Hash power simply refers to the amount of computer power dedicated to cryptocurrency mining at any one time. If the majority of hash power is directed at one side of the fork, we can infer it has more support from miners.
In other words, it looks like miners might back SV.
These Figures are Estimates
It’s important to remember that figures on both sides of the debate are estimates.
Poloniex trading figures are based on a hypothetical market with relatively thin trading volume.
And the CoinDance hash estimates are based on how mining pools have indicated their support. Miners themselves won’t necessarily follow the public statements of their pools.
Bitcoin Cash ABC and Bitcoin SV Explained
Bitcoin Cash ABC – Lays the groundwork for enormous scaling in the future. Keeps the block size the same, while building functionality for new features like atomic contracts. Backed by Roger Ver, Bitmain, and supported by Coinbase, Binance, and other large third-parties.
Bitcoin Cash SV – Claims to be the true Bitcoin vision (or “Satoshi Vision”). Technical updates include a larger block size to improve transaction speed. Backed by Craig Wright, nChain, CoinGeek and a large portion of BCH mining pools.
51% attacks. Merely mentioning them makes crypto traders a little fidgety, and with good reason.
A successful 51% attack against a cryptocurrency would, at best, take a big chunk out of that cryptocurrency’s price. And, at worst, could end use of the cryptocurrency altogether.
When you look at it that way, a 51% attack sounds terrifying. Let’s look at how they happen, and how blockchain projects keep them safe.
51% Attacks, Explained in Simple Terms
Put simply, a 51% attack could occur when a malicious actor (or group of actors) commands more than half the mining or hashing power on a blockchain.
As you can see in the chart below, many different mining pools are at work on the Bitcoin blockchain. If one of those pools reached a 51% majority, they could, hypothetically, initiate a 51% attack.
But What Does a 51% Attack Do?
A 51% attack, also known as a “double-spend attack”, allows the attacker to rewrite history on a blockchain.
In practical terms, it means the attacker can spend that particular cryptocurrency twice.
As an attacker, I would buy something with bitcoin, then initiate a 51% attack to create a new version of the blockchain – one that doesn’t include my transaction.
Sounds pretty scary when you put it like that. That said, it is rather difficult to actually pull off a 51% attack on an established network. Bitcoin, for example, has never been hit by a 51% attack. Most large cryptocurrencies are safe, software bugs notwithstanding.
And, even if you can pull one off, you only become a time traveler. You do not have the ability to break the rules of the network, steal cryptocurrency from others, or create new currency out of thin air.
To understand more, let’s go over how we might perform a 51% attack (hypothetically, of course).
A 51% Attack Requires a New Blockchain “Fork”
To initiate a 51% attack, we need to “fork” the blockchain, which means splitting it in two. Then we need to convince the network that our malicious forked blockchain is the real one.
Cryptocurrencies need to have a way of knowing which blockchain is the ‘real’ one.
Working this out is very simple – the longest one wins. By going with the longest blockchain on the network, the network can always be sure that the current blockchain is what the majority of the mining power wants.
The longest blockchain being the ‘real’ one has some other benefits too.
For example, cryptocurrencies are often community driven. If the community does not like a particular update, miners won’t switch to the new software. If miners don’t switch to the new software, the old chain continues and remains the ‘real’ blockchain for the network.
Making Our Malicious Forked Chain the Dominant One
Essentially, to perform a 51% attack, we need to keep our fork secret.
We can keep our fork either secret to one computer, or let it go between the nodes we control. Once we have our fork, we need to keep it up to date with the rest of the network.
Essentially we create a mirror image of the original blockchain.
You can think of our secret blockchain as a reset button. Once we have it, we can do something on the live blockchain and not copy it into our secret one.
Then, we can mine a bit harder on our secret blockchain and have it be a little longer than the real one. That’s why we need 51% of the hashing power on the network.
Nodes in a cryptocurrency network always follow the longest chain, as it usually indicates what the network at large wants to do. Once we release our secret blockchain to the network, all the nodes grab it and see it as the real one, as it’s the longest.
And once our blockchain is the real one, whatever we did before is undone.
How Double Spending Comes In
Often the thing undone in 51% attacks is a transaction. We can pay for something and then switch out the old blockchain with our secret one where the cryptocurrency is instead transferred to a different address.
This is referred to as a double spend. The network will reject the original transaction, as it will occur after the new transaction from the perspective of the new blockchain.
What a 51% Attack Can and Can’t Do
As mentioned above, the attack does not give us the power to do whatever we want.
