Crypto Pioneer David Chaum Says He’s Built A Better Bitcoin (#GotBitcoin?)

A new platform, called Elixxir, promises to improve on bitcoin’s speed by processing thousands of transactions a second. Crypto Pioneer David Chaum Says He’s Built A Better Bitcoin

The godfather of the cryptocurrency movement is back with a plan to address bitcoin’s biggest shortcoming: speed.

David Chaum, who built his own digital currency more than a decade before bitcoin was introduced (disputed, see video. Section 27.56), is unveiling a new platform that he claims would allow digital cash to be traded almost as quickly as physical cash.

Mr. Chaum is introducing the platform, called Elixxir, at the Consensus conference in Singapore on Thursday. He says that Elixxir can process thousands of transactions a second—a dramatic increase over bitcoin’s current capability—and cuts down on the energy required to maintain the network.

Bitcoin, unveiled about 10 years ago by a person or people using the pseudonym Satoshi Nakamoto, is a digital currency that exists on a computer network that allows users to transact directly with each other, cutting out traditional middlemen. But the self-sustaining system, as currently constructed, requires several trade-offs, one of which is speed. The bitcoin network currently can process around seven transactions a second. By comparison, Visa Inc. can process tens of thousands in the same span.

Speed is one of the reasons bitcoin and other cryptocurrencies haven’t been widely adopted for payments. That has left bitcoin supporters touting it mainly as a place to park assets, more like digital gold than a digital dollar.

“These breakthroughs I’ve made change the whole game,” Mr. Chaum said in an interview. “We can actually meet the requirements to go to consumer scale.”

The claim is an audacious one. Developers have been trying unsuccessfully for years to develop a digital currency that is decentralized, secure and fast. Mr. Chaum says he has solved the puzzle—the so-called trilemma of digital currencies.

Mr. Chaum, 63 years old, has been working on the idea of digital currency since he was a graduate student in the early 1980s. He came close to a breakthrough in the 1990s with DigiCash, but it would be another decade before the first successful digital-currency project—bitcoin—went live.

“Truth be told, when I invented [DigiCash] there was no chance of using it,” he said. “People didn’t even know about the internet.”

Elixxir, Mr. Chaum said, changes the way data is processed and recorded and stored on a decentralized network.

On the bitcoin network, for example, individual transactions are processed in batches called blocks that are connected one after the other, a process that has come to be called blockchain. The entire transaction history is stored on a ledger, which is replicated and updated constantly by every computer on the network. Bitcoin “miners” compete with each other to be the first to batch and process transactions. One participant wins the competition, processes the block, and collects a reward of newly created bitcoins.

Elixxir flips that around. Blocks are produced first and filled up as transactions are recorded, greatly reducing the processing time.

Mr. Chaum’s system appears to compromise a bit by limiting the number of producers at any given time, making it, in theory, less decentralized than the bitcoin network.

The blocks in this new system wouldn’t contain the actual transactions, nor would they be linked to digital wallets. The result is a network that both processes and stores less information, reducing security vulnerabilities and cutting down on the energy needed to run it, Mr. Chaum said.

Unlike bitcoin, which rewards miners that have greater computing power, Elixxir would treat producers equally. The arrangement, in theory, eliminates the computer-chip arms race that makes bitcoin so energy-intensive.

Mr. Chaum said Elixxir will be released as an open-source project, like bitcoin, to allow developers to improve on the platform.

And his goals are bold. By using cryptographic techniques he invented decades ago, he believes he’s “reinvented” cryptocurrency, fixing fundamental problems plaguing the emerging technology, including speed, privacy, scalability and – one that perhaps doesn’t get quite as much attention – resistance to future disasters.

Even further, he thinks solving these problems will take blockchain “mainstream.”

One of the most influential digital money pioneers leading up to bitcoin, the famed cryptographer has been sleuthing around cryptocurrency conferences recently – dropping hints here and there – sparking theories about what exactly he’s been up to.

What he found, though, were many problems with the tech.

