This month, A. Zamyatin and W. J. Knottenbelt, of the Imperial College of London, together with N. Stifter, A. Judmayer, P. Schindler, and E. Weippl, of SBA Research, have published a paper “A Wild Velvet Fork Appears! Inclusive Blockchain Protocol Changes in Practice”, re-introducing the “velvet” fork. According to the paper, this type of fork modifies the given protocol both “backward compatible and inclusive to legacy blocks.” In this case, “new protocol rules are not enforced by upgraded consensus participants, and any valid block adhering to the new rules is also a valid block in terms of the old rules.”

An Introduction to Velvet
Up to now, there have been just two types of forks in the blockchain: the soft and the hard ones. Soft fork is backward-compatible, as only the previously valid blocks are made invalid, and the new blocks are recognized by the old nodes as valid. The hard fork, on the other hand, is a permanent split from the previous blockchain version, which makes the previously invalid blocks valid, so that the old nodes are no longer accepted.

The new forking mechanism has already raised some hype in the crypto community because it just might help overcome the issue of politics slowing down the significant code changes. Aleksei Zamyatin, the research assistant at the Imperial College London, says that the most curious part about the velvet fork concept is that “you can introduce some new concepts to permissionless blockchains without necessarily having a majority of consensus participants agree to do so”.

In essence, the velvet fork means that the developers no longer need to ensure the complete support of the whole ecosystem to update the blockchain.

According to the “Wild Velvet Fork” paper, the fork is potentially capable of preventing the dissent before it occurs: “The velvet fork […] does not require support of a majority of participants and can potentially avoid rule disagreement forks from happening altogether.”

A Brief History of Fork
The first divisive fork in Bitcoin history was Bitcoin XT, launched in December 2014 by Mike Hearn. It was run by more than 1000 nodes in August 2015. Bitcoin XT was aiming to increase the overall block size to 8 MB to achieve twenty-four transactions per second. The project pretty much died by 2016. Though is still maintained, there are barely 30 Bitcoin XT nodes that are still running.

In December 2015, Bitcoin Unlimited was released. It used a unique strategy: though the code was released, there was no direction provided on the type of fork that should be used. Its main features included the miners’ ability to configure the size of the blocks that they would validate. Also, the nodes could set the limit for the size of the blocks that they would accept. Despite some serious problems with reliability, there are currently about 650 nodes running Bitcoin Unlimited.

The next attempt to increase the block size and speed up the transactions was made in December 2016, when the Bitcoin Classic fork was created. Its goal was to increase the block size by 2MB, which was changed to a market-driven block size only 8 months after the launch. Bitcoin Classic achieved the number of 2000 nodes, but, after a rapid decline, there are about 100 nodes running it today.

Segregated Witness (SegWit) was activated in August 2017. It was, essentially, a hack that removed signatures to another data structure, the “extended block”, to reduce the size of individual bitcoin transactions. It was accepted with enthusiasm and received 95% approval from the miners.

Bitcoin Cash branched off in August 2017, when the Bitcoin Cash wallets started rejecting the bitcoin transactions. Some of the major influencers in the industry actively supported it, and several big exchanges (Kraken, among others) decided to provide their bitcoin holders with Bitcoin Cash. Bitcoin Cash miners have the ability to switch to bitcoin mining, which has created the so-called “opportunistic mining”, which means miners jumping between BTC and BCH, as the profitability of these coins changes. Currently, Bitcoin Cash is run by approximately 800 nodes.

October 2017 saw the forking of Bitcoin Gold, a BTC implementation aiming to lower the importance of the big-scale miners on the network. Potentially, Bitcoin Gold’s mining framework allows anyone who has a powerful enough GPU to mine the coins on a competitive level.

All the forks listed previously were either hard (Bitcoin XT, Bitcoin Classic, Bitcoin Unlimited, Bitcoin Cash) or soft ones (SegWit). The term “velvet fork” was mentioned for the first time in a December 2017 paper by Aggelos Kiayias (University of Edinburgh), Andrew Miller (University of Illinois at Urbana-Champaign), and Dionysis Zindros (National and Kapodistrian University of Athens), “Non-Interactive Proofs of Proof-of-Work”. In this paper, the velvet fork is said to be a “less disruptive update mechanism” compared to the soft and hard forks. In the case of velvet update, the updated (“forked”) clients still remain fully compatible with the un-updated ones. As a result, “in a velvet fork, the blockchain system can remain supported by a diverse software codebase indefinitely, while it can still enjoy, at least in proportion, some of the […] benefits of the update without any of the security downsides”.

