A few weeks ago, the relatively new India-based bitcoin mining pool GBMiners decided to switch their software from Bitcoin Core to Bitcoin Unlimited. Bitcoin Unlimited is software that creates an alternative protocol and network based on Bitcoin, if a majority of miners decide to implement a new method for increasing Bitcoin’s current block size limit.
Whether Bitcoin Unlimited would initiate a Bitcoin hard fork or effectively constitute the creation of an altcoin depends on what people decide to refer to as Bitcoin after the new chain is activated.
Bitcoin Magazine reached out to GBMiners to learn more about why they decided to make the switch to Bitcoin Unlimited. GBMiners Founder Amit Bhardwaj responded on behalf of the mining pool.
Segregated Witness Is Not the Right Solution
Like many others who would like to see transaction capacity increased on the Bitcoin network via a hard fork, Bhardwaj displayed urgency in his reasoning for switching to Bitcoin Unlimited. “It is high time when bitcoin needs to scale,” he said. “The transaction fees are going higher and higher, and [the] real essence of bitcoin lies in its use [as an] affordable currency.”
Bhardwaj referred to Segregated Witness (SegWit), a proposed soft-forking (backward compatible) change to Bitcoin that includes an increase in the effective block size limit to more than 2 MB (after users upgrade to SegWit-enabled wallets), as a “small to medium level increase in the network capacity.” In his view, Bitcoin Unlimited offers the best long-term scaling solution without altering how Bitcoin has worked in the past.
Although some would consider the increase to the block size limit enabled by Segregated Witness as modest, one of the main points of this protocol change is to enable a more efficient version of lightning networks. To this point, Bhardwaj argued, “It might work for things like micropayments, but if we consider bitcoin becoming a mainstream currency and people getting their salaries in bitcoin, then even post-SegWit we would need a block size increase.”
When asked for further details on why Segregated Witness is not an acceptable improvement for Bitcoin, Bhardwaj pointed to a Medium post from a pseudonymous author that talks about the change as an ineffective and irresponsible protocol upgrade.
“The technical debt that the update adds to the network is the biggest concern,” said Bhardwaj. “We are not able to predict the impact of such a big change to the underlying operation of the bitcoin transactions. SegWit comes with its own complexities — the downsides of which are completely unknown to us.”
In Bhardwaj’s view, a block size increase is needed as soon as possible via a hard fork, which he believes would come with less code complexity and no unforeseen bugs. “It is a simple change where the active community of miners, wallets and exchanges just have to coordinate and upgrade,” said Bhardwaj. “It makes all the sense in the world to first do the thing with less uncertainty and low probability of failure. Also, we are not fundamentally against SegWit. It just is not the best solution for the biggest and the most important problem at hand, which is scaling.”
Although Bhardwaj is against Segregated Witness as a solution to Bitcoin’s scaling concerns, he does see value in other features enabled by the improvement proposal.
How to Hard Fork Safely With Bitcoin Unlimited
While Bhardwaj claims increasing the block size limit via a hard fork is not a complex alteration in terms of code changes, the controversial aspect of such a change is that it requires a hard fork (and thus all users moving over to a new network), which can be difficult to coordinate—unless the proposed change is itself uncontroversial.
When asked how a hard fork could be pulled off in a safe manner, Bhardwaj pointed to another Medium post, which was published by the ViaBTC bitcoin mining pool. The post is essentially a safety guide for miners who wish to run Bitcoin Unlimited instead of Bitcoin Core.
In the post from ViaBTC, it is recommended that miners wait for at least 75 percent of blocks to be mined by mining pools that are signaling for Bitcoin Unlimited for three straight difficulty periods (roughly six weeks). Having said that, Bhardwaj believes a hard fork initiated by miners running Bitcoin Unlimited only needs more than 60 percent support from the network hashrate to be considered safe.
One of the main concerns with any hard fork is the potential for the fork to result in two competing blockchains, essentially splitting the Bitcoin network in half. This is what happened on the Ethereum network when the hard-forking bailout of DAO token holders led to two competing chains: Ethereum and Ethereum Classic.
