Bitcoin technological trends of 2018: what brought us this year (part 2)

This is the second part of our December cover story. Click here for part 1.

Where the staggering price highs of 2017 have incorporated "hodl" into public consciousness, 2018 was the year that "buidl" became a trend in the crypto-industry – and Bitcoin was no exception.

Expected in Bitcoin Magazine The first hedging history of the year, Bitcoin's technological advancement had an acceleration only in 2018. By improving Bitcoin from all over the world, developers and entrepreneurs have promoted the adoption of Segregated Witness, launched the Lightning network, released privacy solutions, made sidechains and made progress on a Schnorr signature solution – that were still behind the corner just a year ago.

Following the January cover story, the 2018 double-decker cover explores how these five technologies have progressed.

In the second part: privacy, sidechains and Schnorr signatures.

Solutions for privacy

Two of the most promising privacy solutions that have been proposed in recent years – TumbleBit and ZeroLink – were both on the verge of being released at the start of this year.

TumbleBit is a coin mixing protocol proposed for the first time in 2016 by an academic research group led by Ethan Heilman of the University of Boston. TumbleBit uses a (centralized) mixer to create offline payment channels between different participants in a mixing session. Everyone ends up with the coins of others, breaking the trace of the transaction for everyone. It is important to note that intelligent cryptographic tricks ensure that the mixer can not establish a connection between users and their transactions.

Enthusiastic about this potential, the developer of NBitcoin Nicolas Dorier and the developer of Bitcoin, focused on privacy, Ádám Ficsór (as well as many others) have come a long way to implement the solution in the two years following his first proposal. In early 2017, Stratis, the company behind the Stratis platform and token, also hired Ficsór to implement the technology in its Breeze portfolio, which also supports bitcoins.

However, in July 2017, Ficsór had come to doubt the real potential of TumbleBit. The solution requires a relatively large number of on-chain transactions for each mixing session, making it potentially cumbersome and expensive.

"I did not and I do not think anyone else has ever thought of the economy of TumbleBit's Classic Tumbler as I was doing now, in an environment with high levels of Bitcoin in which we are inevitably heading", wrote Ficsór in a post on the Medium's blog. "To be completely honest, after writing all these things, I became rather disillusioned."

Ficsór and Stratis completed the project. After years of great anticipation, TumbleBit was finally released in the Breeze Wallet in August of this year. But at that point most of the excitement around the project seemed to have vanished. Breeze & # 39; s TumbleBit has remained out of the radar of many, and for this reason, usage statistics are presumably low.

Instead, much of the effort to make a more private Bitcoin has moved on to the other privacy solution: ZeroLink. Based on "Chaumian CoinJoin", proposed for the first time by Bitcoin Core contributor Gregory Maxwell in 2013, ZeroLink is a privacy framework announced for the first time in August 2017 by Ádám Ficsór himself.

ZeroLink allows different users to mix their coins in a large transaction that sends coins from all the participants in a mixing session to all the other participants. It has similar requirements (a central server) and benefits (it breaks the transaction track) like TumbleBit, but Ficsór believes that compromises are preferable, in particular because ZeroLink requires less chain transactions.

To realize ZeroLink, Ficsór created his company focused on the privacy of Bitcoin, zkSNACKs, which he revealed for the first time at the Building on Bitcoin conference in Lisbon in July.

A rebrand of his initial "Hidden Wallet" project, zkSNACKs' flagship product is Wasabi Wallet, a desktop portfolio with additional privacy features based on the ZeroLink framework. In addition to Chaumian CoinJoin, this, for example, includes the filtering of side blocks for compact clients: a solution that optimizes privacy for light clients that do not download the entire Bitcoin blockchain.

Wasabi Wallet was officially released on October 31st of this year, on the occasion of the tenth birthday of the Bitcoin white paper. Despite being far from the mainstream, Wasabi Wallet has already become the privacy option for many of those who care more about privacy. According to GitHub's statistics, the wallet has been downloaded thousands of times in the first months since its release. And according to the Wasabi Wallet website, it has already mixed almost two thousand coins.

"Honestly, I was amazed at the growth of users and the activity of social media, and if this continues, we will finally be able to think of liquidity-dependent privacy solutions, for example, to allow direct sending through mixing", said Ficsór. Bitcoin Magazine . "Exciting times".

The ZeroLink framework is also adopted as a standard by other portfolios. The new (and so far relatively unknown) Bob Wallet has announced March which is developing a ZeroLink implementation. In August, Samourai Wallet, focusing on privacy, announced a mobile implementation of ZeroLink called Whirlpool. Stratis's Breeze portfolio also initially showed interest.

