The new Bitcoin is… Bitcoin
Bear market or not, development isn’t slowing down on the No.1 crypto - with more off-chain transaction features, privacy-enhancement, and smart contract solutions likely to be rolling out soon
The Bitcoin Lightning Network has grown by over 200 percent in recent weeks – reaching over $2 million capacity according to data published by IML. An analytics platform for the Lightning Network, IML says the network now has a total capacity of 438 BTC. This increase represents a 288% percent jump from just a month ago.
The standout performance of the Lightning Network is in stark contrast to the overall price activity of bitcoin. BTC/USD is trading at around $3,800 at the time of writing, continuing its extended bear run.
The Lightning Network has also witnessed an eight percent increase in the number of nodes participating on the network. The evidence of a greater number of actors in the Lightning Network points to an increase in the viability of the LN as a solution to the scalability challenges facing the Bitcoin network.
The LN began as a BIP (Bitcoin Improvement Proposal), first suggested by Joseph Poon and Thaddeus Dryja in 2015. After lengthy discourse within the greater Bitcoin community, the Lighting Network went live earlier this year with the aim of making Bitcoin scalable by introducing a network of micropayment channels through which payments could be settled almost instantaneously.
Before its launch, there was speculation as to whether the LN could live up to its potential. However, with the continued growth in the number of LN nodes, its total capacity as well as increased merchant adoption, it seems the off-chain solution is on its way to effectively relieving the Bitcoin network of the high fees and slow transactions that it has faced in the past.
Private and confidential
Confidential Transactions (CT) were initially proposed by Gregory Maxwell as a BIP. This proposal is a cryptographic tool designed to improve the privacy and security of Bitcoin. This feature keeps the amounts transferred confidential – known only to the participants involved in the transaction as well as those they designate.
The increase in the number of firms and resources dedicated to studying and de-anonymizing the Bitcoin ledger to expose the real-life identities behind wallet addresses continues to further negatively affect the privacy of bitcoin users. This state of affairs also threatens the fungibility of bitcoin.
Fungibility is considered an essential feature of a sound currency. Thus, many members of the crypto community are interested in seeing the BIP come to life within the Bitcoin network. In his most recent update, Maxwell revealed that ongoing research had resulted in the reduction of the CT output size. Seeing as the large transaction size has been a major stumbling block for the implementation of the BIP, the announcement breeds hope of a release on the mainnet soon.
According to all the information released so far, Confidential Transactions can be implemented on the Bitcoin network through the more-desirable soft fork. If the increase in the demand of privacy-centric digital currencies is anything to go by, then Confidential Transactions are likely to have a positive effect on the price of bitcoin.
Smart Contracts on the Bitcoin Network
The Ethereum network is second only to bitcoin in the cryptocurrency sector because it holds the leadership position among smart contract computing platforms. However, a startup called RSK labs has developed a smart contract platform for the Bitcoin network. The innovative platform is called RSK and mined its initial block on January 5, 2018.
The Rootstock (RSK) platform is a two-way smart contract platform pegged to the Bitcoin network. Its first version is called Bamboo and promises fast settlement times, increased scalability as well as the inherent smart contract functionality.
Speaking at Consensus 2018, the fourth annual blockchain summit held at the New York Hilton Midtown from May 14 to May 16, 2018, Gabriel Kurman, an RSK labs co-founder, revealed that the RSK sidechain already has support from the mining community, with one in ten bitcoin miners already securing the sidechain.
Bringing smart contract functionality to the Bitcoin network in an effective manner has long been a ‘wish list’ item across the greater cryptocurrency community. If RSK Labs is able to successfully carry out its mission, the market should respond positively and deploy smart contracts on the Bitcoin network due to bitcoin’s battle-tested codebase and its more secure and decentralized blockchain.
The Liquid Network
The Liquid Network generated its first block on September 27, 2018. Similar to the Lightning Network, the Liquid Network is a proposed solution to the scalability challenges faced by the Bitcoin network. The Liquid Network was developed by Blockstream.
The Liquid Network is a production Bitcoin sidechain designed to operate on a 1-1 peg to bitcoin. The side chain has its own native digital currency called L-BTC. The sidechain hopes to better the scalability of the Bitcoin network by allowing for the immediate settlement of transactions sent over its network.
The Liquid Network is supported by an equal amount of BTC frozen in the main chain. This is the function that provides the 1-1 peg as well as final state security for the transactions sent over its network. The peg is also essential to the instantaneous settlement times witnessed in the Liquid network.
An interesting feature of the transactions sent over the Liquid Network is that they are feeless because the sidechain does not have miners. Instead, the chain is secured by a federation currently composed of 23 institutions, most of which are cryptocurrency exchange platforms. Blockstream has previously explained that the Liquid Network is specifically designed to be used in the context of cryptocurrency platforms that need fast settlement times to effectively meet the needs of their customers.
The Liquid Network is also able to support the tokenization of any number of assets due to its pegged design. Additionally, the sidechain can also support obscured amounts, introducing a greater level of transactional privacy than is currently available on the Bitcoin network.
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