“We believe if the hard fork is executed as per the Bitcoin Unlimited plan, we would be able to prevent splitting or at least make the new Bitcoin [the] primary one,” said Bhardwaj when asked about the potential for a network split.
In a scenario where there is indeed a split of Bitcoin into two separate networks, Bhardwaj claimed such a scenario would be a “minor set back in the large vision of Bitcoin.”
Thoughts on Bitcoin Core Developers
In addition to his support for Bitcoin Unlimited, Bhardwaj also feels that the various contributors who work on Bitcoin Core are incapable of handling further development of the Bitcoin protocol on behalf of its users.
“The scaling problem [has been] actively discussed for the past three years now, and yet, the community has not been able to come to a consensus,” said Bhardwaj. “It is extremely clear that the people we are banking on to take care of the development of the protocol are probably not able to do justice to the expectations of its users despite their best intentions. The present stalemate is a clear example; the transaction fees on the system [are at an] all-time high, and SegWit adoption has stagnated.”
When asked if he has ever communicated with any of the Bitcoin Core contributors, Bhardwaj first responded that the ideas of Bitcoin Unlimited and Bitcoin Core need to be merged to produce the best possible version of Bitcoin. When pushed further, Bhardwaj responded, “No, we [have] not connected to any Bitcoin Core Developer yet.”
According to one Bitcoin Core contributor, multiple attempts have been made at opening a dialogue with GBMiners.
In his final comments, Bhardwaj clarified that GBMiners has nothing against the group of Bitcoin Core contributors currently working on the project. “We have immense love and respect for their efforts so far, but our love for making bitcoin a currency for the masses is fundamentally greater,” he said.
The post Here’s Why India’s GBMiners Mining Pool Switched to Bitcoin Unlimited appeared first on Bitcoin Magazine.
Launched last year, Bitsquare is the first decentralized bitcoin and altcoin exchange of its kind. Instead of trading bitcoin through a central intermediary as a typical exchange would, Bitsquare users connect through a peer-to-peer protocol and exchange money directly. To keep everyone honest, traders put up security deposits, while an arbitration system serves as a fallback.
The open-source project led by Manfred Karrer recently ran into a setback, however, as the team tried to register the Bitsquare trademark. Payment processor Square contends that the name Bitsquare is too close to their registered trademark and opposes the registration.
Rather than fighting to keep the name Bitsquare, the team behind the decentralized exchange decided it will pick a new name.
“We would have preferred to keep using the name Bitsquare, but we sought professional legal advice from two independent lawyers, and it appears the odds are stacked against us. Given that fact, we’ll focus our limited resources on improving the platform, rather than on a lengthy and expensive legal process,” Karrer told Bitcoin Magazine. “We’ll pick a new name.”
The Bitsquare team is currently asking the community for input on a new name on the Bitsquare forum. Karrer will personally award the person who comes up with the winning name — to be decided by the Bitsquare team — with 0.5 bitcoin.
Despite the slight setback, Bitsquare itself has been doing well, Karrer said. After a slow start in April of last year, volume on the decentralized exchange has increased organically over time. The number of successful trades on Bitsquare grows each month, with monero, the euro and the US dollar ranking as the most traded currencies. (All trades on Bitsquare happen against bitcoin.)
“We saw the biggest increase of users in times where centralized solutions were conspicuously failing,” Karrer explained. “Most notably, the Bitfinex hack seemed to be a clear signal to many people that their funds are not safe on centralized exchanges. Similarly, we saw an uptick around the The DAO debacle and the subsequent Ethereum hard fork, where centralized exchanges attempted to impose what the real Ethereum chain was on their users.”
Though, as Karrer noted, Bitsquare itself is still a work in progress as well. Volume on the decentralized exchange is still low compared to alternatives. And while rare, there have been some failed trades where arbitrators had to step in to reimburse funds, especially in the volatile altcoin markets. Future versions of Bitsquare will therefore include a more flexible deposit system, while the software will also be extended with APIs that can be linked, for example, to Bitcoin ATMs. For added security, integration with the Trezor hardware wallet is also in the works.
