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One Year Later, A Wave of Apps Is Emerging on Bitcoin Cash

Happy birthday, bitcoin cash.

Tuesday marks the one year anniversary of the first block on the crypto protocol that split from the bitcoin network, now the fourth largest by total value, after a years-long disagreement about the course the cryptocurrency should take.

For supporters, the main goal for the competing protocol was increasing the block size to allow more transactions, and in turn more users, all in an effort to make cryptocurrency competitive with more traditional payment rails. But whether or not that plan would work was very unclear, if not highly criticized.

Yet, over the course of the last few months, around the same time developers raised its block size parameter from 8 MB to 32 MB (bitcoin’s limit is ~1 MB), bitcoin cash has seen an influx of new projects, including social media and tipping methods, taking advantage of its blockchain.

And since many of bitcoin’s most active developers were adamantly against the tweaks bitcoin cash stood for, the developers behind the alternative protocol see these apps as proof their offering is competitive.

Looking through the applications that have sprung up, it’s clear that those drawn to bitcoin cash are trying to carve out a unique role for the cryptocurrency – one that aligns with the initial value proposition touted.

Many of the applications target users with cheaper, faster payments, like Blockpress, a social media platform, and Centbee, a wallet that uniquely integrates a user’s phone list.

But there’s also some work being done to make bitcoin cash a more complex blockchain, able to handle smart contracts and token launches.

“The tremendous accomplishments that the bitcoin cash community has managed to garner in a year of existence with a new ticker, wallets and an all-around ecosystem has been phenomenal, and we hope to continue and increase on this trajectory,” Eli Afram, founder of Bitcoin Cash Australia, an advocacy group for the software, told CoinDesk.

He added:

“There’s a lot happening. We truly have an app explosion in full effect.”

Space and fees

For many app developers, the lure to bitcoin cash is all about the protocol’s unique selling proposition – basically, more space.

Take for instance Memo.cash, a social media platform resembling Twitter, where users can post short messages that get stored on the bitcoin cash blockchain never to be erased. Since bitcoin cash allows for more data to be stored in each transaction, supporters argue bitcoin isn’t capable of supporting an app like Memo.cash.

“Many of these apps cannot work on the bitcoin network, simply because of certain limiting changes that have been made to the codebase. For example, the OP_RETURN function on bitcoin cannot take the same size payload as bitcoin cash, meaning an app like Memo would have a restrictive message size limit,” Afram explained.

On top of that, more space within blocks also means reduced fees for users sending transactions.

For GitCash, which launched just last month, this is integral since it allows users to tip – no matter how small the amount – developers for their work on Github. The project emphasizes that bitcoin cash’s model allows fees to stay low even if usage increase dramatically.

And for developers that work on open-source projects generally on a volunteer basis, this app will likely be a welcome development.

Yet, the timing for these apps that focus on fees could be off.

Many of these developers compare the fees on bitcoin cash to those of bitcoin during the latter’s most popular time period, whereby fees eclipsed $20 per transaction. But right now, bitcoin fees are rather low – sometimes even lower than those on bitcoin cash today.

Still, supporters say it’s still worth it to build on bitcoin cash since it’s future-proofed, meaning ready for a day when usage of the protocols picks up again.

Alejandro de la Torre, vice president of business operations at BTC.com, a mining and wallet provider focusing on the cryptocurrency, told CoinDesk:

“We think these community-driven networks can be very effective at moving the needle in the adoption of bitcoin cash as a medium-of-exchange, which is the primary reason it was forked and developed.”

Scalability concerns

But even while all this innovation happens, there’s a big downside to increasing the amount of data kept on a blockchain – namely, it could make it much harder for users to run the underlying infrastructure that makes bitcoin cash tick.

That’s why in bitcoin, many developers are heads down working on the lightning network, an in-progress layer for pushing transactions off-chain.

Despite these alternatives, bitcoin cash supporters think raising the block size is a better and easier solution.

“[Bitcoin cash’s] last hard fork increased the block-size to 32 MB, virtually eliminating the risk for any network congestion due to scaling and paved the way for a low-cost transaction super-highway,” de la Torre said.

He believes that by making that one small change, bitcoin cash will avoid scaling problems other blockchains have faced.

Referring to the crypto cat app that went viral and caused high fees and transaction backlogs late last year, de la Torre said: “I don’t think we’ll see the bitcoin cash network get clogged by CryptoKitties anytime soon.”

And for de la Torre, the fact that there’s so much space within bitcoin cash means that plenty of other long-heralded use cases for cryptocurrency might finally see some pickup.

“In countries such as Venezuela where monetary inflation is estimated above 40,000 percent, the utility of this new block space to open up fast, low-cost transactions as an alternative payment system to local fiat has been more than salient,” de la Torre added.

Yet, that hasn’t necessarily happened in practice so far – not for bitcoin cash, which only sees a fraction of the transactions the main bitcoin network sees and is worth about a tenth of bitcoin by market cap, but also not for bitcoin either.

