Since taking the spotlight in December with a prolific bull run to $20,089, Bitcoin has continued to dominate headlines. From CFTC and SEC hearings in Congress, to 70% price corrections, it has already been an exciting 2018 for the oldest blockchain in the cryptospace. Mainstream news and businesses are beginning to take a serious look at cryptocurrencies and blockchain technology. Bank of America identified cryptocurrencies as a threat to traditional banking. Early believers are no longer the odd ones at family gatherings — they are suddenly sought after for investment advice. The sense of vindication amongst the early adopters has been marked, with many community members further emboldened by the recent stock market volatility and growing indications of global distrust of governments.
Despite Bitcoin’s seemingly optimistic outlook, real technological limitations remain unresolved. With the increased demand for Bitcoin, the network must process more transactions than it was built to handle, which leads to slow transaction speeds and high fees — a phenomenon the crypto-community has dubbed “blockchain bloat.” This issue is by no means limited to Bitcoin. Ethereum, the second largest crypto by market cap, ran into similar issues recently when demand for “crypto-kittens” and the Pundi X ICO surpassed the network’s capacity.
The solution for Bitcoin is set to come in the form of the “Lightning Network,” a second layer of software that will allow for off-chain transactions. Excitement amongst core developers is tangible, but a number of mathematicians have come forward with proofs showing the Lightning Network will not achieve the intended consequences. Early backers who disagreed with the Lightning Network “forked” to create the Bitcoin Cash protocol in 2017, which takes an entirely different, and equally unproven, route to scalability. Meanwhile, as the world’s attention remains fixated on the Bitcoin debate, an alternative blockchain with 5 years of use just launched a new mainnet to address those very concerns.
BCNext and a Bitcoin 2.0
In autumn 2013, before Ethereum had begun its white paper, an anonymous developer known as BCNext rallied support amongst Redditors for an entirely new protocol that could be viewed as a sort of Bitcoin 2.0. This user shared a vision of a cryptocurrency that went beyond a simple store of value and could revolutionize financial transfers and applications, while being built upon an alternative consensus mechanism that would eliminate the need for the energy-intensive mining Bitcoin is famous for. After an initial release of the software, 70-some investors threw support behind the idea, and NXT — the first cryptocurrency written in Java and secured through Proof of Stake — was formally born.
In the 5 years since it launched, the developer community behind NXT quietly revolutionized the blockchain with a slew of new functionalities — transferable assets (similar to shares), voting, aliases to make sending funds easier, encrypted messaging, a marketplace, document and media authenticity verification (similar to copyrighting), and multi-signature capabilities. All of these features have been fully functional for years, without any hacks.
NXT’s Scaling Drama
It hasn’t been an easy road for the NXT community. The built-in functionalities of the platform were years ahead of the competition, but all those added features meant transactions were more data heavy. If an influx of tens of thousands of users were to occur at once, the network would not be able to keep up. In 2015, disagreements flared up as the developers began work on NXT’s version 2.0.
On one side were the purists — they wanted to maintain as much decentralization in the ecosystem as possible. After all, Bitcoin and public blockchains were born out of the idea that people should control their assets without relying on centralized institutions for any security. On the other side, were the pragmatists — core developers who respected the vision of a decentralized world, but felt the blockchain should be about increasing transparency and the efficiency of business processes.
By early 2016, several contributing teams had broken off from the NXT community. One group launched the top 15 cryptocurrency known as NEM in 2014, which recently made headlines with its swift response to the Coincheck hack. The other team, SuperNET, went on to form Komodo, a decentralized exchange with the largest number of successful peer-to-peer transactions across different cryptocurrency protocols (“atomic swaps”). Despite the setbacks, core NXT developers pushed ahead with their vision of a scalable ecosystem and formed a private company, Jelurida, to raise capital for the development of NXT 2.0.
A Platform Reborn
Oddly enough, the open source code that had served the community so well was the first “problem” to solve. As long as random iterations of products associating themselves with NXT were floating around, the lack of consistency with the protocol would make raising capital nearly impossible. To ensure basic standards and security measures were upheld, Jelurida immediately began requiring licensing fees for all private use and customizations of the NXT source code. From there, Jelurida began several successful rounds of fundraising for NXT 2.0, which had come to be known as Ardor and Ignis.
Initially, NXT focused on packing as many features as possible into one blockchain — a swiss army knife of sorts. All those features meant too much data, so when version 2.0 launched in January 2018, the ecosystem was re-envisioned as a key ring to solve the issue of bloat. A Parent Chain, Ardor, with the sole purpose of establishing consensus sits at the center of the ecosystem providing verification and security to all users. The advanced functionalities of NXT were cloned into a Child Chain, known as Ignis. Ignis allows users to perform those more advanced functions, such as voting and messaging, on a separate blockchain. When the data is actually ready for transmission, Ardor (the Parent Chain), performs consensus on the transactions of the Child Chain. Businesses can then clone Ignis and create their own customizable Child Chains (public or private) with all those built in functionalities, 0 fees, and data transmissions secured by Ardor. As more functions are developed, more Child Chains and functionalities can be added to Ardor’s “key ring,” and the Parent Chain can remain focused on the simple task of data verification and security.
In essence, “Blockchain as a Service” is now a reality. Remind me again when the Bitcoin Lightning Network launches?