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Congestion and Scalability Issues With Bitcoin’s Increasing Use of Ordinals
The introduction of the Ordinals protocol to the Bitcoin network, permitting the creation of unique digital items similar to Non-Fungible Tokens (NFTs), has stirred discussions about its impact on network performance and transaction fees. The increasing use of Ordinals has led to network congestion, causing a rise in transaction costs, with some members of the Bitcoin community categorising these transactions as ‘spam’.
Several ‘Layer-2’ solutions have been proposed to address Bitcoin’s scalability issues. These include the Lightning Network, Stacks and Liquid, all of which aim to improve the efficiency of the network by conducting transactions off-chain, enhancing transaction speed and reducing fees. For instance, Stacks aspires to extend Bitcoin’s capabilities to include more complex operations like Smart Contracts and Decentralised Applications (dApps), while Ck-BTC offers a unique adaptation that preserves complete decentralisation in cross-chain transactions.
The popularity of Bitcoin’s Ordinals presents both opportunities and challenges for Bitcoin. While Layer-2 solutions could potentially ease network congestion, they may also fragment the network and divert funds away from Bitcoin. They can also risk centralising data and processing power towards fewer network participants. As such, there is a need for Bitcoin to continue evolving and innovating to optimise transaction costs and address scalability concerns. Read more here.
To understand more about Bitcoin, Ordinals and scalability issues, here are some resources for further reading:
- What Are Ordinals? A Beginner’s Guide to Bitcoin NFTs
- Tipping the Scales: Bitcoin’s Scalability Problem
- The Pros & Cons Of Ordinals – The Bitcoin Manual
Splitchain, the decentralised network powering Zucoins, uses a very different coordination mechanism codenamed internally as “Direct Correlation Proof of Work”, or DC-PoW for short. This system establishes a direct relationship between the computational effort invested by coin holders and the number of coins they possess. Unlike Ethereum’s Proof of Stake (PoS) or Bitcoin’s Proof of Work (PoW), DC-PoW should allow for a balance between network participation and pressure vs individual demands.
The implementation of DC-PoW in Splitchain brings several advantages. Firstly, it promotes scalability by correlating computational effort with coin quantity, ensuring fair resource distribution and encouraging active network participation. Additionally, DC-PoW offers flexibility in delegating computational tasks, enabling users to contribute while maintaining control over their coins.
Sidenote: This aspect of the system is under rapid, active development and could change before public release. It’ll depend on results from this component of the system being continually developed, trialed in escalating tests, with effects monitored and observed. It may or may not make it into the production cut in its current form, without undergoing more changes, for the safety of users on the network.
By adopting the Direct Correlation Proof of Work coordination mechanism, Splitchain establishes a robust network that supports the growth and scalability of Zucoins. This approach strikes a harmonious balance between user autonomy and network participation, creating what should be a fairer decentralised ecosystem, based on input put back into the system. It’ll mean users can actively engage and contribute back to Splitchain’s network power, while benefiting from the scalability provided by Splitchain to build on top of the protocol.
Ledger’s Password Recovery Feature: A Step Too Far for Crypto Purists?
Ledger, a Paris-based cryptocurrency firm that produces hardware crypto wallets, recently encountered resistance over its proposed “Ledger Recover” feature. This feature, aimed at assisting users in retrieving forgotten crypto wallet passwords, involved breaking up the password into three encrypted parts, each stored by a different company. Critics argue this goes against the principle of “not your keys, not your crypto,” sparking controversy that it underscores the ongoing struggle between centralisation and decentralisation in the cryptocurrency world, not to mention the tricky balance between self-managed asset security and user-friendliness.
Ledger claims that the feature simplifies digital asset access and protection for less crypto-savvy users. However, the backlash has led to the postponement of its launch, further stoking the anxieties surrounding the already complex cryptocurrency market.
The uproar over Ledger’s proposal illuminates the frequent debates within the crypto sector. Critics worry about its potential to undermine security and decentralisation, while Ledger believes it improves accessibility for less experienced crypto users. They argue that distributing encrypted password parts could endanger users’ wallets and violate core crypto principles. Existing password recovery options do not compromise these key tenets.
The tug-of-war between centralisation vs decentralisation, security vs easy-of-use, in the cybersecurity world is intricate. It’s a hard balance to get right. Healthy debate can push the industry forward, but this requires open-mindedness and the willingness to consider differing viewpoints. Collaboration is crucial to find solutions harmonising security and usability, reflecting the intricate evolution of the cryptocurrency ecosystem. There’s no such thing here as “one-size-fits-all”. Read more here.
