When sidechains were originally announced as a concept back in 2014, the technology was generally viewed as a potential death blow to the altcoin market. After all, if you’re able to move bitcoin back and forth between different blockchains, why would there be a need for separate cryptocurrencies?
With the 2017 ICO bubble still fresh in everyone’s minds, it’s clear this sidechains vision for Bitcoin has yet to be fulfilled.
While federated sidechains, such as Liquid and RSK, do exist, they come with different tradeoffs when compared to peer-to-peer (P2P) sidechains in terms of security and censorship resistance. The federated sidechains model is more similar to Ripple, Stellar, or even EOS, where the high level of centralization and lack of anonymity among validators brings into question whether the underlying tokens of these systems should even be considered true cryptocurrencies (see our recent post on this topic).
At the Understanding Bitcoin conference in Malta over the weekend, Adam Back, who is the CEO of Blockstream (the company that first popularized the sidechains concept), was asked whether sidechains are still a credible alternative to altcoins. In his response, Back covered the problems P2P sidechains have faced up to this point, where they stand today, and how they may become more secure in the future.
P2P Sidechains Difficult Due to Miner Centralization
After providing an overview of the federated sidechain model as it exists today, Back pointed to mining centralization as a key reason P2P sidechains have not seen as much traction up to this point.
“I think the other, kind of, hesitation about [the] peer-to-peer sidechain model is it has more exposure to miners, and mining got a bit centralized a few years ago,” explained Back. “And I think that’s improved over the past year. There are many new competitors, and one of the dominant players [Bitmain] has kind of fallen significantly in its influence and market share. So, I think that’s probably for the better. If mining decentralization is better, peer-to-peer sidechains become safer.”
Whether it’s the SPV sidechains outlined in the original sidechains white paper or Paul Sztorc’s more recent drivechains effort, many people aren’t completely comfortable with the level of trust that is placed in miners to act responsibly in these models. Having said that, RSK plans to slowly move from a federated model to a drivechain, and Sztorc is likely to release mainnet-ready code for his own drivechain offerings at some point in the near future.
In addition to the concerns around miners’ level of control over these types of sidechains, Back also explained that these systems require the addition of new opcodes to Bitcoin’s scripting language, which would require a soft fork. This is another reason the sidechains that exist today are federated: their existence is already possible in Bitcoin as it exists today.
Perhaps something like Sztorc’s drivechain proposal could gain consensus as a useful addition to Bitcoin now that mining centralization is not as bad as it once was.
Should Developers Be Building Altcoins or Sidechains?
At one point during this conversation, BHB Network Director Giacomo Zucco, who was moderating the panel, asked Back to clarify whether they should recommend developers work on Bitcoin sidechains rather than new altcoins.
“I think we can,” replied Back.
Back added that the source code for the Liquid sidechain is available online, and other companies, such as Commerce Block, are building on that as the basis for new federated sidechain networks.
“I think somebody said on a panel yesterday that [altcoins] don’t seem constructive, and this was my reaction to altcoins,” said Back. “To keep trying to repeat and create new coins [doesn’t make sense] because it’s a form of dilution, and they generally have not proven to have long life because of the constant stream of new ones with new marketing budgets and the old ones run out.”
Back went on to say that he finds building on top of Bitcoin much more interesting because it is sort of like the TCP/IP layer of a deep, liquid electronic cash system.
“I think it’s far more likely the sidechains do eventually win out over altcoins as a way to do innovation, but probably the downfall of the altcoins and different smart-contracting systems will be themselves because they compete against themselves,” Back continued. “So, EOS and Tron — I don’t even know all the names of them these days. But many of them have large budgets and they use their marketing for visibility basically.”
In terms of the long term security of P2P sidechains, back echoed comments recently made by Blockstream Mathematician Andrew Poelstra.
“I think the really long term answer which can make full security for the sidechain model is something SNARK or bulletproof related,” explained Back. “Today, you can make bulletproofs that are proofs of execution correctness — that this value had this calculation done on it and we know the output without re-running the calculation. So, you make a proof of execution. If there was enough computational resources, the proof-of-execution could be done for the whole validation of a sidechain. And actually the original description of the concept of a two-way sidechain was with that context. That was the far future possibility. The problem is today they’re very expensive.”
SoftBank CEO believes bitcoin will be useful in the future but “not any time soon“
1 minute read
- Crypto adoption is on the rise recently since the leading cryptocurrency of bitcoin has been doing the rounds when it comes to bullish momentum.
- But not everyone yet understands fully what bitcoin is or how it works.
Crypto adoption is on the rise recently since the leading cryptocurrency of bitcoin has been doing the rounds when it comes to bullish momentum. But not everyone yet understands fully what bitcoin is or how it works.
There are numerous videos and articles out there that explain it but some people will leave those articles and videos more confused than when they started!
This is a sentiment that is being shown in numerous institutional investors such as Masayoshi Son, who is the billionaire technology entrepreneur and the Chief Executive Officer of SoftBank, a conglomerate institution based in Japan. He has said that he doesn’t “understand“ bitcoin as it rises significantly in its value.
