Andreas Antonopoulos surprised a crowd at a Berlin Bitcoin conference last week by claiming that, by the end of this year, Bitcoin’s consensus algorithm will be totally changed.
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Antonopoulos: Bitcoin Will Become a ‘Hybrid’
The prediction comes after a much-publicized block size debate in which developers have disagreed on how to update the Bitcoin system in order for it to keep pace with growth in transaction demand.
“By probably the end of 2016 Bitcoin will have a hybrid of Proof-of-Work proof of stake system,” Antonopoulos told conference attendees in a video available on YouTube. “Because Lightning Network is a Proof-of-Stake system, and people haven’t yet realized that Lightning Network is a proof-of-stake system.”
The repeat Joe Rogan guest continued: “In order to set up a functioning channel on Lightning Network, you have to commit money to a multi-sig address, and the more money you have committed to a multi-sig, the [higher] transaction rate it can handle and the more fees it can generate locally. Only it’s a completely trustless proof-of-stake system based on Bitcoin transactions running on top and guaranteed by Bitcoin’s proof-of-work.” Antonopoulos notes he only realized this six months ago.
“I had to go to one of the developers who is writing it, just to make sure I am getting this right. He said, ‘yeah you could call it [a Proof-of-Stake].’”
According to Antonopoulos, Proof-of-Stake could play a large role in Bitcoin’s consensus algorithms in the future. He claims it could allow the Bitcoin network to scale with increasing transaction rates better than does the current Proof-of-Work model.
Proof-of-Stake is an alternative to Proof-of-Work consensus algorithms. They are both similar in that they attempt to provide consensus and prevent double-spending.
Proof-of-Work involves some type of work in order for a block to be produced. Proof-of-Stake requires users to put up some amount of coins which correlates with how much digital currency they can mine.
Bitcoin’s Proof-of-Work currently cannot scale due to the block size limit. Certain Bitcoiners say this might be solved with a Proof-of-Stake system.
A Proof-of-Stake system theoretically results in lower transaction fees as less computing power is needed to produce blocks. Bitcoin’s Proof-of-Work entails producing data, a time-consuming endeavor. Difficulty in Proof-of-Work systems can vary. Oft a random process, this trial-and-error method of computational problem solving can be designed for a low probability for a block to be produced, as is the case with Bitcoin. Bitcoin’s Proof-of-Work is based on the SHA-256 cryptographic hash function.
Lightning Network strives to use smart contract functionality in the blockchain for instant payments across its network of participants. The Lightning Network is designed as an added layer to the blockchain. It combines Bitcoin’s blockchain transactions with its native smart-contract scripting language. According to the Lightning Network, this means a “secure network of participants which are able to transact at high volume and high speed.”
Lightning wants to conduct transactions off-blockchain, removing the limits of using the blockchain: “By making the transactions and scripts parsable, the smart-contract can be enforced on-blockchain. Only in the event of non-cooperation is the court involved – but with the blockchain, the result is deterministic.”
In February, Antonopolous tweeted: “I don’t get all the animosity and conspiracy around Lightning Network. I think it’s really [an] amazing innovation & great solution to scaling.”
Developers on Bitcoin.StackExchange are not as convinced as Antonopolous is about designating Lightning Network a pure Proof-of-Stake system. Staking usually entails updating a network’s status. One earns fees by helping to validate and secure the network. Lightning Network also offers a smart contract platform. Participants can earn fees by providing liquidity. Nodes on Lighting Network forward payments. Lightning Network does not verify nor secure transactions. Consensus, rather, is created by Bitcoin’s Proof-of-Work.
Bitcoinist.Net reached out to Lightning Network but did not hear back before publication.
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Images courtesy of LondonReal, Andreas Antonopoulos.
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Andreas Antonopoulos Makes Bold Prediction on Bitcoin Consensus