Due to a change of circumstance, Parallel Industries will enter an indeterminate period of dormancy. Pre-existing commitments are to be honoured but it will not be possible to accept new engagements. Thankyou for your understanding and support of Parallel Industries over the years.
open source software, project codebase forks are commonplace and occur
when existing software development paths diverge, creating separate and
distinct pieces of software. Torvalds’ original Linux kernel from 1991
has been forked into countless descendant projects. In the case of blockchain-based cryptocurrency networks implementing ledgers, there exists the prospect of both codebase and ledger forks. A cryptocurrency codebaseforkcreates
an independent project to be launched with a new genesis block which
may share consensus rules but with an entirely different transaction
history than its progenitor — e.g. BTC and LTC. A ledger fork creates a
separate incompatible network, sharing its history with the progenitor
network until the divergent event, commonly referred to as a chain split — e.g. BTC and BCH.
3/ Fork terminology is tricky and sometimes muddled. As the concept came to cryptocurrency from OSS development many of the terms have been co-opted but there are further nuances here: particularly to distinguish between codebase / ledger forks, and hard / soft / velvet forks. pic.twitter.com/fh8RLjkAIk
rule changes or alteration of the network transaction history may be
the cause of such a fracture, deliberate or unplanned. Often when
networks upgrade software, consensus rules or implement new features a
portion of the network participants may be left behind on a vestigial
timeline that lacks developer, community, wallet or exchange support. In
the summer of 2018 a fifth of nodes running Bitcoin Cash (BCH) — a minority ledger fork
of BTC with significantly relaxed block size limitations — were
separated from the BCH network and a non-trivial number of would-be
nodes remained disconnected from the BCH network weeks later.
Governance: Decision making process between multiple parties.
Blockchain governance: Decision-making process by mutually distrusting entities in a multi-party distributed system.
On/off-chain governance (aka governance by / of the network):
Decisions are made either explicitly through the network’s ledger and
UTXOs/balances possessed therein, or via some other (in)formal mechanism
such as rough or social consensus.
Read these articles collated by CleanApp for a detailed discussion of key considerations in formally governed blockchain networks.
Immutability: An attribute primarily observed at the protocol layer in the decentralised networking stack — upon
which the monetary layer depends for persistence — ensuring the
inability of stakeholders or adversaries to alter the transaction record
and thereby balances. With this in mind, the oft-quoted concept of ‘code is law’
which refers to immutability in cryptocurrency networks, typically
referring more to preserving the intended use and function of a system
and its ledger rather than a blind adherence to a software
implementation regardless of flaws or vulnerabilities.
What Maketh a Fork?
distinction between what constitutes a vestigial network and a viable
breakaway faction is unclear and difficult to objectively parameterise.
There is a significant element of adversarial strategy, political
gamesmanship and public signalling of (real or synthetic) intent and
support via social media platforms. The notions of critical mass and
stakeholder buy-in are ostensibly at play since ecosystem fragmentations
would be characterised as strongly negative sum through the invocation of Metcalfe’s Law
as regards network effects and hence value proposition. Any blockchain
secured thermodynamically by Proof-of-Work (PoW) is susceptible to
attack vectors such as so-called 51 % or majority attacks, leading to re-orgs (chain re-organisations) as multiple candidates satisfying chain selection rules emerge. These can result in the potential for double-spending the
same funds more than once against entities such as exchanges who do not
require sufficient confirmations for transaction finality to be
reliable in an adversarial context. Should a network fragment into
multiple disconnected populations, adversaries with control of much less
significant computational resource would be in reach of majority hashrate either using permanent or rented computation from sources such as Nicehash or Amazon EC3.
4/ What ingredients are needed to sustain a “minority” network fragment such as $ETC? For a PoW network, it’s going to need significant hashrate to avoid replay attacks, re-orgs & wipeout risks – especially if #codeislaw & immutability is respected. Devs, users & businesses too. pic.twitter.com/G63TJHT4VP
striking example of this was the divergence of the Ethereum developer
and leadership cadre (ETH) from the canonical account-oriented Ethereum
blockchain (ETC) due to the exploitation of a flawed smart contract project resembling a quasi-securitised decentralised investment fund known as The DAO (Decentralised
Autonomous Organisation). In this case the Ethereum insiders decided to
sacrifice immutability and by extension censorship-resistance in order
to conduct an effective bailout of DAO participants
which came to exercise Too-Big-To-Fail influence over the overall
Ethereum network, insider asset holdings, token supply and mindshare. A
social media consultation process in conjunction with on-chain voting
was employed to arrive at this conclusion though both methods are known
to be flawed and gameable. During the irregular state transition process
akin to a rollback, a co-ordinated effort between miners, exchanges and
developers took place on private channels, exposing the degree of
centralisation inherent in the power structures of constituent network
The key event which transformed the canonical Ethereum blockchain (where the DAO attacker kept their spoils) from a vestigial wiped out chain
to a viable if contentious minority fork was the decision by Bitsquare
and Poloniex exchanges to list the attacker’s timeline as Ethereum
Classic (ETC) alongside high-profile mining participants such as
Chandler Guo, well resourced financial organisations such as Grayscale
Invest (a subsidiary of Digital Currency Group) and former development
team members such as Charles Hoskinson to publically declare and deploy
support, developers and significant hashrate to defend the original Ethereum network.
