On Hard Forks: They’re Getting Harder

Since the Ethereum hard fork on July 20th Ethereum Classic (ETC) (the original blockchain which includes the DAO heist) has found increasing support beyond just banter on twitter and crypto forums. It has grown substantially in terms of hash rate, price and trade volume. (It even surpassed Ethereum trade volume on 7/26/2016 at over $105 million).

At the time of the hard fork the new chain established almost instant separation in terms of hash rate leading many to declare the hard fork a success (Ethereum Blog Post). Many are beginning to realize that the fight may not be over. This is the first sign that in the maturing cryptocurrency ecosystem hard-forking a mature protocol provides challenges beyond hashing power — including the hearts, minds, and incentives of speculators and exchanges. With it’s own hard fork in the pipeline it may be a good idea for bitcoin to take note.


 

A Blockchain Street Fight

Anyone remember Double Dragon II for NES? No, just me? Well, in this game there was a point where the character is forced to fight his own shadow — a near mirror image of himself. In the most basic of analogies this is what is playing out before our eyes with Ethereum. We now find the two versions of the protocol battling it out.

Screen Shot 2016-07-26 at 6.34.12 PM

If I had to decide which was which I would call the hard-forked version of Ethereum the “shadow” chain. After all, it’s fair to say it is a less pure.

 

From what I see, this battle is being fought on several fronts. The historical elements of a hard fork include the following:

  • Mining Hash Rate: On one front, miners driven by profit motive are finding that rewards for mining Ethereum Classic in the immidiate time after the hard fork are greater than those of Ethereum leading to increased competition for hash rate between the protocols. This can be seen here: What to Mine
  • Perception & Social Media: Sadly this is a reality which I don’t care to discuss — but if you follow this stuff online the infighting is laughable and makes me slightly ashamed to associate myself with this industry.

A New Layer of Complexity

The new challenge facing open-source protocol forks is the maturing infrastructure surrounding them. Some of the new fronts include the following:

  • Exchanges Enabling Trade Volume & Price: Within days Poloniex exchange made ETC available to trade. Since then Kraken, Bitfinex and Shapeshift have either gone live with ETC trading or shared their intentions to do so. As a result ETC’s 24-hour trade volume now exceeds that of ETH. Its price has also increased substantially with a market capitalization ranking ETC a top 10 cryptocurrency. Where as a less mature ecosystem wouldn’t be able to support the previous chain the industry can now almost instantly get the previous asset on exchanges.

Ultimately, this new layer of complexity may indicate that as the ecosystem becomes more robust future hard forks could face new challenges not faced by previous forks.

So What’s Next?

I do not pretend to know enough to accurately predict how this battle will play out but that won’t stop me from speculating. It would seem the final stage would lie with the developers and companies building upon the blockchain(s) themselves.

If both chains can establish effective hash rates, mining incentives, communities, trade volume, and price it will come down to adoption by developers and companies.

  • Developer and Startup Preference: We’ve seen this play out with other blockchains (example: Onename moving from Namecoin to Bitcoin) where it became clear that one blockchain was favored over another. In this case it likely sealed the fate of Namecoin. The adoption of these companies can make or break a blockchain.

The ultimate deciders may be the developer and entrepreneurial community. Will they choose ETC, ETH … or will the division rendered by competing chains stagnate Ethereum sentiment and give Bitcoin maximalists more time to time to mature their more expansive projects built to compete with Ethereum with a proof-of-work backing. (Examples include YoursNetwork, Sidechains, Lightning Network, Rootstock, etc.)

One thing is certain … there will be more hard forks on open source blockchains and the Ethereum civil war will provided a number of great lessons for these projects. Hard forks are getting harder but with careful planning and attention it may still be possible to mitigate the risks and pull them off smoothly. Only time will tell.

 

Advertisements

On Consensus: The Good, Bad & Ugly of ‘Consensus Maximalism’ for Open-Source Blockchains

When first introduced to bitcoin I experienced an epiphany of sorts in realizing I didn’t understand what money was. One of my first assignments was to educate myself on what makes money money. This gave me a new understanding and appreciation for bitcoin and blockchain technology as a whole.

