The Battle for Crypto Payments Standard: On-chain vs Off-chain
Now that Bitcoin has split into 2 major branches, Bitcoin Core (aka Segwitcoin, Bitcoin Legacy) and Bitcoin Cash (aka Bcash, Big-blocks), one focusing on off-chain solutions, while the other on on-chain scaling, we can finally have our cake and eat it too. The market is free to decide to use one over the other, or both in different situations as the case may suit. Decentralization has been served, in the way of having the two warring strategies both exist and compete in the real world, which is always the best (capitalist) way of dealing with differing approaches at solving the same problem.
Now that both strategies exist are stable and available, let's examine the 2 approaches logically with eaches pros and cons.
AC vs DC
Those of you who come from an engineering background will remember the "Current Wars" back in the turn of the century. It was a decades long battle between Alternating Current system of Westinghouse and Thomas Edison's Direct Current. The standards war was fraught with collusion, FUD inducing propaganda, and media manipulation through the public electrocution of some innocent animals. Let's examine the similarities with Lightning vs Bitcoin Cash.
- AC power was cheaper to distribute over vast distances, DC power was expensive due to the fact required costly thick copper distribution cables.
- AC power allowed for generation plants to be far away from the loads as transmission was cheap and done at high voltage, DC system ran at 110v at generation and load, which required generation plants to be within 1 mile of the loads they served.
- Thomas Edison had many patents on the DC system that he created, from the meters, to the incandescent lamps, to the generators. Adopting AC would significantly reduce his companies profits.
- Due to a rash of deaths in NY due to poorly installed arc lamps which used high voltage AC, vocal advocates such as Harold Brown campaigned against AC and ran a propaganda campaign which tried to posit that AC power was dangerous to society and to promote a more conservative and cautious approach that the DC system presented. He colluded with Edison to stage some public executions of an elephant and a horse to demonstrate the deadliness of AC power, along with helping lobby authorities to ban AC technology for reasons of public safety.
- Later on development of efficient transformers allowed for AC power to be stepped up for long distance transmission and then stepped down for local consumption closer to the load.
Sound a bit familiar?
- Bitcoin Cash is focused on keeping fees close to zero, no matter what the transaction is, or how much money is sent. Lightning network will always be dependant on how deep the balances of the channels are. (analogous to the thickness of the copper cables)
- Bitcoin Cash pays fees to the miners who do all the hard work in far away places where power is more economical or efficient to generate. Lightning network instead diverts fees to the local Lightning nodes.
- Blockstream has an invested much interest into the building of side-chains, off-chain liquidity pools, and Lightning network, all which will see less usage if Bitcoin can scale on-chain directly.
- The most often quoted thing against bigger blocks is that it is untested technology and that the change is too risky to use without further testing. The segwit supporters have used similar FUD spreading tactics and even have resorted to censorship in order to preserve this narrative. Reality has shown that it works and that hard forks are not the end of the world.
- Later developments on BCH will clearly show its usefulness. Planned upgrades already include re-enabling of op-codes that make smart contract capability possible on-chain, as well as improvements that increase the security of SPV wallets. In the long run, the policy of growing the network such that the miners who are economically incentivized to keep the network operating, are the main beneficiaries of the network. Individual businesses will run nodes in order to get the most security out of the network themselves.
The whole battle of the standards, was a net good for the market, as we got the best solution for the economics, and this was possible because both standards were competing for the same market and a free market was allowed to determine which solution was best in the time. This is much like the current market that we have now. May the best blockchain win.
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