A New Blockchain Project Is Generating 20% Of Daily Bitcoin Transactions
Recently, Bitcoin developers noticed some strange activity on the blockchain. Specifically, a large number of unidentified OP_RETURN transactions were discovered.
OP_RETURN is a type of Bitcoin transaction that is used for embedding data into the blockchain. It can be used for anything from proving the existence of some data at a specific point in time (proof-of-existence) to issuing new assets, such as the controversial US dollar-pegged Tether, on top of the Bitcoin blockchain.
Over the weekend, it become more widely known that the entity behind these transactions is VeriBlock, which is a project that piggybacks on the Bitcoin blockchain in an effort to better secure alternative crypto asset networks. According to Casa CTO Jameson Lopp and VeriBlock’s own block explorer, VeriBlock has grown to the point where it now accounts for roughly 20% of all daily Bitcoin transactions.
What is VeriBlock?
The basic idea behind VeriBlock is the concept of proof-of-proof (PoP). This is the supplemental consensus mechanism used by blockchains that integrate with VeriBlock.
Altcoins tend to have security issues due to the relatively low reward for mining these chains as compared to Bitcoin. For example, there is a mining attack happening on the $500 million Ethereum Classic network right now. Without enough hashrate, it becomes easier for nefarious actors to essentially rewrite the history of a crypto asset network’s ledger. This allows attackers to do things like send the same coins or tokens to two different parties, essentially creating new money out of thin air.
The intended purpose of VeriBlock is to improve the security of these alternative blockchains by embedding the current state of the altcoin’s ledger into the Bitcoin blockchain. Instead of relying solely on its own hashrate for security purposes, VeriBlock allows a blockchain to piggyback on the massive amount of computing power that is already pointed at the Bitcoin network.
Notably, former Bitcoin Core contributor Jeff Garzik, who infamously led the development of the abandoned SegWit2x hard fork attempt of Bitcoin in 2017, is part of the VeriBlock team.
Although the VeriBlock blockchain is still in a testing phase, the OP_RETURN transactions that it generates already account for roughly 20% of all of the transactions made on the Bitcoin network every day.
What Does This Mean for Bitcoin?
The idea of embedding alternative data into the Bitcoin blockchain is not new. In fact, there was a technical debate over whether these sorts of transactions should be encouraged over five years ago. This debate eventually led to the introduction of the OP_RETURN operator in Bitcoin Core 0.9.
In the past, Ethereum creator Vitalik Buterin claimed he avoided building his project on top of Bitcoin due to the perception that Bitcoin developers would make things difficult for him by limiting the extent to which data can be embedded in the Bitcoin blockchain.
There are different opinions over whether use cases like VeriBlock should be defined as nothing more than spam, but the way in which a permissionless system like Bitcoin works is anyone who is willing to pay a fee will get their 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 block space. However, there isn’t really anything anyone can do about this as long as people are willing to pay Bitcoin transaction fees in an effort to improve the security of alternative blockchains. Having said that, there are also alternatives to PoP, such as Komodo's delayed proof-of-work (DPoW), which require less transactions on the Bitcoin blockchain. The viability of VeriBlock and its effect on Bitcoin will be something worth tracking in 2019.
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