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Is Bitcoin still the most stable cryptocurrency?

Bitcoin is now eleven years old, but the cryptocurrency of everyday life is still a long way off as real money. Too slow, too cumbersome and too expensive are individual transactions. A new protocol should change that now.

It’s hot, loud and smells of dark, strong coffee this Saturday afternoon in a spacious Berlin co-working space. Around 200 developers, hobbyists and passionate Bitcoiner traveled from all over the world to a two-day Hackday. They want to hear lectures, make prototypes and discuss the most pressing issues of Bitcoin, the digital money that will turn ten in those months.

Although 64 percent of Germans have heard of Bitcoin in the meantime and just under half of the 18- to 34-year-olds here consider cryptocurrencies to be an interesting investment, digital money has not really gained acceptance in everyday life.

“Bitcoin’s original idea is to put money in the hands of many people. To be able to offer an alternative and with it more self-determination, personal responsibility and individual freedom, “says Jeff Gallas, whose research startup Fulmo regularly hosts Bitcoin Hackdays like this one.

The fact that Bitcoin still exists as a decentralized project after ten years is therefore a success in itself, he says. After all, the blockchain has shown as infrastructure technology that a state and bank independent money is possible, at least in theory. However, the first purely digital money is still far from fulfilling its own claims as a universal universal money.

Although Bitcoin can be used to send money around the clock to virtually anywhere in the world without fear of being censored or manipulated. However, the capacity of the system is still very limited. Too strong for millions of people to be able to use the digital money in their daily lives.

Currently, the blockchain can handle only three to seven transactions per second. The transactions take at least ten minutes to be finally confirmed. And with a heavy network load the required fees for the user threaten unpredictably to shoot upwards. That was last seen last year, when urgent Bitcoin transactions were only possible if you were willing to pay 20 euros and more for their settlement.

“The big disadvantage of paying with Bitcoin is that you handle every single transaction via the blockchain and virtually communicate it to the whole world, because everyone on the network has to see, process and reproduce this transaction in their internal accounting,” explains Christian Decker from Zurich the problem.

He calls himself a Bitcoin enthusiast of the first hour, has a doctorate on Bitcoin and is now working for the US startup blockstream on a solution that should help with the scaling problem of Bitcoin remedy. The idea: You do not have to handle every bitcoin transaction directly via the blockchain. Instead, aggregate using special payment channels once as many Bitcoin transactions between two partners and writes in the end only the final statement in the block chain.

Not only millions of Bitcoin transactions could be handled simultaneously via a large network of such payment channels, but also extremely cheap and above all lightning fast. Hence the name of the concept: Lightning.

Up to 500 transactions, Decker estimates, can handle such a channel in the Lightning network in a second. And that’s just the beginning: even now he is even debating it, the expert explains how it could succeed that a Bitcoin transaction last no longer than a tenth of a second.

It is a great euphoria, which is felt on this day not only in Decker, but in all participants of the Hackdays. A spirit of optimism that has brought them together from Japan, South Africa, the USA and many other countries in Berlin, in order to conceptually deal with Lightning, but also to gain practical experience.

On the tables, which are tinkered and coded parallel to the lectures, there is therefore the prototype of a sweets machine, which spits out a handful of chocolate pieces for each Lightning payment. Next to it, a selfie camera that shoots the photo and tweets directly upon successful payment, surrounded by a whole series of freshly configured Raspberry Pi minicomputers.

Each one a full node in the Bitcoin and Lightning network. They should support and further increase the capacity and stability of this decentralized payment infrastructure. And thus follow a trend. Since the Lightning network officially switched from the Testnet to the Mainnet at the beginning of the year, it has already grown to several thousand nodes and more than 12,000 interconnected payment channels.

There are no exact figures because data about this network designed for anonymous payments can not be completely captured centrally. However, the incomplete data also show that Lightning is not only a topic on this day here in Berlin, but also delights the global Bitcoin community as a whole.

This jubilation is the result of a tremendous thirst for action that is breaking ground after years of being slowed down by the community itself and increasingly dammed up. The Lightning concept was already presented in 2015 as a scaling solution for Bitcoin. But for a long time, the community could not agree on whether off-chain transactions were actually the best way to turn Bitcoin into an everyday allowance.

Too experimental, the approach was the so-called “big blockers”. They feared that the financial incentives for the miners sink, if they should continue to secure the network with their computing power without a corresponding transaction fee. In addition, the development and testing of Lightning would take far too long – if the concept works altogether at all.

As a quick and easy solution, they wanted to increase the data limit of the blocks of the Bitcoin blockchain bit by bit to allow more transactions. However, this scaling approach was rejected by others not only as fundamentally inadequate, but also criticized because of the danger of centralization. As the argument grows, as the blockchain database grows faster, so does the cost of running a node in the Bitcoin network. This endangers decentralization and with it the censorship and manipulation resistance of Bitcoin, its greatest asset.

In August last year, this conflict finally escalated. The Bitcoin community split and with it the Bitcoin blockchain. Some of the miners and node operators followed the Big Blocker’s vision, implementing code to expand the data blocks, creating a standalone version of Bitcoin that was no longer compatible with the original: Bitcoin Cash.

However, the overwhelming majority of miners, developers and users did not follow the fork, but remained with the original Bitcoin with Lightning as the preferred scaling option, which would now be easier to implement without the resistance of the Big Blocker.

The market also reacted very positively to the solution of the conflict. Immediately after the Bitcoin cash fork, the Bitcoin price began to rise rapidly and eventually developed the euphoric momentum that culminated in the overheated all-time high of nearly $ 20,000 at the end of last year.

Published inCryptocurrencies

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