The ‘wormhole’

And not only are developers thinking about high-value payments use cases, but the use case that garnered incredible attention last year – the initial coin offering (ICO) – is also being considered for bitcoin cash as well.

Pointing to a long-standing upgrade proposed by Bitcoin Unlimited developer Andrew Stone, Afram told CoinDesk: “There are teams racing to produce a token protocol that will enable countless new use cases, which I’m very much looking forward to.”

And a couple weeks ago, cryptocurrency mining giant Bitmain released a proposal for adding a token mechanism to bitcoin cash, perhaps eerily dubbed “Wormhole.”

The idea with behind these proposals is to make it possible to spin up new tokens on bitcoin cash.

But just as ICOs broadly have taken vast amounts of criticism, the idea is sparking controversy among bitcoin cash users and developers too. Some have argued that the birth of tokens on the network will poorly impact the protocol and even worse, could introduce vulnerabilities that could put users at risk.

Still, that isn’t stopping several developers from trying to implement the upgrade into bitcoin cash’s next hard fork, coming in the fall.

As such, crypto tokens could be the next step towards differentiating bitcoin cash from its rival, bitcoin, and adding features that allow it to compete with even more protocols.

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The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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Litecoin (LTC) Is Not Dead, Abra To The Rescue

Litepay, the payment settlement platform that was meant to send Litecoin (LTC) to the stratosphere, first suffered an indefinite postponement for launch and then was later cancelled completely. Charlie Lee, the Founder of Litecoin, would later issue a public apology stating that the team had gotten a bit over excited with the Litepay project and had ignored some due diligence processes.

The cancellation of Litepay and the apology by Charlie Lee, left many fans and owners of Litecoin (LTC) wondering what next? Some suggestions had been put forth for Litecoin to continue with the Litepay project but with a different approach. Others had simply resigned to the idea that it would be business as usual for Litecoin without a revolutionary platform for cryptocurrency to fiat use for reall life transactions.

But this only lasted a few days for Abra CEO, Bill Barhydt, was quick to declare that Litecoin would be its platform of choice for smart contracts moving forward. Bill was earlier noted as predicting that as soon as the current market conditions improve, All Hell Will Break Loose in the crypto-markets as the big investors move in. He was quick to point out that the current dips in the market, are seen as opportunities by the said big investors.

With regards to Litecoin, Bill was quick to explain in a Reddit post, why Abra had decided to pick Litecoin as their primary asset moving forward, for the company’s smart contract investing solution. He is quoted as saying:

‘We went with Litecoin as the second asset class, after bitcoin, for our smart contract investing solution for 3 primary reasons: 1. commitment to bitcoin compatibility: core roadmap, p2sh support, lightning support, etc; 2. slightly better scalability than bitcoin in short term (block size and block times); 3. mining fees which are primarily a function of #2 although this is more of a short term benefit as mining fees would likely sky rocket if we’re successful anyway!’

With Bill’s statements, it is safe to say that Litecoin  is not dead. The fact that Abra have chosen the Litecoin Smart contract aspect, rather than Ethereum, means that the coin has a bright future. Bill goes ahead to explain how Abra will use Litecoin moving forward.

‘Abra is not meant to be a trading platform like binance or gdax. Abra is mean to be a simple app for retails investors to get exposure to hard to access assets. We enable this investment exposure using a synthetic cfd like model based on p2sh multi-sig scripts on the litecoin and bitcoin blockchains. Our goal is to open this up to different asset classes over time, not just the top 20 cryptos and fiat but even stocks, commodities, etc. An example of this vision that we hope to bring to market in the future is for someone in Ghana to buy exposure to Apple or someone in Indonesia to buy exposure to Alibaba and simply collect their winnings (or give up their losses) in litecoin. All using the same app you’re able to download today from the app store.’

In conclusion, the crypto-verse continues to amaze us with developments even as a shaky Bitcoin that is again below $7,000, causes some ‘normal’ turbulence in the markets. Market analysis of LTC puts it at $120 with a current support level estimated at around $110.

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How To Save on Bitcoin's Soaring Fees

Rising fees seem to be the only thing people talk about in the bitcoin world these days.

The crypto space is full of frustration and vitriol on the topic, as the average transaction fee has soared to $19, turning bitcoin’s old claim to fame as a cheaper online payment method into a laughable assertion.

But despite these increasing costs, and the long-running debate they’ve caused, developers and users argue there are simple ways to decrease fees that aren’t being fully taken advantage of.

This point was raised recently when new data came to light suggesting that one bitcoin startup, Coinbase, singlehandedly facilitates as many as half of all bitcoin transactions, based on the drop in overall network volume when the U.S.-based exchange went offline for a couple hours on Jan. 11.

The problem with that situation, according to critics, is the company could singlehandedly save users (not only its own but other companies’ customers as well) a bundle on their transactions by implementing a couple technical features, namely Segregated Witness (SegWit).

And since the code change for SegWit was activated on bitcoin nearly six months ago, many are upset Coinbase hasn’t yet implemented it.

