Some of the brightest minds in America are putting together their brain power to create a cryptocurrency designed to do what Bitcoin has shown incapable of: processing thousands of transactions per second.
Professors from seven US colleges, including the Massachusetts Institute of Technology, Stanford University and the University of California, Berkeley have collaborated to create a digital currency that they hope will reach speed. Bitcoin users can only dream without compromising their decentralization tenant. Unit-e, as the virtual currency is called, is the first initiative of Distributed Technology Research, a nonprofit foundation formed by academics with the support of the Pantera Capital Management LP hedge fund for the development of decentralized technologies.
Bitcoin is the original cryptocurrency and the first payment network that allows parties to make transactions directly without having to trust one another or rely on a central authority. However, while building a following between developers, anarchists and speculators, mainstream adoption remains elusive.
This is largely the product of its design, in which the inherent restrictions have limited its performance and scalability and, consequently, reduced its usefulness as a daily payment unit, DTR said in a research paper. Academics are planning a virtual currency that they expect will be able to process transactions even faster than Visa.
"The public official is aware that these networks are not in scale," said Joey Krug, co-chief investment officer of Pantera Capital in San Francisco, also a member of the DTR council. "We are at the height of something where, if this does not scale relatively quickly, it could be relegated to ideas that were good but not working in practice: more like 3D printing than the Internet."
DTR plans to launch Unit-e in the second half of the year and plans to process up to 10,000 transactions per second. This is far from the current average between 3.3 and 7 transactions per second for Bitcoin and 10 to 30 transactions for Ethereum. It is also faster than Visa, a centralized network that processes about 1,700 transactions per second on average.
Bitcoin's scalability challenge is a function of its design: the frequency within which new blocks can be created, such as transaction records, and their maximum size is limited.
To achieve greater speed and scalability, DTR has deconstructed the blockchain technology that supports most cryptocurrencies and has sought to improve almost every element of it, said Pramod Viswanath, project researcher and professor of electrical and computer engineering at the time. University of Illinois Urbana-Champaign. The group first sought to understand the limitations of blockchain performance in order to design technologies that work as close to these limits as possible, said Viswanath.
Academics have published research on all aspects of blockchain technology and rely on new mechanisms that have designed to reach consensus, as well as new ways of sharding – a process by which each node retains only part of the blockchain, thus increasing speed – and new channel network payments, to achieve their targeted transaction speed.
The cryptocurrency industry is also very aware of the problem and various initiatives are under way to increase the speed of transactions. Key efforts include the Lightning network, which should make cryptographic payments faster and cheaper by eliminating the need to record each transaction on the blockchain, while another, Segregated Witness, or SegWit, also aims to make transactions faster.
David Chaum, a pioneer of virtual currencies, is also working on a new platform that allows the transfer of digital money more quickly.
The success of Unit-e is all but guaranteed. While the best technology should prevail over the long term, there is a risk that the new currency will not be able to gain traction in the short term, said Andrew Miller, head of the independent technical steering committee Unit-e and assistant professor of electricity and computer engineering. # 39; University of Illinois Urbana-Champaign.
The Swiss-based foundation brings together professionals from the fields of economics, information technology and cryptography, and its members also include academics from Carnegie Mellon University and the universities of Southern California and Washington. It is funded by Pantera and some private individuals, said the Chairman of the Board of Trustees Babak Dastmaltschi, while refusing to elaborate further.
Unit-e is the group's first initiative and future work could cover so-called smart contracts, said Viswanath.
"Bitcoin has shown us that distributed trust is possible, but it does not fit a dimension that could make it a real daily money," said Viswanath. "It was a step forward that has the ability to change human lives, but that will not happen unless technology can be increased."