Part of what makes this space sometimes difficult to navigate is that you can find anything from sound technology to complete technobabble, from rational thinking to crazy visions of global blockchainization, from good engineering to baseless marketing, and people often have a hard time separating one from the other – says Pierre-Marie Padiou, CEO at ACINQ, in Bithub.pl’s #SundayInterview.
Bitcoin is number one cryptocurrency for its market cap and recognizability but it has some weak points when it comes to practical issues, for example proccessing transactions.
Pierre-Marie Padiou: It is important to note that the weak points that everyone has in mind — mainly low transaction throughput, high fees, slow confirmation time — are characteristics of that kind of broadcast-based, decentralized system. Any blockchain with a similar success as Bitcoin would face similar challenges, for example transaction fees on Ethereum have steadily risen during the past year.
I think it is important to acknowledge the fact that there is no free lunch, and that decentralization comes at a high cost. Trying to reduce these limitations by e.g. reducing block time or increasing block size comes at the expense of security, which is the key attribute which makes an otherwise horribly inefficient system like Bitcoin, valuable in the first place.
Fortunately, it appears that once you have a robust base layer, you can build on top of it. That’s what the Lightning Network is about.
And ACINQ is working on it. What exactly is Lightning Network and what specific problems does it intend to solve?
PMP: The Lightning Network is a trustless, instant payment network on top of the Bitcoin blockchain. It is a network of payment channels, which are implemented in the form of smart contracts executed on the Bitcoin blockchain.
Lightning solves most of the practical issues that occur when using Bitcoin: payments settle instantly, are cheap and there is no real limit on the global throughput the network can handle. It does that without adding trusted third parties, and improves privacy by a very significant margin. There is no magic: all this is possible because Lightning allows moving from a broadcast system (where everybody receives and processes all transactions) to a unicast, routed system (where only the relevant parties know about each individual transaction).
Lightning is often described as an off-chain solution. It is true, but what’s really important to keep in mind is that, although there are normally not published on the chain, Lightning transactions are Bitcoin transactions. If the whole Lightning Network disappeared suddenly, you would still have all your bitcoins.
Currently cryptocurrency market seems to be rather far from its final shape. Bitcoin has many competitors. Recently Ripple, currency associated with banking industry, overtook Ethereum by market cap for a short time. Do you think Bitcoin is unbeatable? How many currencies can survive on the market to be used for practical purposes like daily transactions?
PMP: Bitcoin is the strongest at what’s matters most, which is security and censorship resistance. As long as it maintains these key properties, I don’t think Bitcoin can be displaced. I agree that Bitcoin is currently not good at the daily transactions use case, but Rome wasn’t built in a day and I believe that you can build a payment system on top of a secure base layer, whereas the opposite isn’t true.
That said, the market is currently irrational, and anything can happen short term with regard to price increases or market cap, especially because market cap is a very biased metric. But long term Bitcoin is still king in my view.
You say that Bitcoin is censorship resistant which is a very desirable feature for the money in a current political landscape. But what about the crypto market in a larger scale: how resistant to political manipulation is it? Can you imagine a scenario in which the whole technology is hijacked and taken control of by the governments?
PMP: With regard to the current crypto market at large, I don’t think it is resistant to manipulation at all, and I’m pretty sure that governements have nothing to do with it: the main factor is pure greed from investors. I think part of what makes this space sometimes difficult to navigate is that you can find anything from sound technology to complete technobabble, from rational thinking to crazy visions of global blockchainization, from good engineering to baseless marketing, and people often have a hard time separating one from the other.
Now if we focus on Bitcoin, it is quite difficult to actually assess how resistant it is to political manipulation. I would say that the network did a pretty good job so far, carrying on even when media were reporting announcements of bans, and resisting contentious forks. But to be honest, I think that most challenges are yet to come, because the economic weight of Bitcoin is still tiny.
I guess if governments were to wage war against Bitcoin, they wouldn’t hijack the technology itself. Instead, they would probably go after the main developers, companies and public figures behind Bitcoin. But for that to work, it would have to be a global concerted effort, which I think isn’t very likely to happpen.
Bitcoin is drawing attention mainly as a way to make a quick buck. But not everybody is in Bitcoin solely for the money. How much dedication and ideals are there in the Bitcoin community nowadays?
PMP: I agree that a lot of people are here just to speculate. But let’s not forget the tremendous level of innovation still going on in the Bitcoin community. Even a specialized technology company like ours can’t follow half of what’s going on in the space!
Interview by Przemyslaw Cwik