Sergej Kotliar, the CEO of payment provider Bitrefillcalled the new data a “smoking gun” in that it shows how much of bitcoin’s limited transaction space Coinbase is using up. The pseudonymous blogger WhalePanda went so far as to blame bitcoin’s transaction backlogs and high fees on the Silicon Valley startup’s “incompetence.”

Patience is running especially thin as it relates to Coinbase, since the startup was one of the more vocal during bitcoin’s block size debate, complaining about high fees and arguing that an increase in the block size parameter would help alleviate those expenses.

Yet, critics argue, the company really shouldn’t be complaining since it’s not doing everything it can to push fees lower.

In response, Coinbase co-founder and CEO Brian Armstrong took to Twitter to stress that the company is working on rolling out technical features to reduce fees, but hinted that it’s not easy. “Thanks for bearing with us!” he said. (Coinbase declined to comment for this story).

But should users not be interested in enduring the fees for transacting, there are several possible ways to reduce them today.

The fee halver

SegWit was lauded as the optimization that would help bitcoin scale without upping the block size during last year’s scaling debates – yet only 12% of bitcoin transactions take advantage of the technology, even though SegWit transactions cost half as much as normal transactions.

Not all wallets currently have SegWit capability, but hardware wallets Trezor and Ledger support it and mobile wallets such as Edge (formerly Airbitz) and privacy-minded Samourai Wallet do as well.

But for users who don’t want to go through the trouble of switching providers, SegWit capability is on its way at other companies too.

Coinbase and Blockchain.info are working on implementations, for example, but both have emphasized that SegWit is a new and complex change that they need to take their time with – they could lose user funds if a big enough mistake occurred.

Overall though, as the number of companies supporting the new feature grows, bitcoin fees will decrease – some even argue that transaction fees would disappear altogether if SegWit transactions replaced normal transactions.

But if fees aren’t eliminated altogether, a more specific type of SegWit address is in the works, which could potentially save users more in the future.

Estimation game

But while users wait for mass SegWit adoption, they can reduce fees individually using fee estimators.

Although early bitcoin wallets didn’t let users choose fees, this has changed, with many bitcoin wallets providing fee estimator tools to help users decide how much of a fee they should attach to their transaction to get it through the network in a timely manner.

In short, the higher the fee, the quicker the transaction will get added to a block, but on the other hand, users don’t want to overpay. New fee estimator tools try to help users strike the right balance.

That said, some estimators are better than others.

Some users check with standalone tools that consider different factors, such as the estimator from University of Freiburg computer science researcher Jochen Hoenicke, which gives a good idea of what fee is required to get your transaction into the next block.

Another from Coinb.in considers transaction complexity – such as how much data is sent with the transaction. Fees also take this into account, meaning that even a transaction equal to $1 could have large fees based on a large amount of data attached to the transaction, whereas a transaction equal to $1,000 could have a smaller fee if the amount of data attached to it is limited.

Users have criticized some estimators as telling them to pay higher fees than necessary, but that’s partly because fees are so difficult to predict. Fees can fluctuate for all sorts of reasons. The day of the week, for instance, can be a factor since people generally make fewer transactions on the weekend, meaning transaction backlogs would ease and fees wouldn’t need to be so high during that time.

In this way, users who don’t need to send money right away always have the option to wait for transaction backlogs to die down.

Beyond that, there are more roundabout ways to eliminate transaction fees completely, but these are highly dependent on what wallet or exchange provider is used.

For instance, it’s possible to transfer bitcoin on Coinbase for free, using its off-chain way of transacting or by moving funds to the startup’s cryptocurrency exchange, GDAX.

Longer-term tools

While the idea of batching a bunch of smaller transactions into one big transaction has been used in the traditional payments space for some time, it’s becoming more popular for bitcoin businesses that facilitate payments.

If more companies use this feature effectively, bitcoin transaction fees could be reduced by as much as 80 percent, according to one estimate. However, it’s worth mentioning that batching can erode privacy and is potentially slower, depending on how the company or user implements it.

Despite these tradeoffs, though, several companies, including Coinbase, have announced they intend to implement batching to tame fees.

In an effort to keep up with all the industry’s progress on decreasing fees, Bitrefill’s Kotliar launched a tool that allows users to see how optimized their bitcoin transactions are, displaying whether the transaction used batches, SegWit or a handful of other mechanisms shown to increase or decrease fees.

“Just paste a transaction ID and see if you’re overpaying for your bitcoin transactions and withdrawals,” Kotliar tweeted.

Plus, looking even further into the future, bitcoin developers are working on a handful of projects, such as the Lightning Network, that would be instrumental in reducing transaction fees, even as the number of people using the network continues to grow.

Summing up the work in the industry to reduce transaction fees in the short term, BitGo engineer Mark Erhardt tweeted:

“There is a lot of throughput to be gained by making better use of the available capacity.”

Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in BitGo, Blockchain, Coinbase and Ledger. 

Fee charge statement image via Shutterstock

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Interested in offering your expertise or insights to our reporting? Contact us at news@coindesk.com.

