The most interesting developments & projects in Bitcoin now. The government's difficult regulating Bitcoin with the fast changes. Prediction: The Lightning Network. Bitcoin will have a hybrid PoW/PoS system.
Transcript
[AUDIENCE] Thank you for your talk. I would like to ask, what is the most interesting [development] right now? Around Bitcoin and maybe cryptocurrencies in general? Also, if you have the time, what is your opinion on proof-of-stake?
There are people saying that it is fundamentally flawed [due to the nothing-at-stake problem]. [ANDREAS] Well, I am currently on a diet that reduces my preference for carbohydrates. I am trying to prevent diabetes while I still can. So I am a very big believer in steak.
[Laughter] As for proof-of-stake, I think it's rather interesting. But we only have one proof-of-work consensus algorithm that works today. A few years ago, my main [focus] was trying to understand how Bitcoin works at a fundamental level. I keep trying to understand it at a deeper and deeper level.
Now, my main job is still understanding Bitcoin at a deeper level, but also reading about other things. Just when I think I understand, something new comes out [again] and I am blown away. Five months ago, I did not know anything about Segregated Witness. Then Pieter Wuille pulled something out at a conference and blew my mind.
I started reading about Lightning Network six months ago, understanding it about three or four months ago, to some level of depth, and it is blowing my mind. There are dozens and dozens of projects I know of that excite me tremendously. I can see all this raw creativity. This is really funny.
The banks and governments are [thinking], "We will regulate Bitcoin." They have no idea... about what is going on in this space. They have this caricature version of Bitcoin from 2009 that they are trying to regulate. Meanwhile, Pieter Wuille and Greg Maxwell are building Segregated Witness, payment channels, Lightning Network, confidential transactions, and God knows what else.
Thousands of people... building interesting things. So yeah, good luck with [regulating] that. It is overwhelming how many interesting things are happening.
I started writing the second edition of my book. I thought, 'I will just make a list of things that are new.' 'I [only] wrote it two years ago.' [It is now] a four-page document. I need to edit it now because it won't fit. By the time it prints, I will need to work on the third edition list.
Because the second edition will already be obsolete. That is the nature of putting things on dead trees. I think a lot of the new features are fascinating. One of the things - I am going to blow your mind here.
Probably by the end of 2016, Bitcoin will have a hybrid proof-of-work, proof-of-stake system. [Laughter] What? I didn't see that announcement. By the end of 2016, Bitcoin will have a hybrid proof-of-stake system.
Why? Because the Lightning Network is [similar to] a proof-of-stake system. People haven't yet realized that the Lightning Network is a kind of proof-of-stake system. In order to set up a channel on the Lightning Network, you must commit money to a multi-sig address.
The more money you commit, the more transactions it can handle and the more fees it can generate. "I stake money and it generates a small amount of fees" [sounds like] a proof-of-stake system. Only it is a completely trustless proof-of-stake system... running on top of, and guaranteed by, Bitcoin's proof-of- work.
Boom! I only realized this about six months ago, that this is what Lightning was. I then went to the developers who are writing it and asked them, just to make sure that I am getting this right. "Is this really a proof-of-stake system?" "Yeah, I guess you could call it that." I will go and call it that, in Berlin.
The thing is, Bitcoin is full of surprises. Proof-of-stake could be an important part of consensus algorithms... in our future. It allows us to scale much further than proof-of-work [alone], so that is a benefit.
I think we will see a lot of development.