August 1st 2017 is a date that will probably be remembered for a long time in the history of cryptocurrencies. It's the day when we'll find out if Bitcoin, as a crypto currency, will continue to be decentralized. Or, in other words, if Bitcoin will be controlled or not, by a certain group.
The whole turmoil turning markets upside down is, in fact, about that. There is a real danger that miners (or whoever controls miners) will take over the network. All in the name of profits.
In such a scenario, Bitcoin will continue to remain, from a technological point of view, decentralized, as a blockchain. But from a social point of view, it will be just another form of banking. The middle-man will be whoever will control the network.
I'm not going to debate more on the philosophical aspects of this situation, I'm sure we'll have a lot to write about during next days, but I will, however, try to understand if we have alternatives, in case Bitcoin will really become the biggest distributed private bank in the world.
What Should We Look For In An Alternative Bitcoin?
- governance - how the network actually works? who's responsible for what?
- issuance - how are the tokens created? is the process prone to error, easy to hijack?
- cost - there are intrinsic, blockchain-hardcoded transaction fees?
- speed - transactions per second, block generation time?
Let's see how this are playing into Bitcoin, for now. Governance is pretty much melted with issuance. The token production mechanism is by mining, and whoever has more hashpower, dictates the rules. Not good. Cost is not hardcoded in the blockchain, but it's tied up to the governance, so it can be modified at the governance level. As for speed, we talk about 7 transactions per second. But this is just in theory, in practice we can barely see 3.5 TPS (source). Also not good.
Ok, so let's look at alternatives.
Ethereum
Governance is still melted with issuance as the minting process is still mining. But, there is an important but here: if Ethereum really ditch this and goes for a PoS algorithm, then we can have something. PoS should address both governance and issuance and that will bring a bit more clarity. Ethereum already has a history of forking (ETC) so I don't see too much trouble if a part of the current blockchain will stick with mining and only a part will migrate to Casper (the PoS protocol proposed by Ethereum). As for the cost, there is some GAS to be spent. Not good. Speed is also a bit of a problem: although Ethereum claims double the speed of transactions in Bitcoin, namely 15/second, let's keep in mind that Ethereum is also a virtual machine, processing smart contracts. So out of these 15 transactions, I don't know how many are really financial transactions and how many smart contract transactions.
But Ethereum has a few strong points too: it has already a critical mass adoption, it has a few relevant ecosystems living off of its blockchain (Golem, Gnosis) and it has a big potential from a technological point of view.
Steem (Graphene family: Bitshares, PeerPlays)
Governance is DPoS, which, although still not perfect, is a huge step forward from the brute hashpower force of Bitcoin. As for issuance, since it's part of the governance mechanism under DPoS, I guess it will qualify as ok, but the inflation (still very high) can be seen as worrisome. Speed is probably the best thing about STEEM, with a potential of tens of thousands of transactions per second (tested on BitShares blockchain, recently) and also cost: unbeatable, meaning free.
STEEM (and the Graphene blockchain family, BitShares and PeerPlays) is a good candidate. Adoption is still small, unfortunately, and the technical challenges related to scalability seem to be daunting.
Tendermint
BFT (Byzantine Fault Tolerant) is the protocol behind Tendermint, a relatively under-the-radar project, but a very serious one. I've met personally the founders a few months ago and had the chance to exchange a few ideas. Tendermint aims to be a "blockchain of blockchains" and it will make the creation of DEXes (Decentralized Exchanges) a trivial thing. It's not yet live, but it will be very soon, a few months, and their token ATOM, will act as a "lingua franca" of all cryptos on the Tendermint blockchain.
So, governance is probably the best out of all, and probably issuance (since it's part of the BFT algorithm). I still don't have information about the cost and speed but I can only infer that speed will be ok, and cost will be left to the end user.
Slimcoin
I left this at the end, because it's probably the most exciting project I've been watching over the last couple of years. Exciting not only because of the financial potential, but mostly because of the way it grew from its own ashes. From an almost abandoned project, it grew to a nice and active community and it continues to grow. I thoroughly enjoy the discussions around this project and I'm quite happy I stumbled upon it.