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Bought Your First Bitcoin or Ether? Brace for the Fees

Ready to send your first bitcoin? That will be $26 please…

Sure, that’s on the high end of what you might pay to use the bitcoin blockchain today, but if you’re new to the world of cryptocurrencies (and haven’t invested that much), we understand seeing such a sky-high sum might be a shock. (Sorry, Kristian!)

Despite what you might have heard about the “money of the future,” the fact is bitcoin (and other cryptocurrencies) are both expensive – and experimental – today.

But while this might not be what you’re used to (or even what you signed up for when purchasing), looking at the reasons behind blockchain costs can help you understand the technology, its weaknesses and where the ecosystem needs more dedicated minds to improve.

OK, so what’s with fees in the first place?

To start, you’re probably thinking this money is all going somewhere. And it is, just not a single place.

When you send a cryptocurrency transaction, you’re paying for it to be included on the protocol’s blockchain, which you can think of as something an official record of every token on the network ever spent (whether it’s bitcoin, ether or something more exotic). Rather than holding this at a bank or a credit card firm, this ledger is distributed.

This means that should any one computer (or group of computers) go down, the network still has a copy showing that you own your asset. The bad news is you have to pay all those computers to process it.

Here, we’ll introduce you to the first new person on our journey, the miner (or validator, depending on your network).

You don’t necessarily know who he or she is, or which one is verifying your transaction – but they are doing work, so to speak, dedicating computing power, putting aside coins or doing some other cost-prohibitive function to help the network to determine which transactions to include in which block of the chain.

For this, they’re rewarded with newly “minted” cryptocurrency.

OK, but why so much?

If that’s confusing, you can think of it like this.

See, every cryptocurrency transaction is made up of a small amount of data, and most blockchains, have limited space for that data as a reference for all those transactions.

In this way, transaction fees represent how interested you are in getting your transaction through, right at that moment, and stored on the network permanently. As you can guess, the bigger the transaction fee – which the miners (or validators) get to collect – the higher your chances are of getting your transaction into the next block that’s processed by miners.

While data limits and how they change vary from blockchain to blockchain (bitcoin has a hardcoded limit of 1 MB per block), in general developers and engineers caution against raising the limit too much, as it can lead to various technical problems.

Up until fairly recently, most crypto users didn’t really notice these data limits, since the networks weren’t brushing up against them. But as a new round of crypto investors and enthusiasts hit the market, pushing demand generally up, these data limits are being tested and the associated fees are going up (see chart below).

But what fee should I add?

While it might not seem like it, increasing fees are actually a sign that bitcoin, ether and other cryptocurrencies are growing in popularity and use. But on the other hand, as it’s a fairly recent development, your wallet might not be equipped to make it easy for you.

Ultimately, many wallets (the software that provides the interface with your cryptocurrency) make you decide, giving you the power to determine how much to pay.

Still, transactions without a fee or with too low of a fee during peak usage just sit in limbo.

They’re not outright rejected, but it could take hours, even days, for the network to cool and miners to add the transaction to a block. Plus, as mentioned above, the higher the fee, the more likely it is for your transaction to get picked up by miners.

Deciding what fee is serviceable, though, is tricky.

To help users determine what fee is right, various sites offer calculators, and even some developers have stepped in to try and make that calculation less of a headache.

So, what’s next?

The other option, and arguably the boldest move, is moving into cryptocurrencies that are less-used today.

Yet, the infrastructure around these options may still be limited (bitcoin cash, for example, has fewer merchants than bitcoin), and as such, you should be aware that not only might you have trouble transacting, but development may be ongoing to fix vulnerabilities.

Longer-term, blockchain engineers on many of the largest blockchains are working on a range of “off-chain” solutions that could help the technology scale to more users, all while slashing the cost of using the network, and your transaction fees.

While it’s unclear when these solutions will be ready to deploy on the blockchain for the public’s use, with scaling taking center stage during most technical discussions, many think relief might not take long.

Want to learn more? Visit CoinDesk’s full set of ‘Blockchain 101‘ guides.

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The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Interested in offering your expertise or insights to our reporting? Contact us at news@coindesk.com.

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Bitcoin Cash Plans to Increase Its Block Size, Again

Bitcoin cash developers have made “tentative” plans to increase the cryptocurrency’s block size again next year.

At least, that’s according to a new, rough 6–12-month roadmap released yesterday by the bitcoin offshoot’s main developer team, Bitcoin ABC. The roadmap notably includes two hard forks – an upgrading method that requires everyone running the software to upgrade – scheduled for May and November of 2018.

Bitcoin cash is a cryptocurrency that emerged earlier this summer out of bitcoin’s block size debate.

Effectively blocked by those in the developer community who were reluctant to move too quickly towards a block size increase (arguing it could harm bitcoin’s security), a number of bigger block advocates went their own way and created their own cryptocurrency. Most significantly, bitcoin cash boasts a block size parameter limit eight times larger than that of bitcoin.

Bitcoin cash development didn’t stop at this initial split, however. Its developers have announced other plans to improve the cryptocurrency, which are added to by the new roadmap.