Despite it presenting some interesting opportunities, the velvet fork still has not come into wide use. An example of a velvet fork would be the P2pool, a decentralized BTC mining pool that allows blocks to coexist together without splitting.

A Velvety Threat
Velvet forks present a lot of opportunities, yet unexplored, but they can also be a vulnerability.

Wrongdoers could potentially use the velvet fork to their advantage. For example, the recently published paper describes a situation in which a number of “velvet miners” have upgraded to the new set of rules, while the others have not. In this case, the un-upgraded miners can be persuaded to accept the upgraded over the legacy blocks, and this, in turn, “can have an unclear impact on the security assumptions of such systems, as current attack models mostly do not assume a variable utility of blocks”.

Another threat described by Zamyatin is the “selfish mining”. “Selfish mining” means that, when the miners find a block, they conceal it and start searching for the new block, while everyone else is busy looking for the block that has actually been found. This way, the dishonest miners would get a head start in the quest for the next block. As Zamyatin himself said, “I can bribe people to work on my chain. There’s no guarantee that I’ll win, but it could potentially offer an incentive to deviate from the protocol rules.” However, there is still no real clarity regarding how serious these threats really are.

Velvet is Worth a Try
Despite the potential vulnerabilities of the velvet fork and the fact that it “doesn’t work for something like SegWit”, it might come in very handy.

Currently, Zamyatin is searching for a way of implementing the velvet fork to bring the Ethereum’s GHOST protocol to the bitcoin realm. This kind of project is unlikely to gain enough support for either a hard or a soft fork because of it completely restructuring the system, so that the reconciling velvet fork could be the perfect solution in this case.

According to Zamyatin, the velvet fork could have an even bigger potential: “You could even have multiple versions running in parallel, perhaps even compatible to each other, and all this without necessitating often controversial soft or hard forks.”

Jimmy Song, one of the most experienced and respected developers in the field of cryptocurrency, has joined Blockchain Capital in January, as a venture partner, and this month he has already announced a new project: the so-called Platypus Labs for open-source developers.

New Opportunities
Jimmy is known for his detailed and comprehensible analysis of the technical aspects of cryptocurrency. He recently joined Blockchain Capital to render technical assistance in the areas related to investment and research and establish connections between the company and the developers working with crypto.

When describing the new initiative, Jimmy has stated that he wants to reward the developers, because they bring great benefit to the ecosystem, and the company would like to see them compensated for it.

As part of this bridge-building process, Jimmy has announced a new project that aims at providing the open-source developers with a revenue stream and supporting them with a number of fellowships and residencies. The project, informally nicknamed “Platypus Labs”, will first of all focus on those working on Bitcoin Core, which is currently the most widely-used version of bitcoin software.

While the project is still in the early stages of development, some of the Blockchain Capital’s portfolio firms and investors have already shown interest and bought into the funds of the company. This hardly comes as a surprise, considering that the numbers of posted blockchain jobs are skyrocketing; for example, in the U.S., the number has increased by mind-boggling 207% in the course of 2017. Bart Stephens, the co-founder of Blockchain Capital, has confirmed that all the companies in the venture capital’s portfolio (62 in total) are in need of the engineering talent, and gladly welcome Song’s project which comes at just the right time. In the following two months, Song, avidly supported, already plans to launch a residency or fellowship program.

The Labs are located in San Francisco. The first objective is to create the developer ecosystem that is focused on the bitcoin, but in future the project will grow to support other types of cryptocurrency.

Not All Developers Agree
Despite all the enthusiasm and support, convincing the developers to take part in the project might turn out to be a bigger challenge than it seems at first.

Initially, when bitcoin was still a novelty known only to a relatively small number of crypto enthusiasts, the developers who worked with it were either fans working on the code for free, as a hobby, or owners of bitcoin (sometimes, fairly large numbers of it) who were eager to improve the code to protect their assets. Jimmy Song himself belonged to the latter group: he says that is was owing a lot of bitcoin that made him begin contributing to Bitcoin Core.

As bitcoin grew in rate and popularity, the developers started to get hired by various companies, from startups, such as BitPay, to educational institutions (for example, MIT). However, some of the developers declined these job offers, feeling that working for an organization would compromise the concept of altruistic work done autonomously, to contribute to the common good. Those who have chosen to work on bitcoin code for other reasons than monetary reward, are difficult, if not impossible, to catch for the project.

