The blockchain-powered custom tokens platform Waves launched a secure, reliable speedier bitcoin gateway for holding bitcoins on the network on March 11. This move comes amid continued concerns within the Bitcoin community about block sizes and slow transaction confirmation times.
According to the Waves team, bitcoin is here for the long haul and should be acknowledged as such. As the largest currency in the crypto world, more money is transacted through bitcoin than any other. And as the default reference and reserve crypto, altcoins are actively trading against it.
Amid Bitcoin’s strengths are some well-documented weaknesses, however. Development has been slow, and efforts to gain consensus related to protocol changes have been contentious.
The latter issue has led to backlogs in bitcoin transactions and sharply rising fees. In the past, a transaction with a 0.0001 BTC fee would typically sail right through. Today, that same fee might result in a 24-hour delay before miners confirm it. With rising bitcoin prices, the fee needed to facilitate a rapid transaction is not only higher in BTC terms but dollars as well. As a result, fast transaction costs are rapidly approaching those found in the legacy banking system.
While ongoing efforts are taking place to address this issue, all with mixed reviews, keeping various stakeholders in the Bitcoin community content with the options to forge a path forward has been a tall task. Increasing the block size has been very divisive, and the infrastructural hurdles are significant.
Are Sidechains The Solution?
What is the best description of a sidechain? An independent cryptographic ledger that links to the main Bitcoin blockchain without sacrificing speed and performance. They are gaining attention as an option for boosting the scalability of the existing blockchain network leading to faster transaction and confirmation times.
Activity in a sidechain remains in the sidechain. Funds are tethered to an address through the use of a smart contract, leading to significantly higher transaction volumes.
The Waves bitcoin ecosystem functions in a similar manner. Funds are locked to storage clusters when deposited, with the BTC held in multi-sig. Tokens are then issued on the Waves blockchain in a one to one representation. Once this occurs, these Waves bitcoin (WBTC) can then be migrated around on the Waves blockchain, allowing for greater speed and scalability. Security is extremely robust and far more so than that of traditional exchanges with their single-point-of-failure issues.
For cold storage, when funds lie dormant for long periods, the bitcoin blockchain is the best option. But when funds are being frequently moved, often as a means of making a payment in BTC, WBTC can profitably stay within the Waves system. Only when there is a need to move the BTC to an exchange that the bitcoin blockchain is required again ; this makes it easy and efficient once again move BTC around. Higher costs and/or delays are incurred once exiting to use the Bitcoin blockchain.
Says Sasha Ivanov, founder, and CEO of Waves:
“Of course it's not a true sidechain in the same manner as the Lightning Network, for example, but it has a similar result. You can send bitcoins to the gateway, where they are securely held or "locked," and then they can move around the Waves network very fast and efficiently - much more so than on the bitcoin blockchain itself. They can be withdrawn from the client at any time and returned to the bitcoin blockchain.”
Ivanov says it was never claimed that Waves would replace bitcoin. “We already have money - BTC, USD, EUR and so on. We just think it can be more efficient, and more accountable. That's what Waves brings with its bitcoin gateway; a new way of storing and moving BTC around, while still remaining transparent. And soon it will be possible to trade bitcoin against other currencies on Waves too.”
“People are still used to using exchanges to store their BTC, despite what happened to MtGox and so many others. The Waves bitcoin gateway is vastly more secure than a traditional exchange, so the challenge is to bring people to trade on Waves rather than somewhere that has high risks.”