We must still follow the rules on the network. If we don’t follow the rules, our new blockchain is rejected by the network, and the attack fails. The requirement to following rules makes for an interesting combination of what we can and can’t do during the attack.
What the Attacker Can Do
Cause double spends
This is one of the main reasons to perform a 51% attack. It allows us to spend currency twice, essentially stealing it back from the first address it is sent to. Note that this cannot occur without cooperation from whoever owns the currency in the double spend.
Collect block rewards and cause other miners to have invalid blocks
As the attackers, we are mining all the blocks on our malicious blockchain and therefore get to select where the rewards for mining those blocks go. Depending on the price of the cryptocurrency in question, this may provide a nice counterbalance to the inevitable price-collapse of the cryptocurrency when the attack is revealed.
Other than some counterbalance, the block rewards are unlikely to completely negate the cost. For this reason, an attack is unlikely to take place solely for the reason of collecting block rewards.
Stop transactions for a time, or remove confirmations from being added to the blockchain
As we control all the blocks in our chain, we can choose what transactions go into those blocks, much in the same way regular miners can. We simply instruct our miners to not include a specific transaction in their blocks.
The transactions that are kept out of blocks will remain in the transaction pool. After the attack, any miner can pick up the transaction and include it in a block. This means we can delay a transaction for as long as we are in control.
What the Attacker Can Not Do
Steal cryptocurrency from others
As an attacker, we may control the blockchain itself during the time in the attack, but we do not control wallets we don’t own. Having control over the blockchain does not magically give us the private keys required to spend currency we don’t own.
Create cryptocurrency out of nothing
As mentioned above, we must still follow the rules of the network. That means mining blocks and receiving rewards as normal. We can’t magically create non-existent transactions or create cryptocurrency out of nothing.
Completely stop a transaction from occurring
We can keep a given transaction out of the blocks on our chain. But, this does not mean the transaction no longer exists, it simply means it remains in the transaction pool as an unconfirmed transaction. As soon as the attack stops, other miners may pick up the transaction and include it in their next block. Assuming it’s not a double spend transaction at that point.
But that hasn’t stopped Bitmain, the world’s largest bitcoin mining company, from building the next-generation mining equipment.
Bitmain’s new ASIC miners are set to launch Thursday 8th November, but will they reduce energy consumption?
ASIC explained: ASIC miners, or Application Specific Integrated Circuits, are super-powerful processing chips that focus on just one task, in this case, cryptocurrency mining. They are different to normal graphics cards or computer chips which are multi-purpose.
Everything we know about the new Bitmain ASIC Miners
Bitmain is launching two new devices on Thursday: the S15 and T15
Specific details, however, are sparse. We don’t yet know the price, features, or specs of the two devices.
We are officially announcing the release of our new 7nm miners which possess industry-leading hash rates designed to mine with the SHA256 algorithm. Two models will be offered, the Antminer S15 and T15. Available for purchase on 11/8. pic.twitter.com/m6HbWGZS1O
A further study suggests bitcoin mining consumes the equivalent amount of energy as the entire country of Austria.
The new Bitmain miners may go a small way to lowering the very real impact of bitcoin mining on the world around us.
7nm Chip Technology
The extra efficiency comes from Bitmain’s new 7nm chip technology. As explained by Jihan Wu, the 7nm Finfet technology is more powerful and more efficient than before. With “more than a billion transistors,” it ushers in a “new era of high-efficiency.”
Of course, nothing is confirmed until Bitmain reveals the full specifications of the new models. Expect more details when the miners are made available for purchase tomorrow.
Lack of scalability has been one of the biggest problems of blockchain technology since the release of Bitcoin back in 2009. Slow transaction speeds, high fees, and congestion have become major stumbling blocks, but sidechains may offer a solution.
In this piece, we cover everything you need to know about sidechains, from the basic definition to the evolution of this technology to potential applications for blockchains.
We not only discuss why sidechains are important from a technical perspective but also why they are an integral part of driving real-world uses of blockchain technology.
Sidechains, Explained in Simple Terms
Think of it this way. A blockchain can be compared to a highway for vehicles. While one lane may be enough for a steady flow of cars, it probably can’t support a surge of hundreds of thousands of vehicles.
If there are thousands of cars on the highway, it’s likely to result in slower travel times and increased congestion.
The best way to solve this is by creating a better infrastructure for travel.
Now, apply this concept to blockchain technology. The intent of any blockchain is to be able to easily send and store all user data (for example, transactional data of cryptocurrencies, data for dapps and smart contracts, and more).