I believe the Bitcoin, Ethereum, and open-source blockchain communities are collectively suffering from a similar ignorance revolving around the idea of consensus. I call this affliction ‘consensus maximalism’ and hope this post can help shed light on this issue and share a different perspective on this concept.

Beating-Corruption-by-Building-Consensus-459x240

Only known photo of the world’s earliest blockchain.


 

Defining the Term

Merriam-Webster provides 2 variations of the primary definition for the term consensus. They are as follows:

consensus:

a :  general agreement

b :  the judgment arrived at by most of those concerned

Most notable about these definitions is neither includes any reference to absolute agreement. In lieu of absolute, total, or complete the definitions contain the terms general and most. This is a common oversight. I’ve observed this misunderstanding frequently in the Bitcoin and Ethereum space … I call it ‘consensus maximalism’.

Consensus Maximalism vs. Consensus in the Real World

I would define ‘consensus maximalism’ as the belief that to reach consensus there must be absolute agreement by all parties as to the best path forward. The fallacy is this level of rigidity would make any real-world consensus relatively impossible. Real progress requires a real-world definition of consensus.

Dr. John Toussaint, a former doctor & CEO, leadership guru and author famous for his contributions to organizational transformation work in the healthcare space was the first to bring to my attention that consensus is most often never about reaching full agreement. It is best described by the following excerpt:

…synthesizing the wisdom of all the participants into the best decision possible at the time. When you consent to a decision, you are giving your permission to the group to go ahead with the decision. You may disagree with the decision, but based on listening to everyone else’s input, all the individuals agree to let the decision go forward, because the decision is the best one the entire group can achieve at the current time.

After all, the term is rooted by the word ‘consent’. Very few systems, organizations, or communities have ever reached unanimous agreement on any decision. They always require a minority to ‘consent’ to moving forward in spite of their views for the benefit of the majority. Participants often have the option to ‘exit’ should their convictions be strong enough.

The Irony of Consensus Algorithms

The reality is that even in distributed systems consensus is never 100% at any time. This is displayed by orphaned blocks, alternatives cryptocurrencies, and of course hard forks. It is the great irony of this space that the communities supporting these systems struggle so greatly to achieve consensus in their effort to innovate upon consensus-mechanisms (blockchains).

The Good

In my view, as with many things in life, there is likely a smaller minority of ‘consensus maximalists’ who act as the squeaky wheels. This is not to say that this is all bad. In fact I believe it has some great benefits including:

  1. Increasing the difficulty to change highly distributed protocols with larger consensus pools (Bitcoin Core’s relative conservatism as an example)
  2. Encouraging outliers & dissenters with great conviction to ‘exit’ or support minority forks for communities & protocols. This drives creativity & innovation. (Every alt-coin ever)

The Bad

It stagnates progress to the limits of acceptance encouraging participants to ‘exit’. Nothing is more painful then being in the deadlocked state of consensus failure. Be it the decision as to where to go to dinner…

You: “I want to eat out … where would you like to go?”

Partner: “I don’t know, nothing sounds good.”

You: “Ugh… I don’t even want to bother.”

…or the debate on how to scale the world’s most promising blockchain.

The Ugly

The failure to reach consensus often blinds the minority participants from the shared purpose/goal of the entire population. Gun controls a good example of this. Nobody wants mass shootings but many people have strongly held opinions as to how to impact the problem… The ugly reality is as a result many of these camps end up fighting one another rather than focussing on actual experiments/solutions.

This unfortunate reality has reared its ugly head several times in recent years … examples including the bitcoin blocksize debate and the DAO / Ethereum hard fork.

The Good News

One benefit that blockchains have is the almost instant ability for those that do not consent with the path forward to fork. Ultimately anyone supporting or interacting with the longest chain should have nothing to complain about… by doing so they are ‘consenting‘ to the decisions of the majority of hashpower.