It's Possible to Increase Bitcoin's Block Size Without a Hard Fork: Blockstream Co-Founder

Mark Friedenbach, a bitcoin developer and co-founder of the popular Blockstream company, has recently revealed a scaling approach he called “forward blocks,” which could essentially help increase BTC’s block size without a hard fork.

Currently, bitcoin can accommodate a small number of transactions per second, and is unable to compete with traditional payment networks such as that of Visa. While some believe the cryptocurrency should scale through a block size increase – which would require a hard fork - others argue this approach will lead to centralization, and prefer other solutions.

A hard fork is essentially a change to the network that isn’t backwards-compatible, meaning all of the cryptocurrency’s users need to upgrade to keep up with the change. A soft fork, on the other hand, can be backwards-compatible.

Friedenbach’s approach, according to a transcript of his presentation at the Scaling Bitcoin workshop, would be able to boost the flagship cryptocurrency’s on-chain transaction capacity through a Proof-of-Work (PoW) alternation achieved through soft forks and “privacy-enhancing alternative ledgers (side chains).”

According to Friedenbach, a former space apps developer at NASA, the forward blocks approach could ultimately help increase the cryptocurrency’s “settlement transactions volume to 3584x current levels,” while improving censorship resistance via sharding.

Here, the developer refers to sharding as a change to the PoW system and a series of developments that would see bitcoin’s blockchain scale. Most cryptocurrency users refer to sharding when mentioning Ethereum’s scaling solution, which would see multiple network computers divide transaction workload between them to scale the blockchain. These two, per Friedenbach, are “largely not” the same.

Speaking to CoinDesk, the former NASA employee noted his approach could help with the scaling debate, as the community often opposes hard forks because of how hard it can be to do them safely. He was quoted as saying:

Forward blocks makes that whole argument pointless. We don't need a hard-fork to scale bitcoin, if and when we decide to do so. It can be accomplished as a soft fork, like SegWit was.

SegWit, as CryptoGlobe covered, was launched one year ago and recently saw its usage go over 50%. During his presentation, he further suggested it could be good to replace bitcoin’s current halving mechanism, which halves block rewards every four years. To him, a more linear approach could be more beneficial to the cryptocurrency, as it wouldn’t suddenly affect the ecosystem.

Notably, Friedenbach reportedly got to his forward blocks approach by starting out thinking about a “development of a dual PoW change where you introduce a new PoW with a soft fork.” While he noted this wasn’t a proposal, it’s a “good place” to start thinking about the solution.

 

A Controversial Solution

While some could look at the former NASA contractor’s approach as revolutionary, CoinDesk reports not everyone is excited about it. Pseudonymous bitcoin developer “Shinobimonkey” was quoted as saying it was a “network attack being called an upgrade.”

Blockstream’s CEO Adam Back noted that “it’s OK,” as discovering mechanisms “can be useful and separate from whether it would be practical technically and in terms of user consensus.” To him, it’s so far just another tool.

Per the news outlet, Friedenbach isn’t advocating to use forward blocks on bitcoin either, but is merely trying to put the option out there. He’s reportedly set to test it on “Freicoin,” an altcoin he created.

50% of Bitcoin Wealth Held by Just 1,800 Wallets

Neil Dennis

The distribution of bitcoin and cryptocurrency wealth is more concentrated than global wealth - and always has been - according to new research.

Blockchain monitoring platform PARISQ says that bitcoin is almost 50 times more concentrated in the hands of the few than global wealth. Ether's distribution, meanwhile, is 300 times more concentrated.

This means, according ot research shared with CryptoGlobe, that to enter the top 50% of bitcoin wealth, a person would need to own 347 bitcoins - worth at current prices $3.6 million. This 50% of bitcoin wealth is controlled by 0.023% of wallet addresses. By comparison, 50.1% of global wealth is controlled by 1% of the world's population.

PARSIQ dataSource: PARISQ

PARISQ's research shows that 1,805 wallet addresses control half of all bitcoins in circulation. Expanded to the top five cryptocurrencies by market capitalization, just 6,457 individual wallets addresses control all assets.

Whale Wallets

The largest such holders of cryptocurrency - particuarly bitcoin - are know colloquially as "whales", and with such concentrated holdings of assets by relatively few investors raises the danger of price volatility should any whale decide to sell a large slice of their holdings.

Such large transactions are often completed undercover - perhaps by special arrangement with crypto exchanges - so that prices remain relatively stable. It is the goal of any trader, however, to buy low and sell high, and it remains totally within the whale's power to manipulate the market in its favour. Such strategies are the staple diets of hedge funds.

It is thought the major holders of this concentration of bitcoin and crypto wealth are founders, early adopters and institutions such as hedge funds and investment houses.

Indeed, PARISQ's co-founder Andre Kalinowski said:

Cryptocurrencies were created with the desire to create a more egalitarian society away from government manipulation and centralized control. However, the latest research has found that cryptocurrency wealth is controlled by a small number of early adopter and exchange-owned whale wallets.

Monitoring Manipulation

Among the top five cryptocurrencies by market cap, XRP is the most concentrated, with just 14 wallets controlling 50% of the market. Ether comes next with 50% of all digital tokens held by 346 wallets.

The research found that much hadn't changed in years. Kalinowski added that although mass media interest during the crypto-market's peak between December 2017-February 2018 brought significant interest from retail investors, very little has changed under the surface. The whales still hold cryptocurrencies long-term and still have the ability to move the markets. He concluded:

The fact is, the transparency that’s part of the DNA of cryptocurrencies has been clouded by the size and complexity involved in analysing these cryptocurrencies. It’s time to open up the blockchain to everyone, to encourage fairer wealth distribution, or at least ensure the whales are more accountable through better monitoring.