It can be both disconcerting and discouraging to hear a crypto expert opine on the issues of the day. It is a given that they have insider knowledge and a talent for the field, being more than likely a programming wizard, a cryptographer, or that geeky nerd that sat next to you in high school. They are a select group, and one of them is Adam Back. He recently spoke at the Transylvania Crypto Conference that took place in Romania, without any vampires or Halloween treats to speak of. He is the CEO of Blockstream and the co-author of a bitcoin whitepaper about “sidechains”.
If you have never heard of the term “sidechain”, there is no need to do a quick search. It is literally as it sounds, a blockchain that runs independently next to another one. It allows its users to transfer, trade or exchange Bitcoins, for example, after which you can always move your tokens back to the “parent”, if you will. Sometimes, they are also referred to as “pegged sidechains”. Back and his co-author developed the concept five years ago, but despite the obvious opportunities offered, developers chose to sell tokens instead to fund their feature development.
Fast forward five years, and not much has changed. Developers still prefer to sell tokens, get rich, then attempt to develop features, which could have easily been handled effectively on a sidechain. Back’s contention is that incentives are misplaced in the market and still are, but he still believes that a transition will occur down the line, when the concept is fully understood by investors.
In response to Back’s thesis, Kyle Torpey at Forbes concluded:
The end result of this functionality would theoretically be an end to the many altcoins that existed on the market at the time, as there would no longer be a legitimate reason to create a new cryptocurrency in an effort to experiment with new features. Instead, new features that were sufficiently complex could come to Bitcoin by way of sidechains.
Back did believe that a few programs would survive, those which have built true functionality, including Ethereum (ETH), Ripple’s XRP, EOS (EOS), and Litecoin (LTC).
Back discussed the potential of his sidechain idea at the conference, but chose first to cover a bit of crypto history:
In the history of altcoins, it seemed like there was a period where there were a huge number of them that had no features. […] And that played out. And then people started to need a new way to market them, so they added features. Some of them were real features, and some of them were stories to market [their altcoins].
Back went on to claim that the people, who are investing the money in new token-driven programs, will begin to question the credibility of such a proposition:
This financial incentive will remain, but it will have less credibility because if you have a very easy to use extension mechanism for Bitcoin and examples of extensions that do something simple that you can build on, there’s not really a good story about why you’re doing it somewhere else.
Back likened the development juncture as similar to what happened in the early Internet days, when developers had a choice with TCP/IP protocols. As is turned out, wisdom prevailed, and we did not end up with a series of “forked” copies of the original protocols that included specially designed features. An evolution from the current morass of multiple tokens and blockchains to nowhere seeking traffic to a single platform that allows easy access and regress would solve many technical problems of interoperability and address recognition.
Adam Back, a true Bitcoin pioneer, also spoke to such arcane topics as “zero-knowledge proofs”, “extension blocks”, “trustless sidechains”, and “layer-two protocols”, but the non-geeks in the crowd were soon caught napping. In case you are interested, conference staff would more than likely provide a transcript upon request, for, perhaps, a small fee.