What Is Bitcoin Private and Is it a Good Investment?
Originally published on: BTCMANAGER
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June 17, 2018
In the past twelve months, there have been a number of hard forks from the Bitcoin Blockchain. These forks have resulted in some altcoins bearing the Bitcoin brand name. While some forks have created altcoins with relatively high value, market penetration, and merchant adoption such as Bitcoin Cash (BCH), many have floundered and fallen into near nothingness.
What Is Bitcoin Private?
One of the more noteworthy outcomes of the bitcoin “Fork Mania” has been an altcoin called Bitcoin Private (BTCP). Moreover, it has showcased significant growth in value in the past few months, which was significant considering that the rest of the market was just beginning to pick up after a bad start to the year.
Bitcoin Private’s outperformance of other leading cryptocurrencies has led to increased interest and scrutiny as people have started to look at this new privacy-centric coin as a possible competitor to other coins in that market segment.
Bitcoin Private is an altcoin that was created after splitting off from the Bitcoin blockchain. However, BTCP is peculiar because it is the first altcoin that is a combination of two different blockchains. Bitcoin Private is a merge between Bitcoin’s and Zclassic’s blockchain. This type of fork is what is referred to as a “fork-merge.”
Bitcoin Private was co-forked to create an altcoin that utilizes the best features of both its parent blockchains.
What Is Zclassic?
Zclassic is an altcoin that was created by San Francisco-based blockchain developer Rhett Creighton. It came to be as a result of a hard fork from the privacy-centric digital currency called Zcash following ideological differences with the team behind Zcash.
Zcash uses various cryptographic tools to protect and enhance the privacy of all transactions handled through its network. While it’s addition to the crypto space was met with relative positivity due to its innovative cryptographic additions, a section of community members was unhappy with the 20 percent mining fees levied on all nodes. According to CoinGecko:
“Zcash is a cryptocurrency run by the Zero Coin Inc. In order to fund their operations, a 20 percent mining ‘Founder’s Reward’ is included. Every block, in order to maintain consensus, miners running the Zcash code send 20 percent of their newly mined rewards to an address controlled by the Zero Coin Inc.”
To preserve fairness, Creighton executed the hard fork resulting in the creation of Zclassic in November 2016. This altcoin was identical to its predecessor in all ways except the removal of the Founders reward. The developer explained in the white paper: “Because the Zcash source code is open source, Zclassic simply removes the 20 percent Founder’s Reward. This gives people the option to mine a blockchain using the same technology of Zcash, but without paying the 20 percent Founder’s Reward. The mission of Zclassic is to stay as similar to Zcash from a technology perspective, but to never take any pre-mine, founder’s-reward or any other kind of fee that goes to a small group of individuals with special permissions whether elected, appointed, or otherwise.”
However, Zclassic fell into inactivity for some months. “Unfortunately, Zclassic suffered from the same ideas which it derived its greatness: the absence of a founder’s tax led to a lack of active development.” Almost a year after its creation, in December 2017, Creighton announced he would be redirecting his efforts into continued development for the altcoin.
Additionally, it was revealed that the team behind Zclassic were interested in creating a new digital currency and would embark on implementing the co-fork that would then result in Bitcoin Private.
The Technological Specifications
While bitcoin is the digital currency that is best known due to its significant first mover advantage and its highest price value within the crypto market, it is not without its challenges.
At the forefront of these challenges are the block specifications included within the Bitcoin network. The Bitcoin Private white paper explains:
“As the Bitcoin blockchain grew through the years, notable issues began to arise including a fixed, small block size (which led to higher-than-practical fees), slow block time (ten minute average), long difficulty adjustment period (every two weeks), and the development/mass-production of advanced application-specific integrated circuit (ASIC) mining devices (for rapidly calculating SHA-256; this algorithm is a key consensus parameter) leading to further centralization.”
In order for these challenges to be addressed adequately to the benefit of the greater community, there would need to be a consensus-driven approach to changing the underlying Bitcoin protocols that define these specifications. This situation has yet to materialize and seems unlikely due to the number of divergent opinions on how to address these issues.
Also, the lack of privacy-enhancing tools within the Bitcoin network is a challenge for those seeking to use the digital currency while still preserving their financial sovereignty. Moreover, there are organizations dedicated to further de-anonymizing transactions on the Bitcoin network. The BTCP team believes this is at odds with Satoshis original vision for digital currencies:
“Financial privacy is a critical principle in Satoshi’s vision of a new digital currency world, however, many people are still stuck at crossroads with pseudo-anonymous transactions on blockchains. Furthermore, there are government and private sector organizations that leverage massive datasets and machine learning to identify the individuals associated with such a transaction. For example, BitFury is capable of de-anonymizing up to 15 percent of bitcoin transactions as of January 2018, a figure that increases daily and will markedly alter the cryptocurrency hemisphere in the years to come. This lack of privacy in relation to Bitcoin is ironic given the original intent of its creator, although, there exists a solution.”
The solution the team is alluding to is Bitcoin Private. This altcoin combines the time-tested and peer-reviewed specifications of the Bitcoin network with the innovative privacy-focused tools employed within Zcash and Zclassic: “Bitcoin Private, a supposed ‘fork-merge’ of Bitcoin and Zclassic, is intended to add privacy and spendability to the Bitcoin blockchain while remaining cognizant of the challenges, choices, and failures of prior forks. To accomplish this, Bitcoin Private will use a larger block size (two MB), a shorter block time (2.5 minutes), and an ASIC-resistant (GPU-friendly) proof of work (PoW) algorithm for mining — Equihash.”