In addition to TumbleBit and ZeroLink, more privacy solutions have been implemented this year, and more are being developed. For a complete overview of privacy technologies published in 2018 or currently under development, see Bitcoin Magazine The September cover story: Bitcoin as PrivacyCoin: this technology is making Bitcoin more private.

Stratis (the company behind the Breeze portfolio) has not responded to a request for comment on this story.

side chains

A technology long awaited for several years, sidechains are alternative blockchains with bitcoin-anchored coins. This allows users to effectively "move" bitcoins to blockchain, allowing them to operate according to different protocol rules, for example to allow faster confirmation times or to provide more privacy. In essence, the sidechains would offer all the technical benefits of altcoins while maintaining the limit of 21 million Bitcoin coins.

Liquid

While the blockchain development company has since expanded its mission, Blockstream was originally founded in 2014 around the concept of sidechain. Since 2016, he has kept "Elements", an open source sidechain project that shows what is possible with technology. But Blockstream's first commercial sidechain project is Liquid, announced in 2015.

Liquid is designed to offer a rail payment service between exchanges and other service providers, to allow traders to quickly and privately move funds and exploit arbitrage opportunities. This minimizes spreads between trades and increases liquidity across the industry. Called a "federated sidechain", the coins and transactions on the sidechain are guaranteed by a selection of exchanges and service providers: they are the guardians who transfer funds from the Bitcoin blockchain to the sidechain and vice versa.

In October of this year, Blockstream launched Liquid, with its bitcoin-core token L-BTC. A month later, he introduced to the public nodes, portfolios and a block explorer. Liquid is insured by some of the best-known companies in the industry, including Bitfinex, BitMEX, Xapo, Unocoin, Bitso and other tens. Italian bitcoin exchange The Rock Trading offered Liquid on-and-ramps almost immediately after the launch of the sidechain and, at the end of November, also Bitfinex CSO Paolo Ardoino indicated The liquid support will be distributed soon.

Judging from the publicly available statistics, the use of Liquid is still modest: some 25 bitcoins are blocked at the time of writing this article, which required 75 transactions to do so. The sidechain has processed about 3,400 transactions in total, which equates to less than a dozen transactions at the moment. But the long-awaited technology is alive – and growing.

"It's a good start," said Blockstream CSO, Samson Mow. "We only released the client recently, so that's what I would expect, because we have more exchanges that expose integration to their end users, we should see a lot more traffic."

RSK

Another Bitcoin federated sidechain is RSK, with the bitcoin bitmap R-BTC token. RSK is specifically designed to support smart contracts in the Ethereum style and complete with Turing. Like Liquid, the coins on RSK are guaranteed by a group of established Bitcoin companies. But unlike Liquid, RSK is also unified with Bitcoin, which means bitcoin miners use their hash power to create blocks and confirm transactions.

"This idea of" two rooms "translates into a strong security because no group has too much energy and each group has a specific responsibility," said Sergio Lerner, co-founder and chief scientist of RSK Labs, the company that is developing and supporting RSK reference implementation. "And like in Bitcoin, platform users control the fate of the protocol."

In January , the Genesis block was extracted and RSK was officially launched. An early announcement suggests that the companies of the federation include Bitstamp, Bitfinex, Bitpay, Xapo and BitGo – although RSK has not yet revealed which companies are part of today's federation, exactly. (A joint public announcement will follow soon.) RSK has also attracted many of Bitcoin's biggest mining basins: BTC.com, AntPool, Slush Pool and F2pool are already merging the sidechain, representing over 50% of the Bitcoin hash power. The R-BTC token is available in exchanges including Bitfinex and Huobi, and even the RSK platform has been improved a lot, said Lerner: RSK made nine releases in 2018 from version 0.4.0 to the current version 0.5.3.

Perhaps even more important, according to RSK Labs, around 50 projects are working on the RSK sidechain that RSK Labs is keeping track of, although most of the projects are, of course, still in their early stages or are still under development.

Some of the most important RSK projects are developed by RSK Labs itself, as well as by RIF Labs, the company that acquired RSK Labs in November. These include a network of payment channels similar to Lightning called Lumino (which, although incompatible in design, could be filled by the main Lightning network of Bitcoin). RIF Labs recently launched the RIF OS project, which is a range of open source protocols and libraries that will initially run on RSK, which includes a payment network, peer-to-peer storage, name resolution, and more.

"The RSK community is expanding, mainly in Latin America and Asia," said Lerner Bitcoin Magazine "and in the last few months we have witnessed an acceleration of companies that have launched RSK-based solutions, and in 2018 there have been over 100 RSK meetups and conferences all over the world, and RSK Labs also has an ambassador program to follow. ecosystem growth: there are currently over 200 certified ambassadors and over 1,000 in the certification process ".