As an even more ambitious step in the development process, Karrer plans to turn Bitsquare into a decentralized autonomous organization (DAO) later this year. It is a tainted term since the Ethereum debacle carrying the same name, Karrer acknowledged, but he believes it to be a crucial step to ensure long-term sustainability of the project.
“Much like Bitcoin itself, it is important that Bitsquare has no single point of failure. Of course, the code is already open source, and the protocol peer-to-peer, but ideally management of the project would further decentralize over time as well,” he said.
For now, however, Bitsquare first needs a new name.
The post As User Base Grows, Decentralized Bitcoin Exchange Bitsquare to Rebrand appeared first on Bitcoin Magazine.
The most notable update is a change to wallet handling of mempool rejection. This enables more graceful recovery from specific edge cases where transactions depend on other unconfirmed transactions. In other words, it prevents transactions from getting stuck in the wallet and ensures that the Bitcoin Core software doesn’t need to be restarted to fix the issue.
To be specific, Bitcoin Core developer and Ciphrex CEO Eric Lombrozo explained during an interview with Bitcoin Magazine that the “sendtoaddress” and “sendmany” RPC calls merge several operations, which may make proper error handling difficult.
“In the Ciphrex application development stack, we use multiple calls to send transactions: Create, Sign, Send. Bitcoin Core also does this for the lower-level raw transaction processing calls,” Lombrozo told Bitcoin Magazine.
“I still think the send RPC calls combine too many operations into a single call, which makes it hard to do proper error handling as an application developer. But this change at least allows for more graceful recovery from a specific edge case,” Lombrozo added.
Adoption Rate and SegWit
For normal, everyday users, the change from Bitcoin Core 0.13.1 will probably not be a big one. Like Bitcoin Core 0.13.1, Bitcoin Core 0.13.2 includes code for the Segregated Witness soft fork — but activation of course depends on miners. Users are not required to upgrade to Bitcoin Core 0.13.2 in order to remain part of the Bitcoin network, though it is advised.
Within a week since the release of Bitcoin Core 0.13.2, over 12 percent of reachable Bitcoin nodes as stated by Bitnodes have already upgraded to the new release.
The release of 0.13.2 also marks the first minor upgrade of the Bitcoin software in 2017. Bitcoin experts, including Andreas Antonopoulos and Bitcoin Core developer Jonas Schnelli, unanimously agreed that 2016 was an important year in Bitcoin development and innovation.
Schnelli revealed that 517 Github contributors played an active role in the development of Bitcoin, and nearly 4.5 commits were made on a daily basis throughout the year. Beginning with the new Bitcoin Core release, Bitcoin users and enthusiasts hope to see yet another active year of development in 2017.
It is well-known that Bitcoin’s upcoming lightning network promises instant confirmations and low fees. What is not as well-known is that this highly anticipated scaling layer is actually not limited to Bitcoin. The very same peer-to-peer protocol can potentially be extended to, and made interoperable with, many altcoins. This could allow for trustless altcoin payment processors, decentralized altcoin exchanges and perhaps even cheaper bitcoin-to-bitcoin payments and more.
Let’s say Alice has 200 litecoins, but prefers 1 bitcoin. And Bob has 1 bitcoin, but prefers 200 litecoins. So Alice and Bob agree to trade. But neither Alice nor Bob trust each other, so neither wants to be the first to send over the coins. The other may not return the favor.
That’s why Alice and Bob set up an atomic swap.
Atomic swaps utilize a clever trick known as a hash time-locked contract, which in turn leverages the potential of multisignature addresses and time-locks. All this is enabled by the basic scripting language found in Bitcoin and most altcoins, including Litecoin.