Train, Repair, Hunt for the Best Ones
Another focus of Song’s Platypus Project is to provide support and training for the developers who are interested in the blockchain technology but do not have sufficient resources to get the training on their own.

Jimmy, who has committed a total of fourteen changes to the bitcoin codebase, is first of all known as a tutor. He made himself known to the wider public through the two-day Programming Blockchain seminar that was aimed at teaching Python developers how to write code for the bitcoin apps. He is now planning to continue his educational activities at the Platypus Labs and teach the developers the skills of updating the core infrastructure (something that has been neglected for a while).

Song points out that there are many old open-source bitcoin libraries, such as bitcoin (already old when Mike Hearn, who had created it, stopped working with bitcoin in 2016), that are in a very poor state. These need to be repaired and maintained, for the good of the whole ecosystem, as well as for the sake of Blockchain Capital’s portfolio companies. Currently, Jimmy is contacting every one of these 62 companies to ask them which are the coding libraries that they use, what new instruments they need, and how the Platypus Labs may be of use to them altogether. After these interviews are over, he expects to be able to announce the official criteria for the developers who want to join the Labs.

Additionally, he plans to investigate which companies it would be advisable for Blockchain Capital to invest in. These companies are expected to be run by the business people who can code the basics “really well”. As Jimmy himself says, he likes seeing companies that are “innovating, not rent-seeking”.

Vneshecomombank, (VEB), a development bank that is owned by the Russian government and meant to fund the projects aimed at the development of Russian economy, has recently signed a contract with Kaliningrad regional government to create a pilot version of the new payment system that is going to be based on blockchain technology.

The meeting took place last week and included the governor of Kaliningrad Anton Alkikhanov and the chairman of VEB Sergei Gorkov. Alikhanov and Gorkov met in Sochi, at the Russian Invenstment Forum (an annual event “for pesenting Russia’s inventment” attended, among others, by Dmitry Medvedev, the Prime Minister of Russian Federation). The two officials signed the agreement laying the foundations for testing the new technology. Alikhanov stated that “the competence of the bank’s development lies in the area of the blockchain technology” which is expected to help Kaliningrad, the westernmost region of Russia, to “improve the quality of the administrative decisions”.

Gorkov was also very optimistic about the innovative project. In his statement, he called Kaliningrad “one of the most active subjects of Russian Federation in the area of implementing advanced technologies which support the development of Russia’s digital economy.” He also said that the pilot blockchain project “touches upon the social sphere – the area in which one of the basic functions of the state is actualized. Implementing the new technologies allows to significantly improve the quality of these services – enhance the transparency of the system, get rid of the unnecessary paperwork, simplify the service and make it more comfortable for the citizens.” In addition to these prospective benefits, according to VEB chairman, the integration of the blockchain technology can help Russia save a lot of money: “Blockchain technology will give us the opportunity to save the expenses in this area, which currently comprise trillions of rubles across the country.”

Previously, there have already been attempts to research the potential of blockchain implementation for the public sector, when Russian government decided to test a land registry system based on blockchain, but the agreement signed between VEB and Kaliningrad is a significant new aggregation of public and private interests.

The parties plan to work together to bring cutting-edge technologies and solutions to Kaliningrad region to enhance the efficiency of the corporate and state management. The expertise to support the project in the area of social payments using blockchain technology will be provided by the Blockchain Technology Research Center, an initiative of VEB that was revealed in the autumn of 2017. VEB has worked together with Ministry of Economic Development, the Ministry of Communications and Mass Median, and the Ministry of Finance to “create the first center that focuses on blockchain and quantum technologies at the National University of Science and Technology (MISIS)”, as Sergei Gorkov said in his press release. He also added that there were plans “to create a group on investment funds with external financing from both Russian and foreign investors.”

In recent years, Russia has expressed increasing interest in blockchain and in its possible application in the area of public services. As early as August 2017, Vladimir Demin, advisor to the VEB’s Chairman, said that VEB aims at changing the paradigm of the state’s functions, and that blockchain is likely to completely transform Russia within five years. According to Demin, “I presume that, if someone falls into lethargic sleep today and wakes up in five years, they will not recognize the country.”

 

Read more here – https://www.coindesk.com/regional-government-russia-test-blockchain-payments/