Equihash is an algorithm that is designed to make the mining process fair for the community. This is because the algorithm renders Application-Specific Integrated Circuits (ASICs) created specifically for mining powerless. It is an important distinction to make because ASICs are expensive and are thus out of the price range for ordinary members of the community leading to a certain level of centralization in the mining network.
Furthermore, the Equihash algorithm outperforms other protocols designed to resist ASICs because of its memory hardness feature. “Unlike other ASIC-resistant PoW algorithms, Equihash is based on the ‘Birthday Problem’ and the enhanced Wagner algorithm utilized to solve it. Furthermore, Equihash features ‘memory hardness’ whereby a steep computational penalty is associated with a reduction in memory usage and speed.”
This feature increases the ASIC resistivity of Equihash due to the cost of implementing more memory into ASICs to make them competitive with GPUs or even CPUs.” Memory hardness also makes it possible for owners of nodes to quickly notice botnet-based CPU mining as there would be a significant difference in computational output. This would allow owners to expeditiously get rid of any infections of this kind further providing extra protection.
The feature that lends its name to this altcoin is derived from the use of the zk-SNARK proofs which were first utilized in the Zcash altcoin. “In 2014, a groundbreaking research paper by MIT researchers discussed ‘zero-knowledge non-interactive arguments of knowledge,’ or zk-SNARKs. Remarkably, cryptocurrencies that implement zk-SNARKs allow for shielded transactions — funds are entirely anonymous with no transaction or address balance appearing on the ledger.”
As explained by the Zcash team, the zk-SNARK tool facilitates shielded transactions which work to ultimately preserve the privacy of the individuals involved in a trade. “The acronym zk-SNARK stands for “Zero-Knowledge Succinct Non-Interactive Argument of Knowledge,” and refers to a proof construction where one can prove possession of certain information, e.g., a secret key, without revealing that information, and without any interaction between the prover and verifier.”
The co-fork happened by way of a snapshot on the blockchains of both bitcoin and Zclassic on February 2018. This was at block 511346 for BTC and 272991 for ZCL. The mainnet was launched in March. Tokens were distributed via an airdrop to those containing either token.
“When the hard fork occurred, a snapshot of all existing ZCL and BTC holdings occurred. Anyone holding ZCL or BTC in a wallet or supported exchange has been credited Bitcoin Private (BTCP) at a 1:1 ratio. For example, if you held 15.4 ZCL and 0.1 BTC, you receive 15.5 BTCP.”
Controversy Surrounding the Team
Rhett Creighton, Bitcoin Private’s co-founder, leveled allegations against the team for running the project’s fund to earn private profits. The BTCP Treasury Fund is a body set up to steer the development of the altcoin through activities like marketing, exchange listings, and general code upkeep.
While it is unclear why Creighton is no longer part of the council, he detailed allegations of fraud, mismanagement, and cover-ups in a blog post published on May 24, 2018. Through screenshots of conversation, Creighton showed that the team was not transparent with the BTCP community following a payment error made to one of the developers working on the project. He further claimed that two developers Giuseppe Stuto and Jacob Brutman offered him 100,000 BTCP to include lines of code that would allow them to steal BTCP tokens through a coin burn. Lastly, he alluded to an even bigger scandal but did not reveal the details.
Members of the BTCP Treasury Fund Governance Council have denied all allegations leveled against them by Creighton and dismissed them as his attempt to enact revenge. The council also published an update on the treasury and its utilization in an effort to prove their transparency with regards to the funds contained therein.
Price Activity and Future Plans
BTCP is trading at $14.94 at time of press and has a market capitalization of ~$305,000,000 with a ranking of 48th. It achieved its all-time high on April 21, 2018, when it was trading at $40.46. Bitcoin Private is listed on a few exchanges namely: TradeSatoshi.com, Nanex, Octaex, Exrates, BarterDEX, Sistemkoin, HitBTC, and Tradeogre.
The roadmap for the BTCP team includes plans to encourage further community use as well as merchant adoption. They are working on developing robust wallets and payment solutions as well as implementing relevant BIPS, and other essential additions, to the core code base.
Is BTCP a Good Investment?
Bitcoin Private combines two codebases to create an altcoin that leans heavily on the best parts of its parent chains. The inclusion of privacy-centric features to bitcoin’s codebase creates an altcoin that has the potential to perform well in the market.
Bitcoin Private will likely also benefit from carrying the Bitcoin brand name if it continues its marketing efforts (such as receiving an endorsement from John McAfee) and manages to attract more members and developers to its community.
Having said that, if you are looking to add BTCP to your portfolio you will need to consider that it a relatively new altcoin and is likely to need time in order for various issues to be addressed and resolved before it will manage to gain the trust of cryptocurrency investors.
If you are looking to gain exposure to anonymous coins, the likes of Monero, Zcash and PIVX will likely end up being better investments as they have strong developer communities and a headstart on BTCP in the race to become the go-to anonymous digital currency. However, if you already hold these coins and want further exposure to privacy-centric coins then adding some BTCP to your portfolio may make sense.