In short, Alice and Bob submit transactions to both blockchains: one on Bitcoin and one on Litecoin. The Bitcoin transaction sends 1 bitcoin from Bob to Alice, but Alice can only claim this bitcoin if she reveals a secret number only she knows. The Litecoin transaction sends 200 litecoins from Alice to Bob, but requires the same secret number on both chains.
When Alice claims her bitcoin, she reveals her secret number on the Bitcoin blockchain. And with that same secret number, Bob can, in turn, claim his 200 litecoins.
Even though the transactions are on completely different blockchains, they are effectively linked. Bob just needs to monitor the Bitcoin blockchain to see if Alice claimed her bitcoin so that he can claim his litecoins.
All this works today. But it is a bit of a hassle. Alice and Bob need to find each other to set up the atomic swap, which then requires several transactions on multiple blockchains.
This can be improved.
(Note: there are some extra steps to ensure that Alice actually does claim her bitcoin within a limited amount of time so that Bob can also claim his litecoins in a timely manner. The specifics are beyond the scope of this article; however, for details on how hash time-locked contracts work, see Understanding the Lightning Network, Part 2: Creating the Network.)
The lightning network is specifically designed for Bitcoin. But altcoins that are forked from Bitcoin’s codebase — like Litecoin, Dogecoin or Zcash — are typically capable of hosting lightning networks as well. Other altcoins, as long as they include similar or more extensive scripting capabilities (like Ethereum or Ethereum Classic), enable similar solutions.
Like atomic swaps, the lightning network utilizes hash time-locked contracts. Where atomic swaps effectively link blockchains, the lightning network links payment channels. This way, if both Alice and Bob have a payment channel open with Carol, they can transact through Carol, without needing to trust Carol.
And exactly because the underlying mechanics are the same, it’s no stretch to merge the lightning network with atomic swaps. This process makes different lightning networks interoperable across blockchains.
This means that a peer that opens channels on both blockchains could serve as a payment processor, an altcoin exchange and more.
Let’s say, for example, that Alice wants to buy a computer from Bob, for which Bob charges 1 bitcoin, but Alice only owns litecoins. Luckily, Carol has a Litecoin channel open with Alice, and a Bitcoin channel open with Bob. So Alice can now send 200 litecoins to Carol, for Carol to send 1 bitcoin to Bob. Since this is all linked with hash time-locked contracts, Carol effectively acts as a trustless payment processor.
And if Alice and Bob both have a Bitcoin payment channel as well as a Litecoin channel with Carol, they can also swap funds. Alice can send 200 litecoins to Carol, which Carol forwards to Bob. Bob then sends 1 bitcoin to Carol in exchange, which Carol now forwards to Alice. And again, all this is still linked with hash time-locked contracts, so now Carol effectively acts as a trustless altcoin exchange.
Lastly, alternative lightning networks may even improve Bitcoin’s lightning network in some ways. For example, a bitcoin-to-bitcoin payment could be routed through Litecoin peers, if that happens to be the cheapest route. Or, users operating on multiple coins could rebalance their channels. If Alice has 400 litecoins but no bitcoins in her channel with Bob, she may want to exchange 200 litecoins to fund her Bitcoin channel.
Some challenges do remain in order to realize most of this scenario.
One is denial of service (DoS) protection. While the mechanics of the lightning network ensure that no peers can steal funds, intermediaries can block or stall the payment process. To solve this, channels with non-cooperating peers must be closed. This form of punishment should make DoS attacks expensive, as non-cooperating peers need to keep opening channels.
But to verify that the channel was closed and the attacker punished, each peer along a payment chain must be able to monitor all participants. Even if only two peers along a chain of six use Litecoin, all six peers should be able to recognize a Litecoin transaction in case the channel is closed.
And of course, lightning networks must first be rolled out. This, in most cases, requires a malleability fix, at least for optimal performance. Segregated Witness — the malleability fix proposed by the Bitcoin Core development team — currently awaits activation on both the Bitcoin network and on several altcoins, including Litecoin.
But Segregated Witness has not activated yet, and whether it ever will depends on miners — both on Bitcoin as well as on altcoins.