ETC now exists as an independent and sovereign network with diverging
priorities, characteristics and goals to the larger Ethereum network
Forks and network governance: the case of Bitcoin and SegWit (excerpt from Forkonomy paper)
a range of reasons, there is often strident resistance to hard
forks — irreversible protocol upgrades or relaxing of the existing
consensus ruleset — in “ungoverned” trust-minimised cryptocurrency
networks such as BTC. The lack of controlling entities may lead to a
chain split and lasting network partition if the delicate balance of
stakeholder incentives fails in the presence of a divergent event. The
implementation of SegWit (Segregated Witness) by the BTC network was
eventually achieved in 2017 as a backward-compatible soft fork following
several years of intense political and strategic maneuvering by the
constituent stakeholders in the BTC network. This off-chain governance
process of emergent consensus requiring supermajority or unanimity
measured by miner signalling has proven to be an inefficient and gameable mechanism
for administering the BTC network. Certain stakeholder constituencies
such as the developers maintaining the reference Bitcoin Core software
client implementation of BTC could not easily reach agreement with
mining oligopolists and so-called big block advocates over the optimum
technological trajectory for the BTC network.
stakeholders of the mining constituency strongly opposed SegWit as it
would render a previously clandestine proprietary efficiency advantage
known as covert ASICBoost
ineffective on the canonical BTC chain. A grassroots BTC community
movement campaigning for a User Activated Soft Fork (UASF) for SegWit
implementation and a face-saving Bitcoin Improvement Proposal (BIP91)
facilitated the eventual lock-in of the SegWit upgrade in the summer of
2017. A contentious network partition took place in August 2017, giving
rise to the Bitcoin Cash (BCH) network which rejected SegWit and opted
instead for linear on-chain scaling. By changing the block size and
loosening the consensus ruleset without overwhelming agreement from all
constituencies of the BTC network, it is difficult to find a basis for
BCH proponents’ claims to be the canonical Bitcoin blockchain without
invoking appeals to emotion, authority or other logical fallacies. The
continuing presence of Craig S. Wright and his claims to be a progenitor
of Bitcoin are an example of these attempts at legitimacy.
What the #forkgov? Fork-resistance and governance
the significant downside potential of real and perceived threats to the
resilience and legitimacy of a fragmenting network and loss of
associated network effects, the ability of a blockchain-based protocol
network to demonstrate fork resistance provides significant strength to
its value proposition and two notable examples of networks attempting to
utilise such a mechanism are Tezos and Decred. Decred is an example of a
hybrid PoW/PoS monetary network which is implementing a proposal and
governance mechanism termed Politeia.
Since coin-holders have voting rights based on stake weight, they have
the ability to keep miners and developer constituencies honest through
the mechanism to reach decisions by majority stakeholder consensus on
matters including hard forks. These lessons were ostensibly learned
through the developer team’s experiences in writing a BTC client which
they felt was not appraised objectively by the Bitcoin Core developer
ecosystem. Decred’s fork resistance is effectively achieved by the fact
that most stakeholders would be non-voting on a minority chain, it would
remain stalled as blocks would not be created or propagated across the
a high-level perspective, let’s address the most general question: are
these two notions meaningfully compatible? If we think of any natural
process in the Universe — from the celestial to the tribal — as
accretions and communities grow in size and complexity, scalability challenges increase markedly. Minimising accidental chain splits during protocol upgrades is a worthy goal. However, denying
a mechanism to allow factions a graceful and orderly exit has upsides
in preserving the moat of network effect but at the cost of internal
dissonance, which may grow over time and lead to second-order shenanigans. Sound familiar?