The announcement goes on to explain:

“We want to make it more reliable, more scalable, with low fees and ready for rapid growth. It should ‘just work’, without complications or hassles. It should be ready for global adoption by mainstream users, and provide a solid foundation that businesses can rely on.”

Bitcoin cash supporters believe increasing the block size is key to accomplishing this, since fees will theoretically rise less quickly as the block size increases.

Later on in the roadmap, the Bitcoin ABC developers lay out other possible features, such as reviving older rules that had been deactivated in the code.

The roadmap is subject to change as the community chimes in, however. Bitcoin ABC is only one of several bitcoin cash software implementations that need to agree and move forward with the change. (Although at least one other implementation, nChain, has given the proposal its blessing.)

The group doesn’t plan to release a formal announcement until February 2018.

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The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Have breaking news or a story tip to send to our journalists? Contact us at news@coindesk.com.

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How Will Bitcoin's Lightning Network Be Used?

It’s possible bitcoin’s Lightning Network will fall short of its lofty ambition – at least, that’s what a group of researchers are arguing.

Often trumpeted as the future of bitcoin, Lightning’s particular twist on payments channels has served as one of the foundational ideas for scaling all public blockchains. By proposing to push transactions off of the bitcoin blockchain, but keeping strong cryptographic guarantees intact, it’s believed by many developers to be the best way to increase the number of transactions the network can handle.

But the pressure for Lightning may be on. With bitcoin’s debate over its own scaling roadmap now paused, some businesses, upset by the decision, are watching and waiting to see how Lightning develops. Others are packing bags – threatening to migrate to alternative blockchains with fewer users (and thus less expensive transactions).

But, if new research is any indication, there could be some bumps in the road ahead.

Specifically, computer science researchers Simina Brânzei and Eral Segal-Halevi and assistant professor Aviv Zohar have been exploring what a Lightning Network economy might look like. At issue is whether people will actually use it, or if they will simply send normal bitcoin transactions.

In this way, Zohar argues enthusiastically that, although much of bitcoin’s scaling debate has centered on technological theory (whether Lightning transactions could be achieved), not much has been done in the way of determining how consumers and businesses will actually react to it.

He told CoinDesk:

“Sometimes people talk about Lightning as if it’s a done deal. They point out there are early implementations and all the work that’s been done so far. But I think the fate of it will be determined partly by economic forces.”

Transaction competition

But Zohar and his colleagues are also making assumptions. As part of their research, yet to be formalized in a white paper, they are building off of a generalization that there are two main types of transactions.

The first are small transactions, which most people make on a frequent basis, say, to buy a cup of coffee en route to work. The second group consists of larger transactions, say investing in a laptop or a hot-air balloon. These purchases are made less often, but are still important.

With this in mind, the researchers guess Lightning will be used for the smaller transactions, while on-chain transactions, which come with the security of having been finalized and recorded on bitcoin’s global ledger, will be used for the larger ones.

In other words, users will probably pick the cheapest option. And the cheapest option varies.

As such, Zohar believes there could be some competition between Lightning transactions and on-chain transactions. Notably, that’s directly related to bitcoin’s limited block size.

Only those that pay enough in fees will be able to get their transaction in the blockchain, and that’s significant, since users (and businesses) are already complaining about fees today.

Varied outcomes

So, will one transaction type be cheaper overall and thus crowd out the other? Or will the two types coexist? Put another way, how well does Lightning fare against on-chain transactions?

That’s the question the group is attempting to answer with economic experiments.

The researchers used the above assumptions to build two simple bitcoin economy models. The first “toy model” is biased toward Lightning, Zohar said. The economy has a Lightning Network, where users are inclined to make smaller transactions.

“What we want to see is how many Lightning transactions would happen and how many big transactions. What’s the fraction of each?” he asked.

What they found, in this case, is that most transactions are conducted using the Lightning Network. An overwhelming percentage, in fact. Yet, as far as the transaction volume goes, roughly two-thirds still occurs on the blockchain.

These volume results might seem “disappointing” in that some bitcoin developers envision Lightning Network replacing most, if not all, bitcoin transactions, Zohar remarked.

The second simple model – another “extreme” case that Zohar said doesn’t model what people really do – sees if this changes at all when every transaction in the economy is the same size: Users just pay 1 BTC for everything.

The takeaway, said Zohar, is that the results look different in each model. Lightning thrives in the first model, while it’s “destroyed” in the second because users would rather pay the on-chain fees.

Educated guess

But models aren’t reality – they’re simply the best available guess at the outcome.

“I do have to say, this is not the world of Lightning Network in 10 years,” Zohar said, adding that there are many variables the researchers couldn’t capture in their model, such as spending habits among different groups of people.

Plus, better wallet user experiences might one day hide these sorts of questions. Just like most internet users don’t think twice about their tweets are sent across the web, users won’t think about how exactly their payments are routed over the bitcoin network, whether it be on a top or bottom part of the stack.

In other words, it’s impossible to predict the future. “Our model is very naive,” he said. “Don’t take these numbers too seriously.”

Other Lightning Network developers argued similarly.

