Designing a blockchain with financial service providers in mind
It’s been a rough ride for many hodlers since crypto began its decline in January. But as any good crypto investor knows, the bear markets are when the good work happens.
In the past year we’ve seen our industry blossom with greater sophistication, and now the institutions are following.
The media has also picked up on this. In August NewsBTC published a piece highlighting the top reasons that institutional investors are entering crypto, and in September Forbes covered their bet on blockchain-based securities. These are just two of many articles that have hit blogs and publications recently.
Then, at the beginning of October Bloomberg published a report discussing how institutions are purchasing crypto through private transactions rather than exchanges using a so-called “institutional back door.” Private transactions have been preferable to some large scale investors because exchanges didn’t offer enough supply, or for fear of moving cryptocurrency prices with a heavy transaction.
These are issues that will take some time for resolution, with liquidity taking care of exchange supply as more and more big-time players join the ranks.
But we still see an Equibit-shaped hole in the industry, one that addresses scale.
"We’ve developed for scale in two ways: employment of the dark gravity wave, and adaptive block size"
We’ve anticipated since the genesis of the Equibit blockchain that institutions and financial service providers would be looking for ways to engage with cryptosecurities. This is one of the reasons why forking the Bitcoin blockchain code made sense; the network is developed for efficient payment processing with opportunity for protocol layers to enhance speed, as the Lightning Network does.
We’ve developed for scale in two ways: employment of the dark gravity wave, and adaptive block size.
The dark gravity wave (DGW) is a difficulty retarget algorithm. This means that the algorithm reconfigures the mining difficulty of every block (ten minutes), vs. every 2016 blocks (two weeks), as the Bitcoin blockchain does.
Reconfiguring mining difficulty much more frequently improves stability and scalability of the network because it removes opportunity for multipools. Multipool miners move from one cryptocurrency to another as the hashrates change, switching each time a crypto becomes more profitable. This creates issues with inconsistency of hashrate and thus transaction confirmation times.
In smoothing out and increasing the difficulty reconfiguration process, DGW improves chain security with frequent reconfiguring of hash difficulty, block times are more consistent, transactions are faster, and the chain is generally more reliable.
The Equibit blockchain also employs an adaptive block size to assist with scaling. There has been much debate over the size of the Bitcoin blockchain’s block limit at 1MB, with various proposed solutions that have brought both soft forks (segregated witness), and hard forks (Bitcoin Cash), to the chain. As a fork of the Bitcoin code, the Equibit blockchain is customized to meet the needs of the capital markets at large, but specifically financial institutions - adaptive block size increases network capacity for transactions reasonably and based on demand.
Adaptive block size is important to the network because transaction throughput is limited at the current fixed block size. With this solution, block size can be adjusted as required by volume on the network, and self governing without human intervention.
We’ve implemented Bitpay’s Bitcoin Improvement Proposal (BIP) to ensure that the blockchain scales appropriately for market use. The adaptive block size works by calculating the maximum allowable block size every block. It does this by looking back at the last 12,960 blocks and using twice the median block size as the new limit - with an absolute minimum size of 1MB. As far as we know, the Equibit blockchain is the only implementation of this.
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Financial service providers interested in working directly with us are welcomed to get in touch today.