Not least of all that it takes upwards of an hour to send a secure payment, which is not at all competitive with PayPal, Visa or other major digital payment systems.

“Yeah, it’s not really suitable for widespread use,” Chaum told CoinDesk.

But using his more than 30 years of experience working with cryptography and payments, including developing anonymous digital money eCash before even the internet existed, he thinks he’s found a new way to solve these problems.

“I think we can shoot these problems dead,” Chaum told CoinDesk, adding:

“It’s no bullshit. We have code running in our lab.”

Claimed Breakthroughs

The cryptographer claims to have made two blockchain breakthroughs.

One is to change digital signatures, a crucial cryptographic component of cryptocurrency, used to verify whether someone owns the cryptocurrency they say they do.

According to Chaum, the way digital signatures are computed in most cryptocurrencies today is just a hassle. These signatures are just too computationally expensive as is, Chaum contends.

“There’s no way we can get speed and scalability if for every transaction a server has to do a public key operation like making a signature or checking a signature,” he said.

So, Elixxir changes it up a bit.

“We can cheat a little bit,” Chaum said.

Arguing that the system could carry out these public key operations “in advance,” Chaum explained that by doing this, Elixxir is no less than a thousand times faster than any other blockchain.

“It’s a breakthrough. No one else does anything like it,” he added.

The public key cryptography used in Elixxir has another impact as well – it futureproofs the cryptocurrency for the era of quantum computers. Currently, most cryptocurrencies architecture leaves them vulnerable to quantum computers.

And while this technology is likely still a long way from release, Chaum thinks this is such an important notion that he argues governments should be spending time on making sure digital money is quantum resistant.

One Honest Person

Then there’s the privacy of Elixxir – arguably Chaum’s forte, as he’s known as the “father of online anonymity.”

Within the Elixxir architecture, Chaum believes “true privacy” can be achieved through so-called “multi-party computations” – a term he coined decades ago and a feature that’s used for enhanced privacy in cryptocurrency projects like Zcash and Enigma.

The gist of the system is that a bunch of developers or nodes are involved in a cryptocurrency computation, but only one person needs to be honest in order for the computation to work and for the data to stay private.

Elixxir uses this idea in a novel way. The nodes on the network, called “Mixnodes,” produce a multi-party computation for every block of transactions.

Chaum compares this process to a group of people sitting around a card table. Each cuts the deck and shuffles, passing it to the next person. Say three of them are card sharks who know how to shuffle in a way that helps them to determine the location of the cards in the deck.

But if just one of these people is honest and shuffles sufficiently, the card sharks, in the end, are “completely in the dark,” Chaum said.

He Continued:

“Despite their best efforts to collude, and you know make notes of exactly what they do and everything, they are powerless against the one party that actually does what they’re supposed to.”

And in this way, Elixxir privatizes transactions.

Skepticism, Everywhere

What brought Chaum to build Elixxir was suspicion and apprehension about the state of the cryptocurrency industry today.

“In this space, there are a lot of unfounded claims being made,” he told CoinDesk.

“People bend the rules. They try to present things in a way that makes them look as good as possible,” Chaum continued, arguing many projects “gloss over” various technical issues that could break or undermine a project.

Yet, there’s a similar skepticism on the part of crypto enthusiasts investigating Chaum’s promises. A notable example is when the pseudonymous cryptocurrency blogger WhalePanda dug up the Elixxir website prior to today’s announcement, expressing concerns about what he found.

While Elixxir claims to boost privacy, WhalePanda argued that requiring participants to send their name and location in a “KYC form” runs counter to those goals.

But with the technical brief now released, the broader community will be able to determine whether the breakthroughs are actually that, or whether there are bumps in the system.

All in all, though, while the project is currently focused on payments, Chaum believes Elixxir could play an even bigger part in ensuring more people have control over their data online.

“The bigger aim is to create the expectation of the broader public for fundamental human rights – digital rights in their ability to control all these aspects of their digital lives,” he told CoinDesk, concluding:

“Cryptography is the only thing that can give power to the individual in the Information Age.”