Fabrice Drouin, the CTO of Paris-based Lightning startup ACINQ, thinks the research could be “very important,” even while he doubts that these models will be very accurate at such an early stage.

“Lightning is not live yet and it is impossible to predict how it will be used and what the network will look like,” Drouin said. “[Because] there is no real money involved, [the models’] behavior cannot really help when it comes to predicting what will happen on [the bitcoin blockchain].”

But even if the research can’t capture everything, Zohar is asking questions to set more appropriate expectations for the technology.

He told CoinDesk:

“Our main message is not whether Lightning succeeds or fails. But that there are economic effects based on who wants to pay who and how.”

Now, Zohar and other researchers are working on yet another model that falls in between the two “extremes” described above, with plans to release their full findings in a paper soon.

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The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Interested in offering your expertise or insights to our reporting? Contact us at news@coindesk.com.

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Relief and Disbelief: Bitcoin Reacts to Sudden '2x' Suspension

The tweets came fast in furious, almost quicker than the articulation.

After months of anger and debate, a group of businesses and mining firms that use bitcoin’s software to provide services suddenly shuttered an attempt at changing its rules. Scheduled to be introduced in mid-November, the Segwit2x software had emerged as a controversial bogeyman, a cloud of uncertainty over bitcoin’s future, that quickly gave way.

Among those who had for months spoken out against the proposal, and what they perceived as a broken understanding of how protocol development should proceed, euphoria was evident.

“Segwit2x hardfork has been called off! Common sense prevails,” exclaimed litecoin creator Charlie Lee. “Put a fork in it, it’s done,” tweeted author Andreas Antonopoulos.

Developer Akin Fernandez, one of a legion of bloggers who have stood staunchly against the proposal, tweeted succinctly:

“Bitcoin wins.”

Indeed, the strongest voices in the initial reaction were those who had joined a long-simmering protest movement called “NO2X,” which accumulated the support of dozens of companies and users, who displayed their opposition by adding a prefix to their social media names.

The social media behavior, launched in the wake of Segwit2x’s announcement in May, did much to highlight the differing perspectives of the proposal.

An open-source software that requires a diversity of stakeholders to agree to its rules to operate – bitcoin’s major companies, developers, and mining pools have each taken a different view of development and how decisions about updates should be made.

Forged in an invite-only meeting, criticisms of Segwit2x came largely from developers, many of whom didn’t necessarily object to the idea larger blocks were needed, but a culture that had sprung up around startups that largely lacked a frame of reference for network changes had been made, or even the various ways in which changes could be made.

As such, the news could be read as a culmination of a debate that began in 2015, when former bitcoin maintainer Gavin Andresen sought to galvanize interest in a block size change. Since then, several attempts have been made to tweak this aspect of the software.

However, despite its stakeholder support, Segwit2x now joins bitcoin classic, bitcoin unlimited and bitcoin-xt as proposed softwares to fail to gain adoption based on the idea.

Unexpected relief

That said, even many of Segwit2x’s advocates were relieved the agreement was suspended.

“I am glad it is over,” said Guy Corem, a former miner who signed the original Segwit2x agreement in May. “It was the right call.”

Others hinted at the hostility their public support had brought, and the tactics used by supporters of the ‘NO2X’ segment. Members of the group were often criticized for disparaging remarks and attacks made against Segwit2x supporters.

“I guess I can now pay more attention to more fruitful technical pursuits than following the news and fighting trolls online,” said Segwit2x developer Jean-Pierre Rupp.

The acrimonious debate has been almost non-stop on social media channels such as Reddit and Twitter, at the peak leading to alleged death threats.

Due in part to this environment, there was a sense the Segwit2x proposal was not as welcomed by the community as participants had originally expected.

“We’re relieved. The goal of the NYA was to bring the community together and keep the majority of the users on the same chain for at least a little while longer,” Peter Smith, CEO of cryptocurrency software provider Blockchain, wrote in a blog post.

Others argued much the same – that a hard fork to increase the block size makes sense, but only if the agreement achieves support from all corners of the ecosystem.

“We are big fans of increasing the block size, as our customer really get impacted by the fees, but we want to see it done in a responsible way that brings the entire community together, and takes into account more voices,” said Coins.ph founder and CEO Ron Hose.

Bitcoin’s future

Still, there’s a strong sense that bitcoin still needs to scale, somehow, in the future, as it seeks to accommodate new users.

“We’ll either bring bigger blocks to people [with bitcoin], or we’ll bring the people to bigger blocks [on bitcoin cash],” developer Peter Rizun told CoinDesk.

Perhaps unsurprisingly, the news that a block size increase would not be pursued was highly praised by supporters of the Lightning Network, a proposed off-chain microtransaction network that seeks to move bitcoin transactions off the blockchain itself.

“Now that 2x is officially donezo, excited to get back to work building long term solutions like Lightning!” Lightning CEO Elizabeth Stark tweeted.

However, while the news today could position Lightning as a likely solution, the big advances that appear needed to get the network off the ground are now likely to come under scrutiny.

