Bitcoin Satoshi Vision, the fifth largest cryptocurrency by market capitalization (excluding Tether), was created as a fork of Bitcoin Cash (which is a fork of BTC) on November 15, 2018 at block number 556766. It came into existence due to disagreements in the Bitcoin Cash community on, for example, how to handle scalability in the future, namely what the block size limit should be. While Bitcoin Cash kept a 32 MB limit, Bitcoin SV supporters opted to increase the limit to 128 MB and more.
The BSV Mindset
In accordance with the name of the cryptocurrency, one of the main goals of BSV is to remain as close to the protocol specification as outlined in the original Bitcoin whitepaper as possible. The protocol is not supposed to do something special, but instead provide a stable, consistent base protocol to build on – similar to how IPv4, deployed in 1983, still routes most of today’s internet traffic. Such a base protocol was reinstated with the Genesis hard fork that occurred in February of this year. The Genesis hard fork, among other changes, restored the functionality of OP_RETURN in the Bitcoin scripting language, which allows to terminate scripts early. Additionally, pay-to-script-hash (P2SH), which is often used in BTC for multi-signature wallets, is no longer available as an option for new outputs. BSV’s last hard fork will be called Chronicle and mark the move back to Bitcoin’s original difficulty adjustment algorithm (every 2016 blocks) instead of the one inherited from BCH, which adjusts the difficulty for each block based on a moving average of block times in the last 144 blocks.
For BSV supporters, accountability is a key functionality and one of the arguments against employing second-layer solutions such as the Lightning Network. By storing a full record of all transactions directly on-chain, the blockchain aims to enable regulatory compliance. Storing everything on-chain will require enough block space, which is why scalability through large blocks is so important for BSV. The largest block mined so far on BSV was 256 MB large and added to the chain in July 2019 during a mainnet stress test. In the long run, the goal is to produce terabyte-sized blocks and overcome potential propagation issues that might arise. The idea is that such an abundant amount of block space would impose no limits on users and strengthen the peer-to-peer model outlined in the Bitcoin whitepaper. Instead of governing how the chain should be used, the free market would decide.
This scalability approach also has the longer-term goal to shift miner revenues from block rewards to transaction fees. While in BTC, individual transactions are supposed to become more valuable to the user, e.g. opening a channel in the Lightning Network that could then be used many times, BSV is instead focusing on growing the overall transaction volume to increase revenues from fees.
Illustration 1: The percentage of miner revenue coming from fees is currently low for both BTC and BSV. Data smoothed with a 7-day moving average.
Overall, fees have so far only accounted for small percentages of the overall miner revenue. BSV’s goal is to change that through a new mining model.
To compensate for the block subsidy, miners would – after this year’s reward halving – need to make up for 6.25 BTC or BSV per day. With BSV’s plan of terabyte blocks, this could be achieved by having around 1 billion transactions per day, at low per-transaction fees of <1 satoshi/byte.
The new model of viewing miners as transaction processors means that miners have predefined volume based contracts with parties that are interested in conducting a lot of transactions each day. The miner promises certain settlement times for transactions, i.e. inclusion in a block for example within 1 hour, 4 hours or by end of day. This is an improvement over current settlement processes in the financial system, which typically takes two days (“t+2 settlement”). Such an offering would also open up the possibility for businesses to pay transaction processors in traditional fiat currencies, removing the need to take on price volatility risk.
The current system where every user is a network node is not the intended configuration for large scale. That would be like every Usenet user runs their own NNTP server. The design supports letting users just be users. The more burden it is to run a node, the fewer nodes there will be. Those few nodes will be big server farms. The rest will be client nodes that only do transactions and don't generate.– Satoshi Nakamoto
Miners, or transaction processors, would need to operate large data centers under the new model to handle the large blocks and amount of transactions. The idea is that these data centers could also be rented out and serve as a new form of cloud computing – the monetary incentive for carrying out the calculations could directly be settled on-chain.
The miners would also play a major role in providing the infrastructure to support new applications powered by the BSV blockchain.
Developments on Bitcoin Satoshi Vision
While much of the public discussions around BSV are focused on “crypto-political“ issues, there is a lot of development going on under the hood.
Illustration 2: The largest amount of transactions on BSV are related to payments and WeatherSV, a weather data collection service. Snapshot on May 11, 2020.
While most transactions are related to payments (31%), WeatherSV comes in as a close second (28%), and Air Quality Index (AQI) as well as Tocial.io share the third place (14% each). WeatherSV and AQI are recording environmental data on BSV, whereas Tocial is a decentralized social network launched in March of this year with a focus on image sharing. The last application that generates significant transaction volume is ANNE (10%), which is a decentralized data storage protocol. In the future, data storage services could pick up even more in volume, e.g. due to collaborations such as the one with EHR Data to digitize healthcare data.
The data structure protocol that underlies such new services and businesses is the Metanet. In simple terms, the Metanet aims to be the “Internet of Value”. Information is openly available but linked to a monetary premium – tackling some of the obstacles the internet faces today, such as spam and bots in social media platforms or the need for intermediaries to transfer value.
The concept of linking attention to content with value is implemented in social media platform Twetch. Although the general feeling is similar to Twitter, the connection to a value transfer system offers some benefits. Simple actions such as following someone, creating a new post, liking a post etc. each come at a small price tag (in the range of $0.01-$0.10), and a tipping system for variable amounts is included through Moneybutton, a user-friendly API service to the BSV blockchain. These payments go directly to the content creator, with Twetch taking a small cut for providing the infrastructure. This setup has the goal to increase accountability and incentivize the creation of content that is perceived as valuable by many, and hence to reduce spam.
As a last ingredient to the “Internet of Value”, Pixel Wallet is working on a BSV-based digital identity system and KYC solution called VOAM – which stands for “verify once, authenticate many”. The system hides encrypted identity data inside images, and only the user has the key to decrypt the data and knows which image the data is stored in. In the future, this should enable more selective and only authorized access to user data instead of the data silos that large corporations possess nowadays.
Overall, the direction that BSV takes for its base layer – e.g. aiming to serve as a regulatory compliant infrastructure provider for big corporations – compared to BTC strongly reflects the different mindset between the two communities. In spite of the ongoing, at times heated and unconstructive discussion of which approach is “better”, it is worth to take a look through the social media-driven smokescreen and pay attention to the diverse developments happening right now. In the end, the free market will be the judge on how to value each concept.