Drivechains

Finally, a trial version of a drivechain – a product by researcher Tierion Paul Sztorc (formerly Bloq) – was released in September. The sidechain drivechain model is not federated but is entirely protected by Bitcoin miners. By exploiting their existing hash power (and combined with technical safeguards to limit risks), the miners both act as guardians of the sidechain and confirm transactions on it.

More than a concept compared to a specific sidechain design, Sztorc hopes that the future of Bitcoin will contain a diverse range of drivechain in order to copy many of the features now implemented on altcoins. A potential first drivechain would be a "big block" sidechain for fast and cheap transactions, while Sztorc's personal interest has always been to implement a sidechain in the forecasting market.

For development, the drivechain project has made steady progress this year, Sztorc said.

"We are at release 12, and 13 is almost over and has many improvements, many bugs have been fixed and we are working to make the software perfect for now."

However, drivechains require a soft-fork update of the basic Bitcoin protocol to be compatible. Such an update was discussed on the Bitcoin development mailing list about a year ago, and an official version of Bitcoin Improvement (BIP301) was presented by Sztorc at the start of 2018.

Sztorc, however, is doubtful that this soft fork will be implemented by Bitcoin Core, historically the Bitcoin software application through which most of the soft forks have been activated.

"I'm pessimistic that I can convince the maintainers of the Core to melt it," he said, "and I even doubt that the miners would activate it if it were melted, since the soft forks activated by the miner did not happen in a few years and not at all since SegWit – it happened every few months. "

While Sztorc would still prefer that the drivechain BIP was implemented by Bitcoin Core, for now it keeps all options open. This includes the activation of the soft fork without the help of Bitcoin Core or the implementation of drivechain on Bitcoin Cash.

Ultimately, Sztorc could even launch a completely new forkcoin with enabled drivechain functionality.

"It would then have the same general feeling of Monero or Bitcoin Cash," he said. "Some other project."

Schnorr signature proposal

The Schnorr signature scheme is considered by many cryptographers to be the best in the field. Its mathematical properties offer a high level of correctness, it does not suffer from malleability, it is relatively quick to verify and, in the context of Bitcoin, it would allow new functionalities. Schnorr's signatures have therefore been high on the wish list of many in the Bitcoin technical community for some time now.

While Segregated Witness made it easier to integrate Schnorr into Bitcoin, it is still an important business: at the start of 2018, this was not realistically expected to be completed by the end of this issue. year.

But good progress has been made.

In July, Blockstream and Bitcoin Core developer Pieter Wuille proposed an initial BIP on the Bitcoin Development mailing list, with input from other Bitcoin Core contributors including Johnson Lau, Gregory Maxwell, Jonas Nick, Andrew Poelstra, Tim Ruffing, Rusty Russell and Anthony Towns.

But the Schnorr signature proposal was only the beginning, Wuille said Bitcoin Magazine . There will be many other BIPs to be presented as part of the "Schnorr project".

"The Schnorr BIP defines the signature algorithm itself," Wuille explained. "There will be another BIP for Bitcoin integration, the next step is to work out all the details, the more BIPs are not far away."

Bitcoin Core developer for Xapo and contributor to Wuille's Schnorr proposal, Anthony Towns sent an email to the Bitcoin development mailing list last week, detailing some of the additional changes that will be needed to make Schnorr on Bitcoin. These include new sighash flags, whose discussion was underway on the same mailing list since November.

Of particular interest is that Wuille and the other Bitcoin Core contributors are now working on a proposal to implement Schnorr in combination with another major technical update: Taproot.

Taproot was first proposed in January this year by Bitcoin Core developer Gregory Maxwell (who also contributed to Wuille's Schnorr proposal). Taking advantage of several Schnorr-based tricks, Taproot can implement a solution very similar to MAST: it would allow users to create a kind of intelligent data-intensive contract. But interesting, under normal circumstances, these smart contracts would be indistinguishable from regular payments.

In practice, Taproot would allow users to open and close channels of Lightning Network, or make payments that require cooperation between multiple users, or to make certain types of episodes on the protocol without anyone, in addition to the parties involved, could notice that it's what's happening – an advantage for privacy.

However, the initial implementation of Schnorr will probably be direct compared to what the signature algorithm could ultimately allow, Wuille said. Many of these more complex features will be added later.

"The signatures interact with many other parts of the protocol that need to be processed, so it seems more reasonable to integrate Schnorr and Taproot first, which already offer many benefits, such as verifying most of the expenses with a single signature and without needing to reveal a screenplay, "Wuille explained. "Once you have implemented Schnorr in Bitcoin, there are a number of things that wallets can do, including multisignatures and threshold signatures, and the nice thing is that these features do not require their consent rules."

Edit note: Pieter Wuille's comments have been translated by Dutch.

This article has been updated for accuracy.