Next year will mark the 10th year of Bitcoin’s conception; hard to believe that a decade has gone by since one of the most potentially disruptive technologies has been introduced to wreak havoc on the world. However, wisdom does not always grow exponentially with age.
The truth of the matter is that Bitcoin is in trouble. We are now facing a backlog of around 250,000 transactions and it’s growing day by day. With a ten-minute average block time, that translates to an average wait of 24 hours to have your transaction go through; I myself had to wait 48 hours for the last 2 transactions. This is happening thanks to Bitcoin’s low block-size limit of 1 MB roughly containing 2000 transactions; with 2000 transactions being handled every ten minutes, it’s easy to see that there’s a dire need for improvement in this regard.
Slow transaction times along with increasing fees are irking people greatly, since Bitcoin had promised otherwise. However, another problem is present, and one which is not widely-known to the public since its effects are not as evident. An inherent issue had been discovered quite a while ago which basically allows persons with sufficient technical knowledge to change the transaction ID (TxID) without invalidating it, potentially leading to a similar problem which Bitcoin set out to solve in the first place – double-spending. However, rather than spending the same amount of crypto twice, transaction malleability means that the recipient of the transaction can change its txID before confirmation, which would have the effect of showing zero Bitcoin being sent on that txID leading to potential fraud by, for example, the recipient, since the amount would still have been received yet the sender can be told that the transaction did not go through by showing them the falsified txID.
“Discovered quite a while ago” you say? How about years ago? A huge fissure has formed in Bitcoin’s armor and for a long while it has gone unsolved and underestimated. The latter happened due to the general public’s lack of technical knowledge in the matter; the former through childish arguing, kicking and screaming between the most influential people in the Bitcoin network. Bitcoin Core, which is normal Bitcoin for you, wants to implement Segwit, a signature-separation fix with the aim of taking care of transaction malleability as well as increasing the block size to see off that nasty backlog. What has stopped it from being adopted? Well, it turns out that the current flawed system benefits a few miners who discovered that ASICs can exploit an underlying vulnerability resulting in up to 30% better returns for them when mining. These same miners have been offering monetary incentives for other miners not to adopt Segwit, hence the stalemate. This other group is proposing a hard fork of Bitcoin where the block size will be increased significantly but the transaction malleability vulnerability is retained.
And so the very invention meant to overcome the Establishment, bring down the ancient, bloated banks and create a brand new world is in danger of falling at the hands of its own children. Cryptocurrencies such as Ethereum and Ripple are slowly creeping up onto their ailing father with unsheathed daggers; yesterday marked a historic turn of the tide where Bitcoin’s dominance over the total cryptocurrency market worth over $ 50 billion has fallen under 50%. Indeed, financial institutions are enamoured with Ripple and its fast settlement times, and are quite eager to dip into the blockchain through partnerships with Ripple Labs. Other industries are investing heavily in the smart contract system of Ethereum and multiple projects are launching off Ethereum’s blockchain.
Right now there is pretty little justifying Bitcoin’s inflated price except for the fact that you need Bitcoin to buy most of the existing altcoins today and therefore serves as a conduit to other coins. The truth is that Bitcoin’s blockchain can easily handle smart contract implementation and lightning-fast transactions, and the fundamental question remains on whether Bitcoin can heal from this malignant disease and receive its much-needed medicine. If it does, then it will pick up its sceptre again and flick away the threats. If it doesn’t within the next twelve months, then we’ll all witness a fight for the number one spot – and rest assured that there will be blood on the streets.
Join us at the Blockchain and Cryptocurrencies conference taking place next November at SiGMA, the largest dedicated iGaming exhibition and conference in Malta, where similar topics will be discussed in greater detail.