On display at Scaling Bitcoin, a two-day technical conference at Stanford University this weekend, were the challenges yet to be solved with the technology. This includes ensuring privacy in transactions and better understanding the economics of their interactions.

As noted by Hebrew University’s Aviv Zohar, presenting new work on the subject, larger blocks may ultimately be needed to optimize the network.

In this way, speculation is already building that Lightning will not be enough, or that it will take too long to take off. As such, some think that businesses will embrace alternative protocols such as bitcoin cash, an alternative bitcoin with a larger block size, or litecoin, founded in 2012 as a vehicle for faster merchant payments.

“We may start seeing more and more businesses move to bitcoin cash for on-chain transactions, due to the high cost of transacting on bitcoin, which is what Segwi2x was attempting to solve,” Civic CEO and co-founder Vinny Lingham told CoinDesk.

Jake Smith, Bitcoin.com’s business developer and a long-time support of on-chain scaling, said he sold his bitcoin immediately after the news hit. His comments, while brief, showcase how supporters drawn to bitcoin’s possibilities as a peer-to-peer cash have been put off by the news.

“Bitcoin just signed it’s own death warrant, as far as I’m concerned,” Smith added.

Likewise, OpenBazaar lead developer Chris Pacia, whose company moved to distance itself from the proposal last week, said more companies would likely turn to other options.

“[Segwit2x] didn’t really make sense after the bitcoin cash fork,” he said.

Future Segwit2xs?

But while there is temporary relief, there is also new thinking about bitcoin’s future.

The key thing that sets bitcoin apart, to many, is that it’s a decentralized, digital way to move value that no one entity controls. And to some, Segwit2x’s failure simply showcase’s the strength of the technology in defending against influences that could undermine this.

Bitcoin developer Bashco pointed to the long line of attempts to increase the block size, or undermine developers via such proposals, implying there will be others down the line.

“They will lick their wounds and regroup,” the developer told CoinDesk.

This view speaks to the idea Segwit2x was best considered as an attempted “takeover” of bitcoin, in that developers behind it wanted to rewrite the cryptocurrency’s rules without getting full agreement from the community.

A controversial move was also a decision by developers to remove code that constituted what has been described as “replay protection,” meaning the fork could have been executed in such a way that user funds could have been at risk if two chains emerged.

Still, some used the news to call for changes to the culture and community, especially those that keep in mind how governments or authorities could use similar methods to corrupt or harm the protocol in the years to come.

“[W]e must continue with the research into forks and chain splits and building tools and defenses because it will almost certainly be tried again,” Bitcoin Core contributor Eric Lombrozo told CoinDesk.

Bitcoin developer Matt Corallo, who had publicly feuded with high-profile members of the Segwit2x group, voiced a similar opinion that sought to appeal to unity.

“Let’s take Segwit2x’s failure as a learning experience – bitcoin’s community is strong, and needs to broadly support any changes to bitcoin’s consensus rules,” he tweeted.

Others were more grandiose, hinting at the expansive narrative that has seemed to shroud what some outside the industry may see as a benign numerical change.

Pseudonymous bitcoin blogger WhalePanda tweeted:

“We won this battle… but they will keep coming to destroy bitcoin. We will not forget.”

Microphone image via Shutterstock

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Interested in offering your expertise or insights to our reporting? Contact us at news@coindesk.com.

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2x Called Off: Bitcoin Hard Fork Suspended for Lack of Consensus

The organizers of a controversial bitcoin scaling proposal are suspending an attempt to increase the block size by way of a software upgrade.

Known for its strong early support from bitcoin startups and mining pools, the plan, called Segwit2x, or simply 2x, was to trigger a block size increase at block 494784, expected to occur on or around November 16th.

The suspension was announced today in an email, written by Mike Belshe, CEO and co-founder of bitcoin wallet software provider BitGo. One of the leaders of the Segwit2x project, he argued that the scaling proposal is too controversial to move forward.

He wrote:

“Unfortunately, it is clear that we have not built sufficient consensus for
a clean block size upgrade at this time. Continuing on the current path could divide the community and be a setback to Bitcoin’s growth. This was never the goal of Segwit2x.”

“Until then, we are suspending our plans for the upcoming 2MB upgrade,” he added.

The note is also signed by companies that originally supported the plan, forged at an in-person meeting in May, including CEO and co-founder Mike Belshe, Xapo CEO Wences Casares, mining pool Bitmain co-founder Jihan Wu, Bloq CEO and co-founder Jeff Garzik, Blockchain CEO and co-founder Peter Smith and Shapeshift CEO and founder Erik Voorhees.

The group still has hopes that the block size will be increased further down the line, once there is more agreement from stakeholders.

Cancelled image via Shutterstock

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Calm Before the Fork? Segwit2x Goes Silent as Bitcoin Spilt Looms

“It’s sort of like the quiet tension before a battle.”

That’s how Jean-Pierre Rupp, a developer at bitcoin wallet provider Blockchain, described the current state of Segwit2x development. With the code labeled “production ready,” and the work of contributors like Rupp nearly complete, the main step left is the activation of the code, scheduled for late November.

