Editorial 17 July 2018Erik Gibbs
What kind of tokens will the Bitcoin Cash network see?
When it comes to tokenization, there’s no denying that Ethereum had the first-mover advantage. The Ethereum network has been used to produce a number of different tokens, such as EOS, Augur and OmiseGo. Ethereum is basically smart contracts, a feature that’s already available with Bitcoin Cash (BCH) following the May network update. In a Yours.org article, Ryan X. Charles listed the many different reasons to put tokenization on the Bitcoin BCH blockchain.
The first reason is simply one of motivation. Some BCH enthusiasts believe that there is room to allow for the issuance of stocks, bonds and other assets on the BCH blockchain that don’t impact BCH directly. The assets could, in theory, be traded for each other, as well as for BCH, atomically. Dr. Craig Wright, chief scientist of the nChain Group, previously discussed atomic swaps, which he said will enable inter-blockchain conversion between different cryptocurrencies on the Bitcoin Cash blockchain.
While motivation is one of the prime reasons, legal concerns could also drive development of coins on the BCH blockchain. Since laws differ from region to region—sometimes from city to city—the laws of a particular region cannot be embedded into a global coin any more than they can be embedded into email or web protocols. Laws are, as they should be, separate from these protocols.
There is a certain lack of confidence in permissionless tokens that are built around a central point of failure. To put this into perspective, consider a stock that is traded freely on a market but for which the dividend payout can only be given after the stock’s owner provides Know Your Customer (KYC) information. With cryptocurrencies, the tokens can be traded without issue; however, redeeming the tokens is virtually impossible without first receiving permission. There are a variety of tokens that are more permissioned than others and then there are some, like BCH, that is permissionless. The cryptocurrency community has already shown, through its acceptance of BCH, BTC and Ethereum, that it wants at least a portion of the token offerings to be completely permissionless.
It’s already possible, to some degree, to create new tokens on the BCH blockchain through the use of colored coin protocols, the same type used on the BTC network. The benefit to colored coins is that they don’t require changes to any protocols. Compared to the BTC network, BCH colored coins are easier to use since they have lower transaction fees and a larger data size thanks to the OP_RETURN code.
Despite its 10-year history, cryptocurrency is still young. There are certainly a number of changes, adaptations and innovations remaining as the ecosystem continues to mature and more minds become involved to help shape the currency of the future.
If you have Bitcoin Cash-based tokenization solution in mind, CoinGeek is running a £5-million contest for designs that will put tokenization on the BCH chain. The contest is still open, with an adjusted reward and terms, to enable other solutions to also be developed and released open source on the BCH platform. More information about the CoinGeek tokenization contest can be found here.
Interested in helping the growth of merchant adoption of Bitcoin BCH? Join the bComm Association, an industry group that intends to be the focal point for miners, merchants, exchanges, developers and members of the BCH community. Developers and merchants of the Bitcoin BCH community will also be on hand for the first CoinGeek Week happening in London in November. Register here, and be one of the first to know when tickets go on sale.
Note: Tokens on the Bitcoin Core (SegWit) chain are referenced as BTC coins; tokens on the Bitcoin Cash ABC chain are referenced as BCH, BCH-ABC or BAB coins.
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