Forking madness

For those that are new to the crypto world - a ‘hard fork’ is where a new proposal that changes the code and rules of the network is made. If not all network participants agree then the network splits in two; one that runs the new code and one that runs the old code.

Next week was meant to be bitcoin’s 3rd hard fork in the last 4 months. The proposal was to increase the volume of transactions the bitcoin network can process. Currently, the number of transactions every ‘block’ (10 minutes) is restricted by the amount of data that can be stored in the block, 1MB at present. The new proposal was to increase the block size to 2MB, theoretically doubling the number of transactions.

However, early on Thursday morning the fork was called off by the proposers of the fork. The fork was by far the most contentious with the Miners, Developers, exchanges and network users divided as to which bitcoin would be the ‘true’ bitcoin after the fork.

All participants of the bitcoin network acknowledge the need to increase the volume of transactions that can be processed to accommodate new users and applications of bitcoin. They just don’t agree on the mechanism to use to get there.

 

Magnet’s take

There are many ways that a blockchain can increase the transaction volume that can be processed. Whether it be an increase in block size, reduction in transaction size (e.g. SegWit), Lightning Network (explained below), sharding (subdividing the transaction approval process so that transactions need only be approved by a certain portion of the network, not everyone as is the case now) or another proposal.

The Lightning Network is a proposed solution to bitcoin’s scalability issues. It allows two users of the bitcoin network to establish a payment channel to transact through that isn’t on the blockchain. How it does this is the two users commit capital to the blockchain up front that can drawn down over a period of time. Other than the initial capital committed to the chain no other transactions are required to be posted to the blockchain.  

We believe that the Lightning Network is a sensible approach to address bitcoins scaling issue as it does not require any fundamental changes to the source code and allows for millions of transactions to be processed every second, rather than the current capacity of 3-7 transactions per second.

In addition, Bitcoin 2X became political, it was about control and not about solving problems, we think it’s definitely a good thing the chain didn’t split

 
 

Magnet Update

Magnet Capital is now live! We officially launched and issued first units on the 7th of November. The next available entry for Magnet Capital will be on the 31st of November and monthly thereafter.

 

Adoption

  1. The People’s Bank of China (PBoC) has put its support behind the development of a central - bank issued cryptocurrency. Yao Qian, who leads cryptocurrency research at the PBoC, deemed it ‘crucial’ to the success of a digital economy and that it can help to reduce transaction costs, help expand financial services to rural areas and increase the efficiency of PBoC’s monetary policy

  2. Britain’s Royal Mint (BMT) has launched a blockchain to manage, track and provide a reliable record for the ownership of physical gold. The mint, which owns 5.4% of global bullion, plans to imminently launch a blockchain based bullion trading platform. Nicola Robinson of the BMT believes that this would allow for traders to reliably transact smaller amounts of gold and increase the liquidity of the market

  3. Major energy firms are partnering to develop a blockchain based energy trading platform. The platform aims to be open to all market participants wishing to trade energy by the end of 2018. Major participants that have backed the platform and will participate initially include BP, Shell, Statoil, ING and ABN Amro

  4. Jay Clayton, Chairman of the SEC, has described the ICO market as opaque, vulnerable to price manipulation and other fraudulent trading practices. Speaking in New York at the Practicing Law Institute, he indicated that the SEC is continuing to seek clarity and protection for investors in regards to ICOs and crypto asset exchanges

Egor SidelskaComment