The biggest issue, however, is that each blockchain has traditionally been reliant upon one lane of traffic – the mainchain.
By creating multiple roads that connect to the main road, we can create a more efficient transportation system. Similarly, this concept can be used in blockchains.
Sidechains are mechanisms that allow for data processes to take place off the mainchain, all while being connected to the mainchain if needed. Just as a car can travel back and forth from the main road to a side road, so can data between a blockchain’s mainchain and its sidechains.
The difficult part is moving assets (like bitcoin) from the mainchain to a sidechain securely, while proving the bitcoin is yours.
Done correctly, however, it’s theortically possible to make faster transactions via a sidechain, or even swap bitcoin to ether without using an exchange.
Why Are Sidechains Needed?
At first, blockchains didn’t technically have a major infrastructure issue. However, as traffic increased, we began to see these issues become more apparent.
Take the Ethereum blockchain, for example. As more people started using CryptoKitties and other dapps, network fees increased. Scalability problems became more obvious.
Similar to roads during rush hour traffic, blockchains were (and still are) mostly unprepared to deal with an increase in users and transactions during peak usage times. This became particularly obvious in December 2017.
More People Using Blockchain = More Congestion
Around December 2017, we saw a range of factors expose the scaling problem of blockchains:
First, more people were buying cryptocurrencies due to a bull market.
Second, new dapps that used large amounts of data were arriving on the scene.
Third, there was a rapid increase in the number of initial coin offerings (ICOs) that utilized existing blockchains to issue new tokens.
That’s why research has been going on to develop a variety of scalability solutions. Sidechains have been discussed for quite some time but weren’t yet capable of providing the solution that was needed at that time.
Although we haven’t seen congestion like December 2017 since, blockchains need to prepare for the future.
For instance, projects have to consider how another bull market could once again expose scalability issues.
Additionally, we should consider the potential for new blockchain innovations (beyond just cryptocurrencies). These will require larger amounts of data, potentially beyond the limits of mainchain technology. Sidechains are one proposed solution to expand the types of apps that blockchains are capable of running.
Why Haven’t Sidechains Been Adopted Sooner?
In blockchain technology, all sorts of advancements have been made only in the last couple of years. So why do some integrations (i.e. addition of sidechains) take longer than others? This is a valid question.
The best answer is that implementing newer technologies comes with big risk. Look at blockchain platforms like Ethereum and EOS. Not only do they feature their own native cryptocurrency but they also support dapps and tokens from other projects.
By not considering all of the current and future risks of making a big change like sidechain integration, any given blockchain risks not only its own project but also hundreds or thousands of others.
In theory, sidechains can ensure much greater scalability without risking the security of the mainchain. In reality, this hasn’t yet been 100% proven.
The “Scalability Trilemma”
Ethereum founder, Vitalik Buterin, summed things up when he outlined the “scalability trilemma.”
The trilemma points to three things key to blockchain technology: security, decentralization, and scalability.
Most solutions can improve one or two of those things, but usually at the expense of one of the others. In other words, if you want scalability, you probably have to sacrifice security and/or decentralization.
This is the case with sidechains.
Sidechains have been notoriously difficult to implement because they rely upon SPV (simplified payment verification proofs). With SPV proofs, it’s possible to prove ownership of funds when sending from a sidechain to the main chain.
However, without SPV proofs, there is a possibility that, when users or miners move their money back to the main chain, they could take more cryptocurrency funds than they really own in some scenarios.
According to some research, SPV proofs are also subject to a few different types of attacks, which creates a potential security risk for the entire blockchain. This is why, “trusted sidechains”, which are more centralized sidechains run by a few blockchain companies, have dominated sidechain implementation as of 2018.
Since the goal of most blockchain project teams is to move towards a more decentralized system, relying upon a trusted/centralized sidechain would run counter to their core principles.
At the same time, scalability is also a top priority. Still, development teams have been reluctant to accept an either-or scenario where scalability is achieved by sacrificing decentralization.
Progress in Sidechain Technology
The discussion of how to make blockchain technology more scalable has been going on since 2012.
Sidechain-specific research has been going on since around 2014. For the most part, sidechains remain in the research and development phase even in 2018.
This is because researchers have felt that the technology still lacks certain key components needed for real-world implementation. However, this has begun to change just in the past year or so.