That’s when the next stage of bitcoin’s scaling debate, as they say, will come to a head.

First proposed at a private meeting of industry players in May, Segwit2x was intended to forge a compromise in bitcoin’s long-raging scaling debate. Still, it has attracted opposition, primarily for its approach to upgrading the bitcoin software. Chief among concerns is its use of a hard fork to increase the block size, a contentious mechanism due to the fact it could result in the creation of two competing bitcoin assets, or perhaps a single one that no longer interests a certain portion of users.

While Segwit2x’s proponents and detractors permeate social media channels, there’s been comparatively few statements from the group working on the software.

To that point, CoinDesk has observed little activity on the Segwit2x mailing list and GitHub (the level of code changes pales in comparison to other active cryptocurrency projects, even smaller ones such as MimbleWimble or btcd).

But this is by design, according to project developers, who say if no problems are detected, the only thing left to do is wait for the big day.

Rupp told CoinDesk:

“Nothing is really being done at the moment until the fork date. As the most recent document that we published states, we are in a quiet period. We aren’t discussing much about the direction of development afterwards, nor being too active on the technical front until the fork happens in November.”

Small stirrings

While it’s primarily a waiting game now, that’s not to say some testing isn’t being done to make sure everything will go smoothly.

While there’s no additional feature development going on, according to Segwit2x project lead and BitGo co-founder and CEO, Mike Belshe, tests are ongoing to verify the software’s compatibility with existing bitcoin libraries and applications.

Rupp provided evidence of this, saying he’s reviewed the portion of the code set to activate the hard fork. In addition, he said he’s been running a “faucet” – one that spills out test coins so users can see what making transactions will be like on a network upgraded to Segwit2x’s rule set.

Rupp has given away more than 3,500 coins which have been used to make about 5,000 transactions on the testnet. Still, it’s unclear how many and which developers are using the faucet for testing, especially since some Segwit2x developer proponents have since stepped back from the project.

OpenBazaar lead developer Chris Pacia said he’s been “a little out of the loop” recently. And RSK Labs developer Sergio Demian Lerner, despite being the author of the proposal that inspired Segwit2x, simply stated in an email: “I’m not involved in Segwit2x now.”

Other known participants declined to comment or did not respond to requests for comment.

Partisan lines

Still, there may be good reasons for the lack of Segwit2x developer and company dialogue. In bitcoin, the proposal has become a black-or-white issue, and there may be little that can be done to change the minds of those on either side.

As the bitcoin blockchain has grown, there are some who want to keep transaction fees low to attract consumers (or businesses seeking to offer services to those consumers), and those who want to keep them high (so the costs of storing a full record of all transactions doesn’t become prohibitive).

When speaking to developers, there remains staunch support along partisan lines.

John Heathco, a developer who recently contributed to Segwit2x, said he believes there’s still “a lot of community support” for increasing the block size parameter as a way to improve network capacity.

“The majority of individuals just want to be able to use bitcoin without paying ridiculously high fees,” he argued.

Historical data from Satoshi.info shows that fees have indeed grown over time, but only gradually over the last couple of years. (In October 2015, the average transaction fee was 55 satoshis per byte, though it has been as high as 410 satoshis per byte earlier this year, before dropping again to 120 satoshis per byte).

Others believe Segregated Witness (SegWit), a code change that went live on the network in August, will eventually reduce fees (and provide other suitable options of allowing low-cost transactions).

Already, companies such as BitGo and GreenAddress, among the earliest wallet providers to adopt SegWit transactions, report fees are now about half the cost of normal transactions.

Measuring sentiment

Still, users and companies, it seems, are being slow migrate.

Though 144 companies claim they will eventually update to support SegWit, at press time, the percentage of transactions using SegWit is growing slowly, and still in the single digits. Whether because they are uninterested in adoption or unwilling to, it seems, Segwit2x proponents are keen to use the statistic to argue that SegWit doesn’t go far enough.

Yet another fault line is just whose opinion matters in the debate, with developers often echoing the idea that “users” and the “community” have already rejected the proposal.

“Most people, as far as I know, don’t intend to follow it,” said developer James Hilliard, a notable critic of the Segwit2x agreement.

However, the comments mostly point to the lack of resources that can measure the issue, with informal Twitter polls often serving as “evidence” of broader sentiment.

As for the actual parties to the agreement, while a few signatories have backed out, most major miners and 56 companies claim to support the proposal. Still, there is disagreement over whether the opinion of miners and startups should dictate course.

Though less public now about their plans, it seems the companies and developers behind the effort aren’t inclined to weigh in either. Most, it seems, are content to use the silence to their advantage as a way to avoid further backlash, or at least enjoy a moment of calm ahead of what could be a fierce debate ahead.

Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which helped organize the Segwit2x proposal and has ownership stake in Blockchain, OBI, which develops OpenBazaar, and RSK Labs. 

Soundproofing image via Shutterstock

The leader in blockchain news, CoinDesk is an independent media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. Interested in offering your expertise or insights to our reporting? Contact us at [email protected].