BrexitCoin combines Proof-of-Flag governance and historical obfuscation so that mistakes are guaranteed to be repeated. Unelected leaders of BrexitCoin committee must wait for a scandal to occur before the next “democracyblock” may be proposed.https://t.co/cNpICRxHCIpic.twitter.com/dsgYr09UG5
— Byzantine Business School (@BusinessSch001) 4 June 2018
One can look at ledger forks in a few different ways as good, bad or neutral:
A/B/…/Z testing of different technical, economic or philosophical
approaches aka “Let the market decide, fork freedom baby!”
An inevitability of entropy and/or finite social scalability as these
networks grow and mature it is not realistic to keep all stakeholders
sufficiently aligned for optimal network health.
such, protocol layer fork resistance and effective public fora with
voting mechanisms can certainly be helpful tools, but there is a
question as to whether democracy (the tyranny of the majority)
should be exercised in all cases. If there was a “block size” style
civil war in Tezos or Decred with no acceptable compromise in sight,
would the status quo still be the best situation in all cases?
Worth noting that I predicted the first Tezos hard fork over a year ago (@tzlibre)👇.
There is *nothing* that supercedes fork-based governance for cryptocurrencies, and that is a good thing. https://t.co/E0jRomnvqi
perspective is that fork-resistance will largely redistribute the
manifestations of discontent rather than provide a lasting cure to ills,
and the native network governance mechanisms may be gamed by either incumbents or ousters.
More time is needed to see how decision-making regarding technical
evolution unfolds in both networks. Decred seems to be sitting pretty
with a fairly attack-resilient hybrid PoW/PoS system,
but there are some “exclusionary forces” in the network leading to the
escalating DCR-denominated costs of staking tickets necessary to receive
PoS rewards and participate in proposal voting, denying access to the
mechanism to smaller holders.
for tickets and staking rewards naturally increases with ongoing
issuance, as the widening pool of coin holders wanting to mitigate
dilution also does. As the ticket price is dynamic and demand-responsive,
it creates upwards pressure which would make tickets inaccessible for a
growing proportion of coin holders. At time of writing, “ticket splitting”
allowing smaller holders to engage in PoS is available from some stake
pools and self-organised collectives but the process is not yet
automated in reference clients. On the other hand, the ongoing bear
market has seen the USD ticket price fall from ~$8–10k USD at January
and May 2018 peaks to ~$2k USD today in late January 2019 so those
entering Decred with capital from outside the cryptocurrency domain
would likely be undeterred. Data from dcrdata.org and coincap.io.
Further, as per Parallel Industries’ TokenSpace taxonomy research,
staking rewards resemble dividends and token-based governance
privileges resemble shareholder rights which make Decred appear a little
closer to the traditional definition of a capital asset
than pure PoW systems. This may or may not be an issue depending how
regulation unfolds. Tezos has those potential issues plus the regulatory
risk from the token sale. Decred’s airdrop may not have distributed the
coin as fairly as possible but will undoubtedly attract a lower
compliance burden than a token sale or premine.
“Activist Forks” & “Unfounder Forks”
you appreciate the technology utility but dislike the economic, human
and compliance issues packaged together with a project?
Taking this a step further, these dissonant groups may conduct a guerilla
campaign inside a network to focus attention on their cause. Last
summer, a few anti-KYC factions of Tezos had appeared on social media
outlets prior to network launch, however since the mainnet launch things
have quietened down somewhat. One faction which still apparently
intends to create a fork of Tezos changed tact and became a delegated staker within the network whilst continuing to voice dissent — perhaps this “fork activism” can be interpreted as a response to the “fork-resistance” of Tezos.
So, what else could a fork activist do? Take a look around at the ongoing ICO bonfire of the vanities which is largely due to poorly thought out sales of high-friction futility tokens
infringing upon / attempting to circumvent various regulations around
the world. The prospect of removing the token issuers and the tokens
themselves once treasuries are liquidated (by themselves, or by
lawmakers) and development ceases is quite attractive indeed — will we
see a wave of “unfounder forks” as in this example? Perhaps operating in reverse to Simon de la Rouviere’s “Tokenised Forking” where both tokens and founders are excised.
Been thinking about this, started already and will only happen more from here – “activist” or “unfounder” forks if you will.
Wassim will be delivering a presentation on TokenSpace approaches to cryptoasset classification and extending the technique for DAOs in workshops at the upcoming Malta Spring AI & Blockchain Summit, 23-24 May 2019.
Wassim will be taking workshops and talks based on three Parallel Industries projects to Crypto Valley VC Labs in Zug, Switzerland in mid-May 2019. Forkonomy, DAOs and Don’ts and TokenSpace roadtrip upcoming, some sessions will be open to public attendance.