Lightning Hackday Berlin & The State of Bitcoin

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The technical innovations within Bitcoin continue to grow at a rapid pace. September 1, 2018 was the third LightningHackingDay in Berlin and therefore a good reason to look at the state of Bitcoin in addition to the state of the Lightning Network: what is the current state and what developments can we expect.

LightningHackday Berlin can be seen as a foundation for building the Lightning Network: experimentation with use cases and technical developments around the protocol are discussed and discussed. Interested developers and scientists from around the world gather here to work on this game-changing technique.

Various speakers from the Lightning development were present to discuss the technical developments in more detail. There were many different presentations, in this article we discuss the two most important of the weekend: Christan Decker and Jonas Nick (both responsible for R&D activities within Blockstream) covered two important topics: Eltoo and Schnorr Signatures.

Eltoo

Christian Decker treated Eltoo in Berlin. Eltoo is a technical upgrade to the Lightning protocol that was conceived and developed by Rusty Russell, Olaoluwa Osuntokun and Christan Decker themselves. Eltoo is an upgrade to the Lightning Network that makes the current punishment mechanism obsolete. This upgrade has an elegant solution for the (intentional or unintentional) abuse of channel states (balances of the channels). This is much needed when a node times out or goes offline due to circumstances. The node/channel no longer publishes an incorrect status to the (Lightning) network with the help of Eltoo. This minimizes the impact of targeted attacks or unconscious errors.

This technique would also obviate the need for Watchtowers. Watchtowers pursue the same goal; counter abuse of channel balances but through a different method. This method turns out to be complex in terms of implementation and that is one of the reasons why Eltoo is already an improvement. The Bitcoin and Lightning protocols are open systems and therefore everyone is free to choose the implementation they prefer.

However, Eltoo needs an adjustment in the Bitcoin protocol (a SIGHASH option needs to be added to the Bitcoin script), using a softfork. At the moment there is a proposal to add this soft fork to Bitcoin. In addition to peer review of the code, the advantages and disadvantages of this adjustment are discussed.

Schnorr Signatures are mind blowing

In Berlin, Jonas Nick explained Schnorr Signatures as an implementation for the Bitcoin protocol and the benefits it also provides for the security and privacy of the Lightning Network. The subject of his presentation was; “Increase Robustness”. This topic articulates well the power of Schnorr Signatures. Jonas indicates that new consensus rules are being added to the (Bitcoin) protocol by Schnorr, making the network more robust, with the major advantages; efficiency/optimizations (scalability), improving privacy and flexibility of the Bitcoin script. It should be clear: with the arrival of Schnorr Signatures, Bitcoin gets another extremely large improvement to the protocol.

?«£Robustness?«• / Antifragile is primarily achieved through improvements to the Bitcoin protocol in terms of security, privacy, and community consensus. In addition to improvements to robustness, Schnorr Signatures also create more flexibility to the payment script. In other words: it opens up possibilities for all kinds of new applications. An example of new capabilities include secure more advanced contracts such as Merklized Abstract Syntax Tree (MAST) and “Scriptless scripts”. Scriptless scripts is a promising cryptographic technique that allows for major optimizations in terms of privacy and scalability. Scriptless scripts are known from MimbleWimble. Schnorr Signatures also create benefits for Atomic swaps, Taproot and Eltoo, Nick said in his presentation.

Privacy & Bitcoin

Censorship resistance is the property that makes a Blockchain a Blockchain. Without Censorship resistance you don’t need a Blockchain. In other words, financial sovereignty is essential to a global money system. Bitcoin is decentralized with the aim that no central party or power can influence transactions. Each transaction must be free of value judgments (everyone uses Bitcoin under the same conditions: identity should not be of influence, no matter who you are, where you live, what gender you have or what religion you belong to, everyone is equal) to be. In this way it is difficult for countries, companies and/or powerful individuals to push through agendas that are mainly in their own interest.

In addition to decentralization of the consensus mechanism (the full nodes in the network & Proof-of-Work), anonymity is an indispensable part of Censorship resistance . Right now, privacy is bad in Bitcoin. Transactions can be monitored and can therefore endanger individuals and/or institutions. Of course, to prevent criminal activities it might be an advantage that transaction monitoring can take place. But for people living in countries or locations where there is a lot of corruption / government corruption, this creates monetary uncertainties (such as currency depreciation / hyperinflation) (eg Argentina, Venezuela, Turkey, Iran, China, Indonesia, Zimbabwe, …) and/or Bitcoin is banned, a big risk. Money is used by everyone.

Financial privacy is essential to an individual’s freedom. It is therefore good to see so much innovation taking place in the field of privacy in Bitcoin. Some of these developments are;

  • tumble bit
  • Chaumian Coin Join & Zero Link
  • Schnorr Signatures (Taproot, CoinJoin and more)
  • STONEWALL
  • Dandelion
  • BIP 151 Encryption
  • Compact Client-side Block filtering
  • Confidential Transactions
  • Bullet proofs
  • Lightning Network

A recent article by Aaron van Wirdum on Bitcoin Magazine provides a clear explanation and summary of all the above developments.

Conclusions

Based on the above observations, we can conclude that a number of major developments are taking place that make Bitcoin more robust.

Schnorr Signatures & Lightning Developments

Schnorr Signatures are going to be the new big innovation in Bitcoin and are very similar in impact to the improvement that Segrageted Witness brought about. Schnorr Signatures create many improvements and new possibilities for both Bitcoin and the Lightning Network. Furthermore, the growth of the Lightning Network continues to increase strongly, a healthy development.

Segregated Witness

The use of Segregated Witness (SegWit) transactions continues to grow, see screenshot below. Blocks of more than 1000KB are therefore the order of the day. Combined with the Ligthning Network, Bitcoin is currently scaling very well. This is also reflected in the fees.

The Lightning Network also enables all kinds of new use cases based on microtransactions.

Blocks over 1000KB

Privacy developments

Bitcoin transaction privacy is the hottest topic right now. There are many developments around privacy that are approached from a mathematical / cryptographic angle. Substantiated by technical arguments. With the right vision and knowledge, we are on the right track to build a resilient & robust monetary money system.

mining developments

The centrality of mining is always a point of attention. Bitmain seemed to own a large chunk of the network’s computing power for quite some time, and this is a cause for concern. However, recently more and more (new) players are competing with Bitmain. This is a healthy development and will contribute to the decentralization of computing power.

A number of examples of players and techniques that have entered the market or are in the preparatory phase;

  • Betterhash is a technique (developed by Core developer Matt Corello) that ensures more decentralized mining.
  • Samsung builds mining chips, an example of large manufacturers entering this market with a great deal of specialist knowledge of developing chips.
  • GMO Internet Group, a large Japanese internet company that devotes a lot of resources to the development of Bitcoin mining chips.
  • Halong Mining, Hut8 Mining & Bitewei Whatsminer are start-ups that enter the market with a lot of specialist knowledge and capital.
  • Bitfury’s new ASIC chip

In short, Bitcoin continues to improve at a rapid pace, a very positive development. Take Control Bitcoin!

“Lightning Berlin” by Matt Biddulph, used under CC BY / Desaturated from original

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