Velvet has always been a sign of nobility, but in the crypto space, it’s now the name adorning a new and promising way for upgrading blockchain software.
At least that’s the hype behind “velvet forks,” a mechanism for upgrading cryptocurrency code that has some high-profile crypto enthusiasts intrigued.
“We think the most interesting part is the idea that you can introduce some new concepts to permissionless blockchains without necessarily having a majority of consensus participants agree to do so,” said Imperial College London research assistant Alexei Zamyatin.
And that complex statement cuts to the core of why Zamyatin and others believe velvet forks might be beneficial.
In short, in the cryptocurrency space, there have long been two types of forks that people generally discuss – soft forks and hard forks.
While soft forks are seen as less disruptive in that they’re backwards-compatible, they can still be controversial when used to initiate changes not all cryptocurrency users agree with. Further, hard forks are generally seen in a dubious light since they can split a blockchain in two if not all users decide to update to the new rules.
With velvet forks, however, some researchers think the cryptocurrency world can get around some of the disruptive politics that generally bog down major code changes.
First coined by computer scientists working on building proofs that can potentially be used to improve sidechains, a layer-two cryptocurrency technology for pushing transactions off-chain, a velvet fork allows developers to add new rules to a blockchain without full support from the entire ecosystem.
According to Zamyatin, “It’s not rocket science. It’s a pretty simple concept.”
As such, Zamyatin and several other researchers co-authored a new paper that dives deeper into where the mechanism can be applied, which he presented during the Financial Crypto 2018 conference in Curacao at the beginning of the month.
The new paper states:
“The velvet fork […] does not require support of a majority of participants and can potentially avoid rule disagreement forks from happening altogether.”
In the wild
Simply, a fork is a way to upgrade a cryptocurrency system to support important new rules, and throughout the history of multiple cryptocurrency protocols, forks have been used often.
From the hard fork that split ethereum into a competing cryptocurrency ethereum classicto less controversial forks like the one used to move bitcoin to a new signature scheme to the ever-growing number of forks designed to not only create new cryptocurrencies with new features, but also make entrepreneurs (or scammers) substantial amounts of money, forks have become a part of life in the cryptocurrency ecosystem.
But these mechanisms come with a fair amount of controversy much of the time, which is partly why Zamyatin and other academics are so interested in the velvet fork approach.
In the December 2017 paper where velvet forks were first mentioned, the mechanism is described as one that allows for “gradual deployment” without harming the miners that haven’t upgraded to the new rules. In this way, it acts similar to a soft fork in that clients that upgrade to new rules are still compatible with those that don’t.
Further, the paper states that velvet forks require “no rule modifications to the consensus layer,” what some see as advantageous since these are the rules everyone in the system needs to agree with, or everything will break.
While it hasn’t become widely-used as a way of upgrading, velvet forks exist in the wild today in various forms (although researchers argue there wasn’t an official name for the mechanism before this recent wave of research).
For example, the decentralized mining pool P2pool regularly uses a velvet fork of sorts.
Since there is no one entity (replacing that with code instead) that controls the payments dispersed to the miners of the pool for their work, the pool created a second blockchain with an easier difficulty that only miners part of the pool can contribute to. This blockchain is used to gauge how much computing power each miner is contributing, so the protocol can pay them out proportionally.
Even though the blocks generated by P2pool use these extra rules, miners that don’t play by these same rules still accept P2pool’s blocks.
As such, P2pool is an example of a “velvet fork” because the blocks (from both their proprietary blockchain and the bitcoin blockchain) live side-by-side in harmony, without causing a split.
Bias and bribery
Still, velvet forks are a potential vulnerability.
Namely, the paper describes possible ways that velvet forks could be abused by bad actors for their own gain…
Read Full: Soft, Hard or Velvet? New Fork Promises Crypto Upgrades Without Controversy