For specifics on how the lightning network works, see Bitcoin Magazine’sthree-part series.
The post Atomic Swaps: How the Lightning Network Extends to Altcoins appeared first on Bitcoin Magazine.
India’s Prime Minister Narendra Modi announced on November 9, 2016, that 500 and 1000 rupee notes would be taken out of circulation in an effort to reduce corruption, terrorism, black money and counterfeiting, and will no longer be accepted as legal tender in India. His surprise announcement caused chaos in the country as citizens scrambled to adjust to a new monetary norm that banned about 85 percent of cash in circulation.
This move was meant to bring billions of dollars worth of unaccounted money back into India’s economy. The Indian economy has thus far run primarily on cash transactions. This, in turn, has left a substantial proportion of India’s national income unaccounted for, as it doesn’t fall into the tax net. According to a research note by Ambit Capital Research, the size of India’s untaxed black market economy is worth $460 billion. In a “cashless” India, financial transactions will be more easily traceable, and previously unaccounted transactions will not fall through the net of the tax authorities.
The demonetization of the two highest-denomination notes in India has led to an increase in the use of electronic payment services and is a big step toward a cashless society. This, in turn, has two key benefactors: e-money payment companies and bitcoin.
E-Money Stocks Are Rallying
As reported by Bloomberg, e-money stocks have soared since Prime Minister Modi announced that he wants India to become a cashless society. India’s publicly listed electronic cash companies’ stock prices have surged in the wake of the currency reform in November. They are expected to continue to outperform since the government has introduced a range of discounts for making digital instead of cash payments.
Of the 23 e-payment solutions companies listed on India’s National Stock Exchange, 5 have been key outperformers since the new currency reform.
The stock prices of e-commerce software developers Intense Technologies Ltd. and Vedavaag Systems Ltd. increased by over 50 percent, while e-payment service provider RS Software India Ltd., technology solutions provider Aurionpro Solutions Ltd. and telecom solutions provider Tanla Solutions Ltd. have all rallied by over 20 percent.
On the day after the announcement, Credit Suisse Singapore made a strategic investment in Vakrangee Ltd., which provides digital financial services to governments and lenders, by buying 3.83 million shares in the firm and thereby signaling that it is prepared to bet on the profitable future of this sector in India.
A. K. Prabhakar, Head of Research at IDBI Capital in Mumbai, told Bloomberg that his team expects “double-digit revenues growth for e-governance firms over the next 3 to 4 years if the government systematically encourages cashless transactions” and that “growth in digital modes of payments will continue to be strong if the safety is increased and charges are reduced.”
According to the Reserve Bank of India, digital payments have increased by almost 50 percent from November to December, which shows that the shift toward a cashless economy is happening despite initial chaos in the country. This development will bode well for e-payment solutions providers and mobile money services.
Bitcoin Is Booming in India
India’s aggressive move toward becoming a cashless society, however, is not only benefiting e-money companies.It has also created a boom for bitcoin in the world’s seventh largest economy.
According to data compiled by Coin Dance, trading volumes at peer-to-peer bitcoin exchange LocalBitcoins has spiked aggressively in India since November 9, while leading Indian bitcoin exchanges Zebpay, Unocoin and Coinsecure are witnessing a surge of new users coming onto their platform to exchange rupees for bitcoins.
According to Zebpay Co-Founder Saurabh Agarwal, Zebpay’s trade volumes have increased by 25 percent from October to November; they have had 50,000 new users sign up to their exchange in the month of November alone, well above the usual 20,000 new-user increases they have experienced in previous months.
While bitcoin merchant adoption is still next to none in India, the new currency reform and the subsequent push toward digital payments will give bitcoin a boost as a means of making online payments. More merchant adoption will also lead to more individuals adopting the digital currency, which, in turn, will help bitcoin flourish in India’s future cashless society.
The post As India Goes Cashless, Both E-Money Stocks and Bitcoin Benefit appeared first on Bitcoin Magazine.