According to the Bitcoin developers’ (BTC) reports, a surprising amount of block space is being wasted in the Bitcoin network to secure the blockchain of other crypts. A company called VeriBlock has been “borrowing” the hash power of the Bitcoin network to increase security in altcoin vulnerable chains and fill the BTC block space in the process.
VeriBlock works in a process known as “test test” whereby you get to the last “test” using the hash power of the Bitcoin network. According to Forbes, perhaps the most notable contributor to the VeriBlock project is former Bitcoin Core developer Jeff Garzik.
Only a matter of time before the impact of VeriBlock on Bitcoin rates is no longer trivial
As highlighted this week by the Ethereum Classic (ETC) debacle, the risk of a 51% attack on altcoins is much greater than in the BTC network. This is because there is much less hash power that protects these smaller networks. With less computing power by applying them, attackers need to command much less computing power to subvert network rules.
A 51% attack allows those behind it to wreak havoc with a cryptocurrency and enrich themselves. This may involve duplicating the spending units of the currency, essentially creating money for the attacker at all.
To help the altcoins with their failed security requirements, a startup called VeriBlock has devised a way to use the immense bitcoin hash power to help secure the blockchain of smaller projects. This involves the use of OP_Return transactions added to the Bitcoin blockchain.
VeriBlock is not even completely live on the main network, but it is already having an impact on the Bitcoin network. The Director of Technology of CasaHODL and Bitcoin developer Jameson Lopp highlighted a few days ago that the start-up was currently responsible for 20% of all transactions in the network:
The source of the highest volume of OP_RETURN has now been identified as @VeriBlock “trial test” miners. They are creating around 20% of all BTC transactions now. It seems inefficient; It will be interesting to see if the incentives work in the long term. https://t.co/LpjyhGKg2b – Jameson Lopp (@lopp) January 5, 2019
While there is nothing anyone can do to prevent VeriBlock from using the Bitcoin blockchain in such a way, doing so reduces the utility of the network. With 20% of each block filled with transactions that support networks that bypass the economic as well as literal human interest of Bitcoin, VeriBlock could be incredibly detrimental to the success of a complete space, largely linked to the current number one digital asset.
VeriBlock will already have an undesirable impact on the price of transactions on the network. If a large increase in net profit again occurs, there may be another “race to the top” situation within the transaction fee markets. The last time this happened, it was not uncommon to spend $ 40 on Bitcoin fees. Such a fee is difficult to swallow when it is directly caused by the economic activity that benefits Bitcoin. When it is caused by a group of altcoins that support an essentially null economic activity and supposedly in direct competition with Bitcoin, most users would find it totally unacceptable.
Assaulting the BTC hash rate in the way that VeriBlock is doing and filling blocks with data that benefits the chains of blocks that die, only serves to delay the inevitable, while limiting Bitcoin’s chances of success.
The massive proliferation of cash and the continued profitability of scams in space has made the digital currency difficult to take seriously for anyone outside the industry. Many of these altcoins, particularly those who need the support of VeriBlock, need to die completely before this can change.
After all, it is hard to imagine a less noble existence than not surviving the hashish power of incentivized miners to secure the network through mining rewards and, instead, continue to exist at the expense of the possible adoption of Bitcoin while still providing – quick “-preview of investors hoping for an imminent moon launch.