Creating a Better Bitcoin: Paul Glass’ Bold Bet
As the founder of the recently launched eCoin Project, Paul Glass has his eyes set on fixing the flaws he sees with crypto. And if successful, his efforts could catalyze a new normal for the utility of digital currency.
Thus far his journey has been an interesting one. Having stumbled upon Bitcoin in 2011, while at William & Mary Law School, Paul spent hour upon hour studying the deepest recesses of Bitcoin. He admits to being reticent at first, questioning everything from double-spend scenarios to how do transactions really get confirmed without traditional, third-party intermediaries. Over time, he says, Bitcoin became a fever pitched passion of his, one that increasingly swallowed up more and more of his attention.
In 2012, Glass jumped into the world of mining seeing that it was ripe with profit potential. During this process he figured out how to make rigs; at one point having over 20 of them running simultaneously with four to six GPU’s each.
In addition to Bitcoin, he ventured into Litecoin, Blackcoin, and Darkcoin. Glass also became intrigued with the broader economic implications of money and currency. He attributes the latter, in part, to genetics tied to being the great, great grandson of Carter Glass, a historic icon who figured prominently in the creation of the U.S. Federal Reserve System.
Today, Glass believes that Bitcoin, despite its meteoric rise as an alternative to prevailing monetary, banking and financial systems has some major weaknesses of its own. He is quick to point out the problems associated with bitcoin’s limited and deterministic supply, high price volatility and lack of transactional privacy. Moreover, says Glass, Bitcoin’s governance is severely flawed, resulting in an “oligopoly” of lead developers and control by an increasingly centralized mining industry.
In an exclusive interview with BTCManager, Glass discusses his issues with the current operational models for crypto as well as some of the solutions he’s actively pursuing through the eCoin Project to correct them.
What Have you Discovered About the Crypto World that Needs to be Addressed?
The biggest lesson I’ve walked away with from studying lots of cryptocurrencies is that “Proof of Stake” does not work. In my opinion, it inherently creates a centralization of the mining process which leads to sort of an arms race. As a result, it’s now becoming impossible to compete with a place like China where electricity costs little or nothing.
Can you Elaborate a bit More Here?
Sure. Because of the increasingly centralized nature of the Bitcoin mining structure, a 51 percent miner approval level is needed for any sort of protocol updates or changes. So instead of a decentralized cryptocurrency, we’ve now got one that’s increasingly centralized and is no longer in under the control of the true stakeholders who hold, own and use the coin. With only a centralized few controlling the transactions, the whole blockchain can be easily controlled and manipulated.
You’re Referring to the Lead Developers, Correct?
Yes. Because they are an unelected body, they ultimately have zero accountability to the system. You’ve got lead developers controlling the gateway as well as miners controlling what’s approved. That, to me, is a huge problem.
So the Miners are Ultimately Self-interested in How it Works out for Them?
Yes. In terms of Bitcoin Core versus Bitcoin Classic debate, the question became whether to migrate to a 1MB or 2MB blockchain. So if I’m a miner, I don’t want to increase the blockchain size because that’s more work for me. And to make matters worse, I can’t raise my transaction fees. So we’re faced with a governance issue; a misalignment of interests between the miners and those of the larger community.
What Other Issues are you Seeing with the Current Bitcoin Model?
Another big problem is its huge volatility. That’s why you hear some who are unfamiliar with bitcoin calling it a Ponzi scheme and other crazy stuff. The fluctuations and general instability are a big concern and this is why many everyday people, merchants, and investors turn or stay away from it. At the end of the day, the only people who are game for this high volatility are speculators.
What in Your View is Behind this Volatility?
The problem with bitcoin is that the supply can’t react to demand because it’s a deterministic supply. Granted it is not as inflationary as the US dollar. But it’s still a deterministic supply which doesn’t allow supply to efficiently react to demand. So the price volatility is just a function of demand.
How does this Problem get Solved?
What’s needed is a cryptocurrency where the price of supply is perfectly elastic and able to adjust according to demand. In other words, if demand is really high, and the price starts going really high you need the supply to explode as well.
What will this Price Need to be Based On?
You can’t base it on fiat money because it’s essentially a broken system where it’s only a matter of time before it will collapse. And you can’t base it on something like the Consumer Price Index. The way the CPI is calculated has changed in every single U.S. presidential administration since Ronald Reagan.
So the idea with eCoin is to peg it to the residential consumer price of electricity in the U.S.
Why Residential Electricity?
Because it is a resource that everybody uses and is a necessity. In modern society, electricity is something that we all need and use.
How do you respond to the naysayers who question whether this is a viable option for creating price stability?
I am well aware that this is a somewhat complicated idea in terms of managing the supply of eCoins. But in an extensive statistical analysis of electricity price patterns and how they square with inflation, I discovered that the two actually corresponds quite well. These prices in fact closely matched the CPI, and actually trended a bit higher.
There is so much talk about anonymous transactions these days. How does the eCoin Project propose to address this?
I would argue that the real question is not anonymity, rather it’s privacy. So the idea with eCoin is to have transactional privacy combined with independent, third-party verifiability. In other words, whenever someone transacts with another party, a unique, encrypted key code will be produced for that transaction. That way a person can then prove that the transaction took place through a dedicated code that they can decrypt without having to open up their private wallet.
How does this compare with say the privacy features of Dash?
Dash is just an internal mixing service for obfuscating the linkage of transactions. The blockchain is still transparent. Another problem I see with Dash is that it creates opportunities for a man in the middle attack. In other words, if a person has access to the masternodes, they’ll have the transactions right there in front of them. It’s kinda like the fear of the NSA running Tor. For if they have enough Tor nodes, they’ve got you.
As technology and techniques for tracing transactions on the blockchain get better over time, this will only get worse. In fact, there are companies right now that are specializing in blockchain analysis.
For those who value transactional privacy, this represents a problem. It is also a perfect example of why a transparent blockchain, which Dash uses, is not the way to go. eCoin transactions will be encrypted on the blockchain.
You also mentioned governance as being another major issue with Bitcoin. Can you briefly explain a bit more about this?
The problem is that the lead developers and the miners are in control of the system, not the true stakeholders who own the coins. Our intent with eShares is to flip that model so that the stakeholders are in charge. Once the eCoin System is released, eShares holders will completely control the system. Any changes to the system will happen through an internal democratic vote of eShares holders.
To help implement changes and provide an official representative body for the system, a nonprofit called the eShares Foundation will also be created. All board members for the foundation will be chosen by eShares voters via an up or down vote. Once the systems are fully released, founders or developers will be are unable to do anything unless the eCoin foundation authorizes it and any changes to the system must be approved by eShares holders.
So what is your long-term hope and vision for eCoin in terms of fostering a new normal for crypto?
We support Bitcoin and all digital currencies and appreciate their contribution as an alternative to fiat currency and the current monetary, banking and financial system.
At the end of the day, we here at the eCoin Project are just a rabid group of enthusiasts working to enhance the use, value, utility and sustainability of crypto by addressing the aforementioned fundamental weaknesses that have long hindered its full adoption.
You can find out more about the eCoin Project Proposal here.