The Bitcoin blockchain has been the most popular distributed ledger since its inception in 2009. Over the course of its existence, many altcoins and privatized blockchains have entered the crypto space offering niche applications and bank-2-bank databases that have tried or are trying to take Bitcoin’s place. So far nothing has been offered that compares to the irreversible, trust-free transactions and security provided by proof-of-work mining in the Bitcoin network.
An Immutable Ledger Matters
The latest chapter in the Ethereum community has created some distrust in reliability when the network decided to bail out a third-party application. 85% of the community decided to reverse the DAO attack using a hard fork though it’s possible they could have used an entirely different method to recover the funds as many proponents said something had to be done.
However, now, people will always remember that Ethereum has reversed a smart contract. Meanwhile, Bitcoin has never broken the trust of its user base. There are instances of forking where Bitcoin developers had made a significant change to the code. However, out of all the examples, no third party applications were ever rescued, and Mt Gox — the most notorious theft of bitcoins to date — was not bailed out.
Bitcoin’s immutability relies on proof-of-work (PoW), which is a proven way to secure a blockchain through powerful computation and processing time by a computer.
The curation of Bitcoin is handled by a large community who have chosen to rely on one simple scheme and that method only. A dynamically scaled governance system is not what Bitcoin is about and to conflate this with the protocols simplistic innovation of PoW is an attempt to add centralization.
Ethereum’s decision to hard fork was motivated by greed or vested interest in a third party application. Users were pressured by developers from the foundation and Slock.it to hastily fork with no other possible solutions in less than thirty days. A decision like this would most likely never happen within the Bitcoin community.
Bitcoin: The Simple Answer
The simplicity of Bitcoin is a pretty remarkable feat, and it has continued to astonish the world. With innovation from its irreversible trust-free solution many projects and external applications rely on the technology it has produced. After Bitcoin was introduced, the idea continued to evolve into new concepts and use-cases that people dubbed “2.0 technology.” The notion of 2.0 applications, platforms that offer novel functionality, and smart contracts swept the community by storm.
It was declared that Bitcoin was too simple and didn’t provide enough incentive to keep the network together. None of these criticisms have held true thus far, and Bitcoin’s simple answers remain steadfast.
Bitcoin uses proof-of-work to exchange value with miners and nodes all around the world validating these exchanges. The network solves the problem of trust with only one very expensive solution and those who participate agree it is the most superior way to rely on without fear of cheating the rules.
When problem-based solving is mixed in with the system it adds far more variables, many more loopholes and new potential points of vulnerability. This can be seen with the current Ethereum Classic vs. Ethereum debacle as multiple solutions introduced to the system has brought about a messy situation of two chains. This has proven to undermine the credibility of the Ethereum developers and the network itself.
Smart contracts have been popularized by Ethereum and other cryptocurrencies. The subject was originally brought back to life when Bitcoin was born as it was discussed in the early nineties by Nick Szabo and others. Since the discussion of smart contracts grew more popular many altcoins and platforms have tried to harness the potential of the self-executable agreement. Yet none of them have provided any background on how they might fail, or explain that maybe developers would be needed to verify and audit the code.
A 100-word audit was deemed acceptable for a $150 million dollar DAO project and the weakness didn’t come to light until researchers from Hacking Distributed warned the cryptocurrency community. Unfortunately, auditing is rarely done for many 2.0 platforms, yet people throw millions of dollars at these projects.
Smart contracts, specialized dApps and the many other innovations that have sprung from Bitcoin and developed further by projects like Ethereum will still bring innovation. All of the 2.0 ideas will come to fruition and most likely in just a few short years. However, many of these projects are shouting they are enterprise ready to attract investors, while the reality couldn’t be further from the truth.
With the DAO, $150 million was raised and shortly after $50 million was stolen by finding a loophole in the contract itself. To think investors haven’t noticed the failure of one of the largest self-executable contracts built on the Ethereum blockchain would be naive. When talking about the DAO situation King & Wood Mallesons partner, Scott Farrell a blockchain advisor, told the Australian Financial Review this week:
It demonstrates the need to take extreme care with the automation of contracts on a blockchain, but the platform itself worked as expected. Future smart contracts should be more robust.
Bitcoin has brought us a simple answer to a difficult period of time when it comes to the fiat system. People are just figuring out how important Bitcoin is, and maybe it’s time we focus our energy on the simple task of 1.0 cryptocurrency solutions rather than having faith in ideas that need a whole lot more maintenance.
People have to rigorously improve the concept so in time smart contracts become a reliable and robust system much like the simplicity of Bitcoin’s trust-free transactions. Hacking Distributed writer, Emin Gün Sirer, explains this quite eloquently:
Smart contracts are and remain an incredibly exciting field. We have only begun to scratch the surface. There can be no birth without pain, no initial foray into the unknown without some setback.
Maintenance is an essential subject that many people forget. With smart contracts and 2.0 concepts, people dismiss the need to audit these protocols. Not just from inside the operation but third party auditors need to get involved. Currently, Bitcoin is trusted as the most efficient blockchain that has been audited by thousands of people. Most other projects have not had this happen as their protocol has very few developers touch their code or even look at it.
No cryptocurrency or project to date can match what Bitcoin has provided to global citizens so far. Some of these other protocols may claim to be enterprise ready but one must research diligently as most blockchain projects won’t ever get past the white paper.
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