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Photo: VeriBlock / Twitter
Recently, Bitcoin developers have noticed some strange activities on the blockchain. Specifically, according to Forbes, a large number of unidentified OP_RETURN transactions were discovered.
OP_RETURN is a type of Bitcoin transaction that is used to embed data in the blockchain. It can be used for anything by testing the existence of some data at a specific time (proof-of-exist) for the issuance of new assets, such as the controversial Tether Pegging in US dollars, on top of the blockchain of Bitcoin.
This function accepts a sequence defined by the user with a maximum of 40 bytes. When a transaction containing a challenge script with an OP_RETURN function is extracted into a block, the sequence of bytes that accompanies it enters the blockchain.
OP_RETURN and its 40 byte limit represent a compromise between two opposing views of Bitcoin's future.
One field sees the blockchain as a secure and decentralized data repository on which numerous financial and social applications can be built. Promoting the growth of these new applications helps ensure the long-term relevance of Bitcoin. Allowing transactions to transport application-specific data in a standard way makes this goal go forward.
The other field sees the Bitcoin blockchain exclusively as a means of recording electronic payments in cash. Even so, important scalability problems will have to be addressed sooner or later. Trying to meet the data requirements of arbitrary application levels only increases the cost of maintaining the network today, while pushing forward the day of the showdown.
In recent days, it has become clearer that the entity behind these newly disclosed transactions is VeriBlock, a project that relies on Bitcoin blockchains in an effort to better protect networks of alternative cryptographic assets.
"Proof-Proof" which uses the hash power of Bitcoin
VeriBlock works on a process known as "proof-of-proof" for which the last "test" has arrived using the hash power of the Bitcoin network. Perhaps the most important contributor to the VeriBlock project is the former Bitcoin Core developer, Jeff Garzik, who sadly led the development of Bitcoin's SegWit2x rigid fork attempt in 2017, part of the VeriBlock team.
The new debates on OP_RETURN started with Jameson Lopp's tweet on January 5th. According to Lopp, who is CTO of the home cryptocurrency provider, VeriBlock has been identified as the protocol behind the highest volume of output OP_RETURN. The data from opreturn.org showed that in December 2017 VeriBlock published 784k OP_RETURN transactions and according to Lopp, they are about to publish 1.5 million transactions in January 2018.
The source of the now higher volume of OP_RETURN outputs has been identified as @VeriBlock "test-proof" miners. They are creating about 20% of all BTC transactions now. It seems inefficient for me; It will be interesting to see if the incentives work in the long run. https://t.co/LpjyhGKg2b
– Jameson Lopp (@lopp) 5 January 2019
Although the VeriBlock blockchain is still being tested, the OP_RETURN transactions that it generates already represent about 20% of all transactions made on the Bitcoin network every day.
Although some may characterize VeriBlock as mere spam, the truth is that Bitcoin works on a system where anyone willing to pay a fee will get his transactions into the blockchain. For now, VeriBlock is making it more expensive to make actual money transfers on the Bitcoin network due to the limited availability of space in the block.
However, there is really nothing anyone can do about it as long as people are willing to pay Bitcoin transaction fees in an effort to improve the security of alternative blockchains. The profitability of VeriBlock and its effect on Bitcoin will be something worth tracking in 2019.
If the company continues to increase the number of transactions created using OP_RETURN and filling the limited space of the Bitcoin blocks, the market will offer the price of transaction fees to the point where it could become uneconomical for VeriBlock to continue to increase its transactions.
The massive proliferation of financial tricks and the continued profitability of space scams have made digital currency difficult to take seriously for anyone not in the industry. Some think that many of these altcoins, especially those that need the support of VeriBlock, have to die completely before it can change.
We have already written about how the Ethereum Classic (ETC) debacle occurred last week and how the risk of a 51% attack on altcoins is much greater than on the BTC network. This is because there is much less hashing power that protects these smaller networks. With less computing power imposing on them, hackers have to command much less computing power to subvert the rules of the network.
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