How Your Zucoins Wallet App Manages Data and Backups
Safeguarding your digital assets extends beyond the realm of cryptocurrencies. Just as Ledger’s password recovery feature has sparked discussions about striking the right balance between security and user-friendliness, ensuring the safety of your Zucoins is equally paramount. Utilising the built-in backup and restore functionality within the Zucoins wallet, you can create a secure backup that serves as a safety net in case of unforeseen events like accidental loss or device failure.
Understanding the contents of your Zucoins wallet backup is essential as you take proactive steps to protect your digital wealth. The backup file contains a comprehensive collection of your wallet’s data, including the private key that grants access to your assets and the wallet address, which uniquely identifies transactions within the Zucoins network.
Additionally, the wallet backup file preserves a detailed record of your contacts and transaction history, capturing the information up until the exact moment the backup was created. Each backup represents a snapshot of your wallet at a specific point in time. Generating a new backup will not overwrite any previous files, unless you chose to do so.
If you have many backups, you’ll notice each file name incorporates the creation date, time, and the first ten characters of your wallet address. This should make it easier to figure out the differences between your wallets.
The Zucoin wallet app stores almost all of its data on your device, locally. It also does the majority of the grunt work when processing a transaction. Hence, this is called a ‘non-custodial’ wallet. This is because you manage and store your personal data by yourself. Currently, the only thing the Splitchain network holds is usually a couple of your most recent transactions, which is necessary to account for things like malicious double-spending attempts on the network (i.e. spending the same coin twice).
It is crucial to note that these backup files are intended exclusively for use within the Zucoins wallet app. Opening or modifying these files outside of the Zucoins wallet app may corrupt them, just as modifying any Microsoft Excel or Word document file inside of other apps, instead of those made for those files, could do the same.
Sidenote: It should be very obvious by now that you should store this backup file very securely and never share this file. It holds the keys to your digital Zucoins wallet. Likewise for your device with the Zucoins wallet on it too. For example, if your smartphone was compromised or stolen while it’s unlocked, it has the potential to overturn your life very quickly. An unlocked phone has most people’s private data, including emails and contact lists, ready to exploit. From there, a hacker can rapidly take control of major parts of your life, not just your Zucoins in your wallet app. Good security practises are seriously important and downplayed by most people.
For the most part, restoring a backup will reload your transaction history and your contacts that were saved at the time the backup file was created. This means any transactions done after the backup will not be restored, as these were not in the particular backup file, at the time it was created. There is one exception to this: The system can get the last transaction you completed from the Splitchain network cache, depending on what the app has automatically determined it needs. You can have peace of mind knowing that your last-known balance remains copied onto the SplitChain network, as its primary purpose is to cache this.
In a decentralised market, the responsibility for safeguarding your crypto and digital assets falls squarely on your shoulders. As the digital landscape continues to evolve, it becomes crucial for individuals to take full control of their assets and prioritise security.
Hong Kong Sets the Stage for Retail Crypto Trading: A Signal for China?
Hong Kong is reintroducing cryptocurrency trading for retail investors, positioning itself as a significant regional cryptocurrency hub. The new regulatory guidelines, which include suitable customer onboarding processes and comprehensive disclosures, could also influence mainland China’s approach to cryptocurrency due to its close ties with Hong Kong. The more established cryptocurrencies, like Bitcoin and Ethereum, are expected to meet listing criteria.
Hong Kong is emerging as a potential destination for cryptocurrency businesses following mainland China’s 2021 crackdown on cryptocurrency mining and trading. The introduction of these new rules could foster investment and growth in the cryptocurrency sector, cementing Hong Kong’s place as a regional leader in this field.
However, there are concerns over how these regulatory changes might impact mainland China’s stance on cryptocurrency. The region has exhibited caution in fully embracing cryptocurrencies due to potential effects on financial stability and security. Not to mention, it risks competing with mainland China’s own digital Yuan, their native currency, which was rolled out in recent years. Hence, it remains uncertain if these new rules will either encourage or deter mainland Chinese investors.
Despite the optimism surrounding Hong Kong’s new regulations, some skeptics argue that there might be unforeseen challenges that could impede these initiatives. Also, it’s yet to be determined if these strict regulatory requirements will meaningfully prevent fraud and protect investors. These factors highlight the general need for investors to exercise caution and thoroughly consider their investment objectives and risk tolerance. Read more here.
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All the best,
Peter
MyZucoins