Dmitry Khovratovich: Public Scrutiny Will Determine the Most Secure Blockchain Solution
In an exclusive interview with Binary District, Dmitry Khovratovich, a researcher at the University of Luxembourg, discussed both the limitations and advantages of bitcoin and Ethereum; how several emerging cryptocurrencies and blockchain projects are tackling the limitations of the two blockchain networks; and the usability of permissioned or centralized blockchain platforms.
Since the emergence of bitcoin, the mainstream media, financial news publications, traditional economists and analysts have been critical of bitcoin’s supposed anonymity - highlighting its use case on the dark web. In recent times, however, government agencies and the global law enforcement community have begun to regard bitcoin differently.
With the arrival of companies specializing in blockchain analytics, law enforcement officials have come to the realization that bitcoin transactions can in fact be evaluated, analyzed and traced. This is done relatively easily through the use of sophisticated transaction analysis tools and blockchain explorers. As a result of this, several major dark web marketplaces have been removed and vendors have been caught.
“The decentralized payments is one great thing I see in both platforms, to which Ethereum adds decentralized code execution. Secure implementation of these features has been an open problem for years, and I really enjoy watching practical solutions.”
The general public has gradually begun to regard bitcoin as a safe haven asset and digital gold, instead of as a financial network for dark web criminals and drug traders. Institutional investors and retail traders have also adopted bitcoin, particularly in the US, Japan, and South Korea.
Limitations of Bitcoin and Ethereum Networks
Dmitry Khovratovich maintains that bitcoin and Ethereum are limited by a lack of anonymity and privacy. He also emphasized the scalability issues of both blockchain networks - a fact that developers from both Bitcoin core and the Ethereum Foundation would admit to.
“The limitations are well-known: traceability resulting in privacy loss, scaling problems, and openness resulting in almost no confidentiality. The scaling problem though is being tackled by many prospective solutions such as Raiden or more powerful Plasma, EOS, Tezos. However, it'd be premature to judge their efficiency as a lot of technical details are still being developed or unknown”, he said to Binary District Journal.
The new generation of blockchain networks, such as Tezos, are also focused finding a solution to the lack of economic incentives for core blockchain developers. Currently, most developers for Bitcoin Core and the Ethereum Foundation have very little financial stability, despite the fact that they sustain the codebase of two of the largest blockchain networks in the world.
In an interview with Binary District Journal, Vlad Zamfir, a researcher at the Ethereum Foundation, stated that most blockchain core developers are being paid salaries lower than industry standards. Newly emerging blockchain projects like Tezos and EOS are attempting to tackle this issue; a development that Khovratovich considers positive for the entire cryptocurrency industry.
“Of course, not every solution is secure, but as usual in cryptology, the public scrutiny will bring us the answer which one is.”
Khovratovich remains an avid proponent of bitcoin and Ethereum, and the practical solutions they provide. In particular, the ability of the two blockchain networks to process decentralized payments. In just 8 years of development, both networks have established themselves as an alternative decentralized financial system, running counter to traditional global banking systems and financial networks.
“The decentralized payments is one great thing I see in both platforms, to which Ethereum adds decentralized code execution. Secure implementation of these features has been an open problem for years, and I really enjoy watching practical solutions,” said Khovratovich.
Ivey Business School professor JP Vergne proposed that the best indicator of growth and a cryptocurrency’s exchange rate is the developer activity around the blockchain network.
"We found that the best predictor of a cryptocurrency's exchange rate is the amount of developer activity around it." - @PirateOrg— Jameson Lopp (@lopp) July 5, 2017
Khovratovich also noted that the increase in the market cap and price of cryptocurrencies, such as bitcoin and Ethereum, has started to attract many researchers and developers who want to contribute to the open source codebases of blockchain projects.
“The exchange rate rising has attracted a lot of researchers, developers, architects which seek to gain from a growing market. I see a lot of concurrent activities in the field, and almost any technology demand has been met with a solution. Of course, not every solution is secure, but as usual in cryptology, the public scrutiny will bring us the answer which one is,” added Khovratovich.
As long as market demand for cryptocurrencies and leading digital currencies continues to grow at this current pace, there will be more than enough incentives for new developers, entrepreneurs and researchers to venture into this relatively new market.
Potential of Permissioned and Centralized Blockchain Platforms in Commercial Markets
While the vast majority of cryptography experts and developers are opposed to permissioned blockchain networks, Khovratovich explained that well-structured permissioned blockchain networks can be secure, flexible and efficient for commercial purposes. He emphasized that security on permissioned blockchains rely on nodes, which can still maintain a robust platform if conditions are met.
“I have seen some notable implementations of permissioned blockchain networks such as Sovrin or Stellar. Interestingly, they are still decentralized though the network stability is based on a different assumptions. In the Proof-of-Work-based networks the security is based on the assumption that no one is able to gather more than a third of hash power”, said Khovratovich.
The blockchain industry is at a very interesting juncture in its development: there is a new generation of blockchain projects looking to provide innovative solutions to the limitations of first-generation cryptocurrencies, such as bitcoin and Ethereum.
Multi-billion dollar companies are also attempting to automate most of their operations through the utilization of permissioned blockchains, which could result in significant reduction in costs and expenses in the future.
“In BFT protocols, which form the basis of permissioned networks, the security relies on having more than two thirds of all nodes benign. Both assumptions are sound and from some point of view are good enough for decentralized networks”, concluded Khovratovich.
Blockchain technology like Aladdin on his flying carpet, promises to show us the world… well at least a freer one with transparent and efficient business practice. Nothing screams romance like a decentralized ledger, am I right? However,
according to Vlad Zamfir, the exact same properties that make the technology extremely useful, can also have a harmful impact on society. If it’s not a pet monkey, it’s something else…*sigh
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