How Public Blockchains Like Bitcoin and Ethereum Can Be More Private and Scalable
We spoke to Iddo Bentov, a cryptocurrency expert and Cornell researcher, about the potential to utilise blockchain technology in various industries, and how public blockchains like Bitcoin and Ethereum can improve in terms of scalability, privacy, and usability.
Primarily, Bentov explained that he is most interested in the idea and concept that money does not have to be controlled by a human or a centralised institution that makes arbitrary decisions.
Unlike fiat currencies like the US dollar, which is controlled by a central entity called the Federal Reserve System (FED), decentralised currencies such as Bitcoin and Ethereum exist as protocols, governed by a distributed network of miners, users, developers, and node operators.
“I like the idea that the money is not controlled by a human that can make arbitrary decision, but it's controlled by an algorithm that it is known to everybody, that it is predefined”
“I like the idea that the money is not controlled by a human that can make arbitrary decision, but it's controlled by an algorithm that it is known to everybody, that it is predefined, and this is the way that it works. I think this has potential”, said Bentov.
The application of blockchain technology in the realm of finance has been referred to as its killer application. As demonstrated by the global blockchain market, the most dominant cryptocurrencies in the market including Bitcoin, Ripple, Bitcoin Cash, and Litecoin are payment-focused blockchain networks whose major function is to settle transactions on a public ledger.
Money is the most realistic application of blockchain technology, because in its current form the blockchain is not capable of processing large chunks of information efficiently. The proof-of-work consensus algorithm employed by major public blockchains disallows any information or data being processed on a public ledger before miners approve and verify them with computing power. In essence, the blockchain can be described as a significantly slower version of database technology that exists as a decentralised protocol and unbreakable network.
In the future, Bentov noted that blockchain technology could be used in many industries that need to process information in a trustless manner, without the involvement of third party service providers and moderators. One industry that has already adopted blockchain technology is the charity industry, led by the United Nations’ Building Blocks.
Already, through its innovation centre known as Building Blocks, the UN has integrated Parity, a version of Ethereum that is fast and scalable, to process donations on the blockchain. The replacement of banks with blockchain technology eliminates the necessity of third party audits and transaction monitoring, which leads to a substantial decline in transaction fees.
“It's a question of whether you use a simple blockchain that is more scalable like Bitcoin where everything is very simple, or you use something more complex.”
“If you want to transfer data through an agreement between different businesses that are distrustful of each other, you have this public blockchain where you know that what you put on the public blockchain becomes irreversible - that this really happened, so now they can use this blockchain for their agreements in whichever ways they want. This is a very high-level generic point here, but there are probably more specific use cases for blockchain. So now again it's a question of whether you use a simple blockchain that is more scalable like Bitcoin where everything is very simple, or you use something more complex,” Bentov explained.
Using Hardware to Process Bitcoin Payments Faster
During his presentation at the Genesis London Conference, Bentov noted that hardware such as Intel’s SGX (software guard extensions) can be used to process zero-confirmation transactions, allowing payments to be processed instantaneously.
According to Bentov, tokens and cryptocurrencies could be interchanged and traded on hardware-based systems as well, avoiding centralised platforms and exchanges. Intel SGX can be integrated into any device, like laptops. If SGX can be securely implemented to create a method of processing cryptocurrency transactions and trades, it could potentially allow Bitcoin and other public blockchains to process transactions with a capacity that is incomparable with the current transaction volumes of cryptocurrencies.
“Say you want to trade the Bitcoin for Ether or Litecoin. We get really good security in the sense that these trades would really happen, and the new balances will settle on the blockchain after a period of time, a fixed period of time, or if there is some attack, the user will just get the original money back,” said Bentov, emphasising that cryptocurrency trades can be securely processed on trusted hardware, given that if trades do not go through due to an attack, funds are refunded back to the owners.
In 2016, Cornell researchers led by Cornell professor Emin Gun Sirer revealed an Intel SGX-based system called Teechan, capable of processing 2480 transactions per second per channel, by taking advantage of the efficiency of trusted hardware. This year, Sirer revealed that bloXroute Labs are working on a similar system based on trusted hardware to process thousands of transactions per second, on-chain. At the moment, Bitcoin is settling less than 7 transactions per second.
Improvement in Privacy Leads to Scaling
At the conference, during an interview with Binary District Journal, Bentov delved into the privacy of Bitcoin and other cryptocurrencies like Zcash. Bentov explained that several privacy solutions, such as the MimbleWimble protocol and bulletproofs, are being explored by Bitcoin developers, and added that these technologies could be more efficient than the actual Bitcoin protocol because they do not have to store history from Genesis, or the beginning block of Bitcoin.
Bentov, however, emphasised that big rewards follow big risks, as the implementation of MimbleWimble would lead to a radical change in the codebase of Bitcoin, similar to the impact Segregated Witness (SegWit) had on the Bitcoin network. While SegWit improved the scalability of Bitcoin by decreasing the size of transactions and therefore speeding up the processing of transactions, it took over a year for SegWit to be integrated through a soft fork.
“To have a protocol that is MimbleWimble instead of Bitcoin, like to replace Bitcoin with MimbleWimble, this will be very controversial.”
“Some of the Bitcoin developers and some anonymous person came up with this MimbleWimble protocol, which is actually even more efficient than Bitcoin because you don't need to keep the history from Genesis,” said Bentov. “Just from the latest stake you can be convinced that you have the real data of the ledger of the blockchain, but this is like a very radical change from Bitcoin. To have a protocol that is MimbleWimble instead of Bitcoin, this will be very controversial.”
As such, although privacy solutions and protocols could have immense impact on the scalability of Bitcoin, due to the amount of change those bring to the core Bitcoin protocol, these solutions will likely not be implemented onto the Bitcoin network in the short to mid-term.
Through the UN World Food Program, Syrian refugees can now buy food from Jordanian grocery stores by simply looking at a small machine by the cash registers. An iris scanner is able to identify an individual, then accesses and spends food vouchers linked to that individual’s account.
An accurate record of these grocery transactions is then committed to the blockchain ledger. Robert Opp, Director of Innovation and Change Management at WFP, predicts that by March 2019 an addition 400,000 refugees will receive some form of assistance through blockchain initiatives.
Illustrations by Kseniya Forbender
To contact the editor responsible for this story:
Margarita Khartanovich at [email protected]