Stanford University professor David Mazières has published a paper describing a new virtual currency system that could function without experiencing some of the potential issues associated with using Bitcoin. The Bitcoin system relies on software which is run by thousands of computers connected by the internet simultaneously to form a network of “miners” using a set of cryptographic principles and rules to verify transactions in a decentralized manner. While this groundbreaking system offers users a high degree of reliability, Mazières says it also makes the process of clearing transactions somewhat slower and less secure than is optimal for a currency that is beginning to be integrated into the global financial system.
Mazières has been hired by the cryptocurrency nonprofit Stellar to develop his proposed protocol, known as SCP. Whereas Bitcoin mining involves solving a series of encryptions to verify a transaction, SCP instead uses a network of trusted participants to independently approve each transaction. Once a majority of the network agrees that a transaction is valid, the payment will be posted. Mazières argues that this method will prove to be faster than the mining system used in Bitcoin transactions, which currently takes about 10 minutes for approval.
The SCP also hopes to improve the security of virtual currency payment. Because miners need to be able to “solve” the encryptions, there is a limit to the complexity that these encryptions can attain while preserving the function of the Bitcoin system as a whole. SCP avoids this potential problem by doing away with this process altogether. No major instances of fraud or malicious activity have yet been reported in the Bitcoin system, but some academic reports have raised questions as to whether this will remain true in the long-term.
The security proposition of Bitcoin is that the people who invested in mining infrastructure can be trusted, but that may not be true… Here I can choose for myself who to trust,
said Dan Boneh, a fellow Stanford professor who reviewed SCP but is not involved in the project itself. Bitcoin is currently the only virtual currency in widespread use but the emergence of a new competitor could mean that this will soon change, giving consumers multiple cryptocurrencies to choose from when paying for goods and services.
Read more here – “A New Competitor for Bitcoin Aims to be Faster and Safer,” (Tom Simonite, MIT Technology Review).