Bitcoin (BTC) Users Paying to Secure Weak Altcoin Networks
A recent new development highlights the strange ways in which differing blockchains interact and re-ignites the old age question of what constitutes ethical behavior in a permissionless ecosystem.
The CTO of CasaHODL, Jameson Lopp, a long time blockchain enthusiast and outspoken voice on ‘crypto-twitter’, recently pointed out that a company called VeriBlock are creating one-fifth of all transactions on the Bitcoin network. For a relatively unknown company, the figure at first seems bizarrely high. However, when you dig a little deeper, the reason for the high traffic is revealed.
VeriBlock is a new startup that came about as a way to offer small, unsecured blockchains protection against 51% attacks. The networks of smaller cryptocurrency startups often have so little hashrate that they are very easy to attack and ‘double-spend’ on – a method of essentially printing and stealing new coins and devaluing the project.
VeriBlock uses a Bitcoin transaction called OP_RETURN to enable altcoins to piggyback on Bitcoins hashrate, thereby keeping them safe from attacks. The concept is known as proof-of-proof (PoP), whereby Bitcoin is providing the proof for another blockchain. The problem is that the method pushes up the cost of Bitcoin transactions for genuine Bitcoin users in order to assist other altcoins which, some might say, are its competition.
If Veriblock can afford to pay the Bitcoin transaction fees and its customers are happy to pay for the service, then it could present a profitable business model. Since Bitcoin is an open-source permissionless blockchain, everybody is free to use it as they please. This means Veriblock has the right to continue operations as it pleases but it does pose the question – should cryptocurrency businesses have any moral responsibility in a trustless environment?