From the GoChain Medium Blog archives!
It all started with a smart contract.
A friend was starting a company early last year and wanted to do an ICO to raise money. He was big into cryptocurrency and knew the space well.
When you had a crypto question, he was the guy to ask (we all know that guy right?).
He needed some help with his token sale contract so a couple of guys from our team volunteered as both a way to help a friend and to learn. From there, we took it upon ourselves to learn everything about Ethereum and smart contracts; what they were, how they work, and how they are implemented.
The Potential is Huge
Today, nearly every ICO/token sale is done as an Ethereum smart contract and for good reason.
Ethereum is insanely popular which means the community for helping each other build smart contracts is there, the contracts themselves are set in stone which makes for some level of trust between parties that don’t know each other, and having everyone using the same technology means the related tech and services like token exchanges can easily support all the new tokens since they all implement the same interface.
There’s a standard interface for tokens that defines the functions required for a token sale, called ERC20. The general gist behind the ERC20 token contracts is: a) token purchasers send ETH to a contract address b) the contract puts the ETH in a wallet c) the contract issues X number of tokens in exchange for the ETH d) token owners can then transfer tokens to others (trade).
It makes a lot of sense when you think about it. An immutable, incorruptible contract between a buyer and a seller.
So far, so good.
But… There are Problems. Big Problems.
We all know smart contracts have a lot of value, which is what makes Ethereum so special. But it’s not all sunshine and rainbows.
Besides the fact that you need a PhD in quantum physics to figure out how to write and deploy contracts, there are some serious issues at the core of Ethereum (many of the other top cryptocurrencies have these exact same issues too). And once you start digging in, the rabbit hole goes deep.
- You find out that the promise of decentralization isn’t true. More than 70% of mining is in China and run by only a handful of companies.
- You find out that the energy used to power these cryptocurrency networks is probably keeping the coal mining business alive. If Ethereum were a country, it would be in the top 80 countries in terms of energy consumption. Ethereum uses 3x more energy than Google. Let me repeat that: Ethereum uses 3x more energy than f**king Google. And you know what’s worse than Ethereum? Bitcoin. Bitcoin uses 10x more energy then Google. Take a few seconds to ponder that. You can power a US household for a day and a half for every… single… Ethereum… transaction. Bitcoin? 24 days. You can power a US household for 24 days for the cost of sending your buddy .0001 BTC. Clean up on aisle 7?
- Then maybe you’re thinking that it must use all this energy to do something useful? Nope, it’s using the energy for Proof of Work (PoW) which is calculating a useless value. The first miner to a calculate a hash with X number of zeros in front of it wins the block. To give it credit, it has worked remarkably well to keep an untrusted network secure and true.
- Well it must be doing a ton of volume to require that much electricity? Nope, wrong again. Ethereum can only handle ~13 transactions per second, Bitcoin can only do 7. For comparison, Visa can handle 24,000 per second. What happens when there are more than 13 transactions per second? Everyone waits… for… their… transaction… to… get… processed… Sometimes when it’s busy you can wait hours. It is possible to pay an insane fee to get your transaction processed faster, but no matter what, any more than 13 per second and transactions sit in the queue, waiting to get processed. How are you supposed to breed your CryptoKitties in a timely, cost effective fashion? So even consuming this totally insane amount of energy, these cryptocurrencies are basically useless for any real world use case.
- And to top it all off, every month there is a major hack/theft from a smart contract, where literally hundreds of millions of dollars have been stolen. These are primarily due to bugs in smart contracts, but as any software developer knows, there’s no such thing as software without bugs. And if that’s the case, there needs to be a way to fix them. Currently, there is no way to fix them, you just have to watch as you and your customer’s money disappears before your eyes. And there’s no recourse. Some of the biggest thefts in the history of mankind and there’s zero recourse.
There Is a Better Way
After learning about all of these problems, and how serious they are, we decided we needed to take matters into our own hands. Bitcoin is never going to change and Ethereum is on a timeline of years to try to fix things. We want to fix these issues now.
That is what GoChain is all about.