In October 2017, Aggelos Kiayias, chief scientist at IOHK, made a technical breakthrough that could help propel sidechains into the next stages of adoption. In a scientific paper called “Non-Interactive Proofs of Proof-of-Work”, Kiayias explains the increasing importance “to be able to efficiently handle multiple blockchains by the same client and reliably transfer assets between them.”
In this research, Kiayias outlines the world’s first Proof of Proof-of-Work. The research shows that this proposed design could use SPV proofs that are able to prevent many of the normal attacks.
From a security standpoint, Kiayias’ work is a major milestone for not only the adoption of greater scalability within one blockchain but also across multiple blockchains.
Bitcoin, Ethereum, EOS: Cross-Blockchain Communication
In the paper, Kiayias describes an ICO which distributes tokens issued on one blockchain but allows paying for them using coins in another blockchain.
Essentially, using this research to build a real-world application could allow for the possibility of cross-chain communication.
For instance, in the future, we could see interoperability between different blockchain networks (i.e. Bitcoin and Ethereum, EOS and NEO, or a variety of other combinations).
This is one of several ongoing efforts by around the globe to research how to improve the performance of sidechains. Here are some more important examples.
3 Projects Focused on Sidechain Deployment
Developed by Blockstream, this project was actually the first commercial sidechain on the market. It has already been implemented by a few different cryptocurrency exchanges. With Liquid, every transaction uses real bitcoin, pegged via a sidechain to the Bitcoin blockchain. This solution also ensures that users are always dealing with real, verifiable assets.
This project uses a federated sidechain – a private blockchain with different features, capabilities, and benefits than the main Bitcoin blockchain.
According to the Liquid website, Liquid will never be as decentralized as Bitcoin. However, it is designed to remove control from any single party, geographic location, or political jurisdiction.
It also allows for increased privacy via the “confidential transactions” feature, which hides transaction amounts from everyone except for the parties directly involved in the transaction itself.
This is a solution that uses a series of smart contracts that run on top of the Ethereum blockchain. Plasma’s goal is to scale Ethereum to be able to handle millions (or even billions) of transactions per second, compared to the current amount of only 10-15.
This is possible because Plasma eliminates the need for every node on the network to verify all transactions as they occur.
Projects like Ethereum and OmiseGO are driving the research, development, and implementation of Plasma as a scalability solution. Ethereum’s Vitalik Buterin said in May 2018,
“So if you get a 100x from Sharding and a 100x from Plasma, those two basically give you a 10,000x scalability gain, which basically means blockchains will be powerful enough to handle most applications most people are trying to do with them.”
What sets Rootstock (RSK) apart from many other proposed solutions is that it is a drivechain/sidechain hybrid two-way peg designed to port Ethereum’s smart contract functionality to Bitcoin without impacting the main blockchain whatsoever. This is a significant project because it would be the first project to bring any sort of smart contract functionality to the Bitcoin blockchain.
In 2017, crypto security expert Sergio Demian Lerner released information about Lumino, which is a compatible version of the Lightning Network built on top of Rootstock.
During this process, Lerner introduced a new protocol called the Lumino Transaction Compression Protocol (LTCP), which forms the transaction layer to the Lumino network. The purpose of LTCP is to create far smaller bitcoin transactions to enable as many as 100 transactions to be processed by the network every second. That’s six 6-to-33 times higher than Bitcoin’s 2018 transaction limits.
For those concerned with potential privacy concerns, Lerner suggested in 2017 that users could add greater privacy to transactions by techniques like creating new accounts with each transaction or using tumbling services to obfuscate (hide) the origin of their coins.
Future Possibilities for Sidechain Technology
The possibilities for sidechain implementation are continuously increasing with research advancements. Sidechain technology is not just important from a technical perspective. It can enable blockchains to achieve more transactions per second while also reducing transaction fees.
Furthermore, it is one of the most vital components to driving blockchain capabilities far past what is currently possible today. When we look at decentralized applications in 2018, many are still quite rudimentary.
A good comparison is to think of blockchain in 2018 kind of like internet connectivity in the early 2000s.
It was still much better than the 1990s, for example. Still, there was a lot to be desired. Back then, there were no easily-accessible mobile technologies (i.e. 5G networks), so devices couldn’t connect from anywhere.
Connection speeds were also significantly slower. Similarly, blockchains in 2018 are limited in what their services they can do. However, through the proper implementation of sidechain and other scalability solutions, any given blockchain could potentially run numerous types of advanced applications (for example, AI, IoT, and more) that require large amounts of data.
This could empower applications that are merely concepts in 2018 as well as future applications that aren’t even in the theoretical stages yet.
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