Bitcoin, schmitcoin. Let's play piggyback on the blockchain

Cryptocash isn't cool any more – and its core mechanism is being hijacked

Mission creep - by third parties

Hearn views those people piggybacking on the blockchain with derision.

“The blockchain only moves money. That’s the only thing that the blockchain was designed to do,” he said. “People do attempt to abuse it with OP_RETURN and other things for moving around other stuff, but that’s because these people, in my view, are maybe being a bit lazy. Maybe they’re just not very good at design. I don’t think that this is the right way to do things, except in very special situations.”

Right now, the problem is still relatively small. Over at cryptocurrency website Of Numbers, an analysis from January found that just a tiny fraction of transactions (0.3 per cent) came from applications piggybacking on the Bitcoin blockchain.

However, that’s a snapshot of the blockchain’s entire six year history, and many of these applications are relatively recent. Their proportion will grow over time. Indeed, more recent data suggests that one piggybacking application, called Counterparty, can make up as much as 2.5 per cent of Bitcoin transactions on some days.

Then, there are the other transactions floating around the blockchain, including online gaming transactions that can often pollute the chain with large volumes of tiny value, and Bitcoin tumblers, which move lots of money between different addresses for customers in a bid to make it anonymous. None of it is helping to slim the blockchain down.

Gideon Greenspan is one of the people piggybacking on OP_RETURN. He’s the CEO of Coin Sciences, a company that is using the blockchain to send "coloured coins" around the Bitcoin network.

His protocol, CoinSpark, sends tiny amounts of Bitcoin between users. In those transactions, it inserts data in OP_RETURN that effectively marks those Bitcoins as other assets. He hopes that companies can send anything from invoices, to loan agreements, or even the deeds of a house across the blockchain, making use of its timestamping and anti-tamper technology to legally document a transaction.

“To succeed, Bitcoin needs to find mainstream applications,” said Greenspan. “It would appear to me that raw Bitcoin transactions in terms of moving the Bitcoin currency around are not a compelling application based on Bitcoin adoption so far,” he said.

Why don’t these people just create a blockchain of their own, and leave Bitcoin to move around non-existent, highly volatile assets for each other to steal?

People like Greenspan are unwilling to abandon the popularity and scalability of Bitcoin and start over with something new. One of the reasons that the Bitcoin blockchain is so useful is that so many people use it.

The more people who do the hashing, the more secure and trustworthy the blockchain is. The Bitcoin network outpaced the world’s top 500 supercomputers combined almost two years ago, and that’s before it really took off. All of this makes it prime real estate for companies wanting to use it for other things.

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