So, what will make Slimcoin a good candidate to replace Bitcoin? Issuance. Slimcoin is the first PoB (Proof of Burn) currency in the world. That mechanism makes Slimcoin "mineable" with a Raspberry Pi (I wrote a few articles about PoB on Steemit, check the #slimcoin hashtag). The cost is built in the blockchain bust adjustable by each user, the speed is something that I really don't know about, but I can only assume is on par with Bitcoin's (Slimcoin is a fork of PeerCoin, which is based on Bitcoin). It may not be a mass alternative to Bitcoin, but it can certainly be used in certain vertical markets.
What Do You Think?
So, what's your opinion? Do you know of any other potential replacements?
I'm a serial entrepreneur, blogger and ultrarunner. You can find me mainly on my blog at Dragos Roua where I write about productivity, business, relationships and running. Here on Steemit you may stay updated by following me @dragosroua.
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You bring up some very good points. I'd be interested in your viewpoint of EOS and it's long term outlook to be able to solve a lot of the problems presently facing crypto. Slim coin I've heard of but as of now am ignorant in it's utility. Thank you for bringing this up as I'll start looking into it now.
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Still no clear information about EOS, just some words. When I'll see an initial version, even an MVP, I will be able to emit an opinion. But based on @dan's technical abilities, it will be a very good piece of engineering, what remains to be seen is how fit it is for the current times and context.
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I am confused to why a hardfork will inevitably lead to centralization in Bitcoin. There will most likely be a fork but with so many people aligned with the original vision, the "real" branch will always survive.
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In a network where the hashpower is concentrated in the hands of a few, there's no "real" branch, just another type of bank.
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I disagree. That hashpower only has "power" becasue the people give it. Their rewards are only worth anything if they appease the users. If they misbehave, the users are always free to do as they please. That is the power of Bitcoin. "Bitcoin" might be taken over, that does not stop the people from keeping "their version" going.
Bitcoin mining is a lot more decenteralized than you make it out to be.
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I think that if Bitcoin becomes a centralised private bank (and it probably will) and it does well out f it, you will see more and more crypto currencies follow suit.
Think about that from an investor's point of view - centralised control, someone who is accountable for the money I am investing, is a lot more attractive and a decentralised model where my money is at much higher risk.
So the currencies that will get funding will be the centralised ones. The decentralised ones will be fringe products for anarchists and crypto-geeks. The mass adoption cryptos will be centralised because that's what most people want. They understand centralised. It's not new and scary. So that's where most people will go.
The question for the developers of new blockchain technologies is- are you in it for the money, or to build a better world?
If you're in it for the money, just like a normal bank, then a centralised blockchain is what you want.
The biggest trick, if it can ever be pulled off, would be to have both - a blockchain that regular people understand and are comfortable with, that is not just mining people for money, like a normal bank.
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I agree with the fact that there will be two categories of blockchains: private / public ones (already being used by banks for improve their transaction capacity) and decentralized public, which will always be open and independent. They will balance each other and create some sort of equilibrium. In the best scenario, obviously. In the worst scenario, there will be just another Lehman Brothers moment, called SegWit, or whatever.
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Very good post @dragosroua. I'm still a little confused as to the whole August 1st thing, but I know it has something to do with forking or potential forking in the bitcoin blockchain. I'm all for decentralized and I think that is one of the most important factors in bitcoin being used.
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Pretty excited about Tendermint... Anyway, waiting for the event as well.. Aug 1. I just don't know who I can trust, but the whole suspense it just exciting :)
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The August 1st decision point does seem to be quite mega. Is any of the mainstream financial, non-crypto media picking up on it yet?
I wonder if there will be a large scale turning away from Bitcoin if the big miners do take control? I guess it will be tricky to bypass it totally as so much of the crypto world still orbits around it.
Is much known about the big miners, and who is controlling them? Am I right in thinking of lot are based in China?
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I like your post @dragosroua
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I learnt that EOS is planning to implement 50K transactions per second,if true that could really solve the issue of scalability.
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I guess that is the problem with having a decentralised platform that relies on miners to update their software to carry out mining and verifying transactions.
They have tremendous powers on enforcing what they want, compared to the users of the developers.
I've never heard of slimcoin before but it seems like if bitcoin does go through utter turmoil it may be a good alternative.
Will we see the rebirth of slimcoin?
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