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Money 2.0 Stuff: Updating Blockchains is like cleaning a pig

Quick take

  • Starting a blockchain and making changes is literally more like rocket science than creating a photo sharing app. Insects can be fatal and even more difficult to perform than those to be distributed.
  • The Grin project, probably the most crowded "encryption" of 2018, was launched last week.
  • The development of Bitcoin's Lightning Network was staggering. This week, The Block's Larry Cermak analyzed the numbers on how Lightning's growth looks with me, looking forward to some of the key improvements in usability, security, scalability and privacy.

Updates are difficult, Man

The update of blockchain is always a can of worms. The addition of the crucial update of SegWit to Bitcoin took two years of broad debate.

The first question that most normal people have is "How do you schedule updates for a decentralized thing?" This is perfectly reasonable, because once these networks are at liberty, in theory, no one really "decides" how they work. Blockchains have rules and these rules are defined in the software.

Many people – companies, individuals, miners – have an understanding of what the rules are. Changing these rules requires that most of these people coordinate independently, again, in theory. If few people can decide on what the new set of rules is and arbitrarily unroll it … yes.

In effectively decentralized blockchains such as Bitcoin and Ethereum, changes take place in some form:

  1. The person has an idea, talks to other people and then writes a formal proposal (for example a BIP, Bitcoin improvement proposal).
  2. The proposal is widely shared between the developer mailing lists and community forums where many teams, developers and enthusiasts focus on design.
  3. If the proposal is seen as a good idea and can be implemented as backward-compatible, work on it begins, usually with the intention of extending it with a number of other similar updates. Updates compatible with previous versions can be launched slowly over time (like a soft fork). The biggest changes that can result in a controversial difficult fork or leave behind some outdated users are considered the last resort.
  4. Each independent software implementation is modified separately. On some announced update dates that give everyone the time to update to the latest version of their software, all new features open.

In Bitcoin, the hard forks are left as a last resort (SegWit was finally adopted after the super genius Pieter Wuille understood how to implement it as a soft fork).

Last week, Ethereum was planning to implement their next big network update, Constantinople. Unfortunately, a bug was discovered only a couple of days before the update date, prompting the planned update at some future date (with many core developers in a fun way pushing to call the new Istanbul update.)

This update would have had many performance improvements, but the most important operation was the delay of the difficulty bomb. The developers of Ethereum eventually want to switch to Proof of Stake, an important update that requires everyone to switch to a totally new version of the software. To encourage them to do so, the people involved decided not to make a choice: in a series of "bombs" of pre-programmed difficulties, the Ethereum chain eventually becomes so difficult to dig, thus increasing the time between the blocks, which "freeze" the chain and force people to update. Matteo Leibowitz del Block explains:

The "Ice Age" function, which makes it difficult to detect increasingly difficult hashes, has been designed to encourage miners to move to the Ethereum Proof of Eke chain once development is finalized. Due to delays in the search for Proof of Stake, the main developers decided to delay the ice age, allowing the blocks to maintain production time of 10-15 seconds.

Because the PoS research has took longer than expected, the developers of Ethereum needed to push the bomb of pre-programmed difficulty, because they still need the miners to stay on board. Unfortunately, making complex changes to the software is difficult and often creates new bugs in the process. While nearly 50% of the nodes were already up-to-date with the new software, an intelligent contract control company (ChainSecurity) found new potential vulnerability in smart contracts that ceased due to the new update, causing Core Devs to delay 39; update in February.

The bug, which breaks old smart contracts, has caused some philosophical debates in the community. Matthew Leibowitz explains in his post-mortem summary:

The debate is of a rather philosophical nature, centered on the meaning of "immutability" and on the responsibility of the core developers towards the developers of smart contracts. On the one hand, developers of smart contracts want assurances that their code will be immutable, as promised at the beginning of Ethereum, and they argue that changing the way the code is interpreted through code updating operative violates the sanctity of immutability.

He also raised some interesting questions from the wider crypto community. Starting a blockchain and making changes is literally more like rocket science than creating a photo sharing app. Insects can be fatal and even more difficult to perform than those to be distributed. What guarantees do protocol developers need companies or individuals to create apps at the top of their chain?

What does it mean for Ethereum that speculators have to squeeze at what should be a predictable supply program is a moving target like Fed rates do? Are there concerns about a small group of developers or some companies that have control over the roadmap and the Ethereum release cycle?

VC Man Bad

This week the long-awaited Grin project was finally launched. I have already written a complete overview previously, but here are the highlights:

  • The project is one of two that implements the privacy protocol Mimblewimble, which was released anonymously in 2016.
  • It was released in a similar way to the "immaculate conception" of Bitcoin: one day an excerpt with non-specialized hardware and without pre-sale.
  • "Grin" is itself a reference to Gringotts and MimbleWimble is the name of a curse, the creator used a pseudonym that refers to Tom Riddle in French and yes, everything else is a reference to Harry Potter.

The launch went smoothly, probably one of the most anticipated in history with the equivalent of 146,500 GTX 1060 6GB or 88,200 GTX 1070 Ti 8GB currently in mining grin.

Such as I noticed in October, Grin was probably the most crowded "encryption" of the business of the year with Eric Meltzer writing down in his ProofOfWork newsletter:

An interesting thing is that, unlike Bitcoin, which at the time of launch was so trampled and ignored that Satoshi had to extract an Intel CPU by itself for most of 2009, there are (according to conservative estimates) 100 million VC investment dollars mostly in special investment vehicles to extract Grin.

This investment has not been solicited by the team, despite this has triggered a lot of deep cypherpunks to wax nostalgic on the pure times when Satoshi could launch into anonymity in relative obscurity.

While the mechanics around the launch of the brand-name "VC coin" have now turned off many people, it is important to remember that investors are still taking significant pre-launch risks for the success of market deployment and reception (which it is still uncertain).

Grin (and the previous BEAM launch) are about to usher in a new era of mining based on the PoW as a violent reaction to the focus of last year's industry on moving to the PoS en masse? How much will Grin have in the current interest in other privacy projects? How much of a competitor is a private Bitcoin cryptocurrency considering that Bitcoin sees its own privacy improvements?

The project serves as an extremely interesting case study for 2019.

Other things have happened

  • Kevin Connolly, who played an extremely enterprising pizza producer on Entourage, has just started working on a new show called "Cryptos". Ignoring for a moment that the most likely result is a gigantic HBO celebration at Silicon Valley, it could be fun.
  • The Ivy League academics are back on it, launching a new cryptocurrency project that is a hypothetical Bitcoin competitor. It's just, well, faster. That means it's better, right?
  • On the subject of speed, the development of Bitcoin's Lightning Network was staggering. This week, The Block's Larry Cermak analyzed the numbers on how Lightning's growth looks with me, looking forward to some of the key improvements in usability, security, scalability and privacy.
  • The MolochDAO, trying to focus on funding of Ethereum-like infrastructure projects similar to The DAO, was formally announced this week. Even if it is material risks, it is interesting to see that earlier Ethereum early childhood experiments see a reboot with more security and infrastructure. We pray that this does not involve another rescue.

Another crazy week in cryptocurrency; enjoy the marathon, take breaks during the sprints.

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