Jihan Wu, co-CEO of Bitmain and the world's largest bitcoin mining hardware maker, took the stage at The Future of Bitcoin Conference 2017 on Friday with a diagnosis: Bitcoin has fallen behind on a fe
Jihan Wu, co-CEO of Bitmain and the world's largest bitcoin mining hardware maker, took the stage at The Future of Bitcoin Conference 2017 on Friday with a diagnosis: Bitcoin has fallen behind on a few fronts. Wu laid out three gaps he wants the network to close: smart contracts, ways to pay the people who run full nodes, and extension blocks that could open the door to experimental features.
Ethereum's initial coin offerings have dominated crypto headlines for months now, and Wu sees that as evidence of something Bitcoin lacks. Smart contracts matter. "I think today, Bitcoin has missed at least one very important innovations in the world, which is smart contracts," Wu said. "When smart contracts were introduced, I recognized that it's very important."
Wu has history with this problem. He was an early investor in ASICMINER, a bitcoin mining hardware company that raised money on GLBSE, an unregulated bitcoin stock exchange that operated in 2011 and 2012. GLBSE served as a kind of prototype for what the ICO market does now, except centralized and hosted on a single website. Then GLBSE shut down. Suddenly, investors who held shares in listed companies couldn't prove ownership.
"It was chaos because the capital table of the virtual company on the website became unknown," Wu recalled. "No one could prove that he owns certain shares of a certain company."
Other exchanges tried the same model. BTC-TC, Bitfunder, and Havelock Investments all came and went. The legal risks of running such an exchange steered Wu toward a different solution: blockchain-based assets. Ethereum's ERC20 token standard shows the blueprint. "The ICO [market], I know, right now is quite crazy and there are a lot of scams," Wu said. "But if you want to create a kind of decentralized economy, then you want to allow those entrepreneurs to raise money from the public without regulations."
Bitcoin can issue tokens already, through tools like the Coinprism wallet. But those tools have limits. Building the kind of decentralized applications Ethereum developers tout requires more powerful scripting. Bitmain saw the gap and invested in RSK, an Ethereum-style sidechain for Bitcoin, back in 2015. "As a community, we have to admit that Bitcoin is a little bit late [to] this innovation," Wu said.
Wu also floated the idea of using ICOs to fund Bitcoin protocol development in a transparent way. Without naming Blockstream, he criticized Bitcoin developers who work in public but hide how they plan to profit from that work.
Wu pointed to a different funding model that another blockchain adopted. "One very important competing blockchain just redistributed the miners reward to long-term coin holders and their full node operations," he said. "That's the kind of model where you incentivize everyone to store coins over the long term, make judgments about the technical improvements for the long term, and to contribute to the community."
Which blockchain he meant is unclear, though he seemed to be referencing Ethereum's eventual shift from proof-of-work to proof-of-stake. Many Bitcoin users write off Ethereum's features as scams. Wu disagreed. Real innovations exist in those features, he argued, but Bitcoin's insular development culture keeps the network from experimenting with them.
Finding ways to pay full node operators has been a standing question in Bitcoin for years. So far, no answer has gained widespread traction.
The third piece of Wu's vision was extension blocks. These sidechains require all full nodes and miners to validate them, but participants can opt in. "It's a special sidechain that requires all full nodes and mining nodes to verify the consensus rules in the extension block," Wu explained. "If something goes wrong, the largest risk is maybe the extension block goes wrong. But it's voluntary, and it's just someone who dared to take a risk to use the extension block."
Smart contracts could arrive this way. Mimblewimble, a proposal to dramatically improve Bitcoin's scale and privacy, could too. The original sidechains white paper warned about the risks extension blocks posed, and Wu's framework accounts for that.
He closed by pushing Bitcoin toward more experimentation. "It's quite easy to introduce bugs in Bitcoin protocol implementations," Wu said. "Most of the software will fail, but we have to try to be successful."
