Bitcoin gets slower, smaller and more like Ethereum

Editor’s Note: Our writer Galen Moore (who previously wrote an analysis of STOs) attended the MIT Bitcoin Expo this weekend. These are his field notes on his interviews with a bunch of the leading thinkers in the Bitcoin community, along with links to the full audio if you want to go deeper. ~ Danny Crichton

The MIT Bitcoin Expo is not really about Bitcoin, per se. Many other cryptocurrencies are discussed. Sometimes, warring factions find themselves in the same room.

On the Friday night before the main event, a Boston Ethereum developers group hosted a bitcoiner VC and the CEO of a private-key custody company for “a conversation on Lightning and the future of Bitcoin.”

It was a frank conversation in front of a room full of people who may have been skeptical about the future of Bitcoin. Castle Island Ventures general partner Nic Carter allowed that Bitcoin’s fixed money supply might become a liability. Jeremy Welch, CEO of Casa, acknowledged that Lightning is not going to solve all of Bitcoin’s problems.

For example, Lightning makes sending and receiving bitcoin faster, cheaper and a little more private, but questions remain as to how such Bitcoin payments will be useful.

Developing (and not developing) the future of Bitcoin

James Prestwich of Summa. Photo by Galen Moore

Carter and Welch’s conversation turned to ossification, a proposed drawdown of developer activity on Bitcoin to guard against future attacks. One Ethereum developer leaned back to ask me what ossification means. “Turning into bone,” I said. He looked a little mystified. Misunderstandings remain between followers of the two largest cryptocurrencies. Ethereum developers remain in a kind of “move fast and break things” mindset, while Bitcoin developers treat their codebase like it was software for air traffic control.

There are some who are trying to bridge the gap. James Prestwich’s consulting firm, Summa, helps Ethereum developers that want to use Bitcoin. Beyond reaching a bigger market, this has technical advantages, Prestwich said. We were drinking pineapple-strawberry Lacroix before his presentation about a better way to handle cross-chain transactions.

“Most Ethereum developers work on contracts and not consensus layer,” he said. “Contracts are not as abstracted from consensus as we like to think they are. It’s a very messy, leaky layer. The advantages here are more on the consensus layer, but that’s going to affect how your smart contract works.” The full audio of my interview with Prestwich is here and a recording of all the presentations at MIT Bitcoin Expo 2019 can be found here.

Connecting the Bitcoin and Ethereum communities

 

Andrew Poelstra of Blockstream. Photo by Galen Moore

Prestwich is one of many working on better ways to connect Ethereum and Bitcoin. Andrew Poelstra, director of research at Blockstream, a Bitcoin-focused development firm, presented a proposal that would, in one way, make Bitcoin more like Ethereum, then take it beyond that point, adding confidentiality features like those built into privacy chains Monero and Zcash.

All cryptocurrencies use digital signatures to validate transactions. Poelstra’s proposal would implement a different kind of signature, called a Schnorr signature, in Bitcoin. Deployed alongside something Poelstra calls “scriptless scripts,” Schnorr signatures would allow developers to write smart contracts to govern Bitcoin transactions, without revealing the terms of the contract to the entire blockchain.

Many startups have used Ethereum smart contracts for “DApps,” or decentralized apps. Bitcoin may be able to capture some of that kind of activity, but Poelstra said privacy is critical to attract the participation of banking institutions and anyone else who might put freight of great value on Bitcoin’s rails.

“I basically tell them that it (Bitcoin) is essentially not useable for most use cases because all of the transactions you produce are published to the entire world, and the details of those transactions, including weird contractual things such as multisignature policies, are visible to the world,” Poelstra said. “And the result is that whatever transactions you’re doing using Bitcoin wind up being completely visible, completely transparent.”

If Bitcoin is ossifying, a switch to Schnorr signatures could be among the last major changes to the Bitcoin protocol.

Bulletproof-ing the future

Cathie Yun of Interstellar. Photo by Galen Moore

Meanwhile, developers on other chains look like they are accelerating their work.

Stellar is a finance-focused Ethereum alternative that emphasizes performance. At Interstellar, a development firm focused on Stellar, cryptographer Cathie Yun has been working on a way to add privacy features in Stellar and other chains, using a technology called bulletproofs. After a presentation explaining how that works, she told me why it’s important. “Effectively, right now, if you were to write a smart contract–say you’re making a loan,” she said, “then all of the information that that contract is dealing with has to be in plain text.” The full audio of my interview with Poelstra is here.

Schnorr signatures are so old that the patent their inventor, Claus Schnorr, won for them, expired in 2008. There’s a gap between Schnorr signatures and the novel technologies that Yun and her team are building on, that speaks to the different principles the two developer communities operate on.

“Bulletproofs just came out in 2017 and now we’re building layers on layers on layers using bulletproofs as our underlying protocol,” Yun said. “It’s challenging to take something this new and bring it into production because along the way there’s a lot of kinks that have to be worked out.” The full audio of my interview with Yun is here.

New ways to validate transactions

MIT during the Crypto Winter. Photo by Galen Moore

Others are developing entirely novel ways to validate transactions on a blockchain. Giulia Fanti, an assistant professor at Carnegie Mellon University, presented Prism, a new blockchain that proposes to deconstruct a blockchain into its constituent parts, then run each of those parts at the physical edge of communication capacity. “We should evaluate blockchain consensus protocols with respect to physical limits,” she said in her presentation.

Like most new chains, Prism focuses on solving Bitcoin’s scaling problem by increasing throughput and reducing latency. At least one researcher at MIT Bitcoin Expo this year thinks he may have found a solution to the scaling problem of the growing size of Bitcoin’s transaction record.

Tadge Dryja, an MIT Digital Currency Initiative researcher who co-wrote the white paper for Lightning, presented “UtreeXO,” a “dynamic accumulator” that could shrink the size of Bitcoin’s ownership record down to less than 1 Kb. That would mean a node validating Bitcoin transactions could run on a much smaller and slower computer than would be possible today–for example, a mobile phone or an internet-connected appliance. The full audio of my interview with Dryja is here.

Scaling solutions such as these beg a question: for what uses is Bitcoin getting ready to scale? At this year’s MIT Bitcoin Expo, a few new applications for using Bitcoin were buzzed about and handed around. Most are more demonstration or experiment than solution. Lightning Pizza is a newly popular example of the capabilities of Fold, which uses gift-card transactions to facilitate bitcoin commerce. Others are less practical. Pollofeed.com is a chicken coop livecam that accepts fractions of a bitcoin to feed the chickens. At the end of the conference, everyone seemed to be playing satoshitreasure, a puzzle game with crypto-rewards.

Beyond financial speculation, many Bitcoin uses today tend to resemble these applications built for early adopters. Meanwhile, the technology is leaping ahead. Developers at MIT Bitcoin Expo discussed the ability to run entire Bitcoin nodes, and participate privately in smart contracts and cross-chain transactions from the edge of the network on devices the size of a chip.

It’s hard to see around the corner and know what uses that kind of technology might unlock. But it doesn’t seem unreasonable to be preparing for them to be something big.

Update: An earlier version of this story characterized Nic Carter as a “bitcoin maximalist,” a label that he doesn’t embrace and which may not be fair. It’s been changed to “bitcoiner.”