Son has said that bitcoin investment is seemingly pulling his attention away from his actual own business according to a report from business insider last week on the 19th of November.
He added that he would spend five minutes every day watching the price of bitcoin go up and down highlighting that he was told by a friend to invest 1% of his personal assets into the coin. Quick maths shows that this is around $200 million.
When discussing the future of digital currency, the CEO said that digital currencies will be useful in the future and are great for development but it will take time and they won’t go anywhere any time soon.
“I think digital currency will be useful [...] But I don't know what digital currency, what structure, and so on.”
© 2020 CryptoDaily All Rights Reserved. This article is provided for informational purposes
As it grows, how much ground will XRP cover next year?
1 minute read
- Is 2021 XRP’s year?
- How adoption will result in the success of the token.
Timothy Peterson, the well-known advocate for bitcoin and manager of global macro, believes that the San Francisco-based XRP token will have its best year in 2021 since 2017.
As previously reported earlier this week, Peterson has recently said:
“I know it doesn’t look like much but this is $XRP lowest price forward. I think people will be surprised at $Ripple’s performance in 2021. It will probably have its best year since 2017 and maybe outperform #Bitcoin.”
As many people will already be aware, the success for ripple and its token will all depend on adoption by financial institutions. They have developed numerous new products such as rippleX in order to help facilitate a seamless transaction on the decentralised ecosystem for the network. But for the tokens targeted market, only 2% of financial institutions are actually willing to use it.
The Chief Technical Officer of Ripple, David Schwartz has previously said that there are numerous obstacles that prevent adoption for the token some of which include problems with regulation. That being said, well-known traders and investors at Galaxy trading have said that the asset is proven to be resilient.
“Although it is perhaps one of the most disliked projects, it has more than once shown its aggressive nature at a time when no one is expecting it.”
They see that the coin is capable of sparking by 10 times its current price as they say:
“We believe that this moment is very close and since catching the exact bottom is something very unpredictable, our advice to all who want to invest is to start buying at these “golden” levels of support where 10X can become a reality.”
The benefits of Ethereum 2.0 will come sooner rather than later according to Vitalik Buterin
1 minute read
- Vitalik Buterin, has recently answered a number of questions from the community as a part of a “ask me anything“ session on Reddit.
- The co-founder highlighted many different topics but specifically said that he expects some significant and noticeable network improvements to come for the project sooner rather than later.
Vitalik Buterin, the co-founder of one of the biggest crypto projects in the industry known as Ethereum has recently answered a number of questions from the community as a part of a “ask me anything“ session on Reddit. The co-founder highlighted many different topics but specifically said that he expects some significant and noticeable network improvements to come for the project sooner rather than later. He further said:
“TLDR: merge happens faster, PoS happens faster, you get your juicy 100k TPS faster.”
Over the years, the network for Ethereum has experienced some significant rounds of high congestion. Three years ago in 2017, the popular CryptoKitties game slowed down the network massively but with the decentralised finance space growing rapidly, the network has been seriously clogged up.
As a result of this, it has led to high fees and longer than average confirmation times.
With Ethereum 2.0 very much just around the corner, there is a significant scaling upgrade solution that is supposedly going to speed up the network rapidly. This will increase the number of transactions per second and it will also move the blockchain to a different consensus algorithm known as a proof of stake. Phase 0 for the upgrade is set to occur on the 1st of December in two weeks!
The co-founder further went on to say that “all of these changes are designed to decrease the time until eth2 becomes useful to people.”
The second richest man in Mexico invest 10% of his portfolio into BTC
1 minute read
- Ricardo Salinas Pliego is the second wealthiest businessman in Mexico and the 166th richest man in the world.
- It was recently announced last week that he has invested 10% of his liquid portfolio into the leading cryptocurrency, bitcoin.
Ricardo Salinas Pliego is the second wealthiest businessman in Mexico and the 166th richest man in the world. It was recently announced last week that he has invested 10% of his liquid portfolio into the leading cryptocurrency, bitcoin. This came after he shared a video throwing huge amounts of paper money into the garbage. Not only does it show how worthless the government-issued cash is in today’s world but it also shows how important digital assets such as bitcoin could become.
Para iniciar con el #Bitcoin, les comparto un video tomado en un país latino donde los bancos tiran el dinero a la basura (el papel moneda no vale nada) es por eso que siempre es bueno diversificar nuestro portafolio de inversiones 😌.— Ricardo Salinas Pliego (@RicardoBSalinas) November 17, 2020
Esto es la expropiación inflacionaria! 🤦🏻♂️ pic.twitter.com/ahblQW6AhO
Furthermore, the video indicates the hyperinflation and how bad it got in Venezuela.
Ricardo is worth more than $11 billion at the time of writing and is the only billionaire from Mexico who seems to have benefited from the coronavirus pandemic and the economic crisis that has come as a result.