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Overcoming Limits of Bitcoin: MIT Researchers Aim To Enable Scalability And Smart Contracts

Key goals are faster transmissions and execution of complex rules

So far, most approaches to blockchain, tokens and cryptocurrencies had specific up- and downsides in terms of features. In a (highly simplified way) Bitcoin was seen as a form of digital gold. Ethereum on the other side had the key feature of smart contracts, making it attractive for corporate and industry. Other platforms usually aimed to have specific features to solve specific problems. 

Bitcoin now might close up to other platforms as researchers from the MIT in the US are working on two enhancements, although the approach is in an early research stage. The software is in at a stage of a working demonstrator, but as for now not recommended to be used with real money transactions. 

There are two main enhancements creating interest in the blockchain development community:

Firstly, they want to speed up transactions, providing a solution to a growing problem of scalability. Reason: The larger and more distributed a blockchain system gets, the more pressing is the issue of ensuring that everything is synchronized. Different to a centralized database distributed blockchain has an issue with growth and scale. If everyday transactions such as small payments would add up to millions and billions which would then be fulfilled using blockchain scalability would be a blocker. 

Option to use Blockchain for day-to-day transactions

Based on reports by Coindesk, the research at MIT aims to initiate transactions based on defined external events. To do that they use the Bitcoin Lightning Network, a nascent second layer technology. The Bitcoin Lightening network, initially introduced in a paper from 2016, can be described as a “proposed system built on top of Bitcoin that would let people instantaneously send/receive payments and reduce transaction fees by keeping them off the main network. It helps Bitcoin be more useful as a day to day currency.” (Source: Bitcoin Lightning Network: 7 Things you should know)

Secondly, the researchers are testing an approach to initiate and execute “contracts” via Bitcoin, using “discreet log contracts” which would broadcast data to the smart contracts. Bitcoin so far does not provide a scripting language to create and later fulfil contracts like Ethereum. 

Faster and scalable

In summary, the there are a number of developments, promising more speed and more options. The additional layer is a way to overcome limitations of blockchains, notably including the option to perform cross-chain transactions.

Quote (from Lightning Network, a page providing key information about the platform):

  • Instant Payments. Lightning-fast blockchain payments without worrying about block confirmation times. Security is enforced by blockchain smart-contracts without creating a on-blockchain transaction for individual payments. Payment speed measured in milliseconds to seconds.
  • Scalability. Capable of millions to billions of transactions per second across the network. Capacity blows away legacy payment rails by many orders of magnitude. Attaching payment per action/click is now possible without custodians.
  • Low Cost. By transacting and settling off-blockchain, the Lightning Network allows for exceptionally low fees, which allows for emerging use cases such as instant micropayments.
  • Cross Blockchains. Cross-chain atomic swaps can occur off-chain instantly with heterogeneous blockchain consensus rules. So long as the chains can support the same cryptographic hash function, it is possible to make transactions across blockchains without trust in 3rd party custodians.

Sources:

Coindesk: MIT Tests Smart Contract-Powered Bitcoin Lightning Network (May 23, 2018)

What is the Lightning Network?

 

Photo by Chris Liverani on Unsplash