devices that lock and unlock using cryptocurrency and smart contracts and aims to function as a decentralized autonomous organization (DAO).
SlockIt aims to facilitate the growth of the sharing economy by enabling people to rent out their property in new ways. The broader vision for the project, however, is to be positioned well within the “Internet of Things” movement by enabling machine-to-machine communications and payments.
For example, SlockIt is working with German energy company RWE to develop blockchain-enabled electric car charging stations that will allow blockchain-enabled electric cars to pay for their own energy automatically. This sort of blockchain-enabled smart property is currently possible only on the Ethereum blockchain because it is currently the only blockchain that is turing complete.
Ethereum is also unique in that it enables its decentralized applications (dapps) to function as DAOs. For example, those looking to participate in the SlockIt DAO can do so by buying tokens representing the right to participate. The DAO receives a 1% fee from every transaction that takes place on the SlockIt dapp. The DAO then can vote on how to allocate the funds.
As more dapps are built on top of Ethereum, concerns about the size of the Ethereum blockchain and incentives for nodes to host it are growing. Jenztsch, however, assures us that SlockIt will not contribute much to the size of the Ethereum blockchain because its locks will function primarily through peer-to-peer signed messages and will only need to embed data on the blockchain when the Slock is rented and again when it is returned.
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