Bitcoin's Biggest Startups Are Backing a New Effort to Keep Fees Low
A project called Bitcoin Optech is launching to ensure companies like Coinbase and Square know the best technologies out there to reduce user fees.
2017 was a wake-up call for bitcoin supporters to say the least.
With so many people using the software amid a price boom, the fees for sending transactions swelled higher than ever before, even rising to as much as an average of $26 for a single transaction. It was a road with too many cars, leading to a veritable traffic jam.
Sure, the situation wasn't long to last, as fees fell back to manageable levels, but the worry is this spike could always happen again – if, or dare we say it, when, bitcoin "goes mainstream."
But fees don't have to be as high next time there's a spike in the cryptocurrency's use, at least that's the argument being put forward by those launching a new effort called Bitcoin Optech.
Led by bitcoin developer and Bitcoin Core contributor John Newbery, the effort is an attempt to help the companies that rely on the bitcoin software figure out what scaling technologies they're missing, including those that will push fees lower.
Newbery told CoinDesk:
That gave him the idea that developers with knowledge of bitcoin's underlying tech could be more aggressive in helping companies through such upgrades. For instance, the bug fix Segregated Witness (SegWit) activated last August, but bitcoin businesses were slow to adopt the change, even though it can cut fees by half.
Since it can help to improve the experience for all bitcoin users, many notable entities are interested in the effort, with investors Xapo CEO Wences Casares, entrepreneur John Pfeffer and bitcoin development group Chaincode Labs giving them the money to get the project off the ground.
The non-profit effort also boasts six member companies so far, including Coinbase, Square and BitGo, all who've expressed what they believe is a need for an effort like Bitcoin Optech.
"By collaborating with leading engineers in this space, we'll be able to achieve more than we could have by tackling these problems alone," Coinbase lead bitcoin engineer Brock Miller said in a statement. Square strategic development lead Mike Brock said the company is "proud" to be working with Optech.
So far, Bitcoin Optech has made contact with 15 to 20 bitcoin companies, saying they're surprised by how excited they are to adopt various scaling technologies. "They're saying something like Optech has been missing. and could be beneficial. It's even bringing people together," Newbery said.
In this way, it's also helping heal relations between the various groups that have sprung up to support the decentralized bitcoin software. In the worst parts of bitcoin's history, a rift has emerged between developers of the Bitcoin Core protocol and the industry's companies, with the two different groups advocating for very different technical upgrades.
"The more engagement there is between industry and open source, the better," Optech's announcement blog post explains.
To that end, they've identified a few key technologies that they can help business with right now.
is a complicated problem dealing with the most efficient way of choosing which "coins" to send when a bitcoin users sends a transaction. Adding to the complexity, Bitcoin OpTech project manager Steve Lee stressed that the best selection technique often varies from wallet to wallet.
While "fee estimation" is another technical problem that's hard to get right. Fee estimation tools in bitcoin wallets today often tell users they should pay fees much higher than they actually need to be paying.
Speaking about these very strategies, the Bitcoin Optech team, joined by Bitcoin Core contributor Andrew Chow, held their first workshop in San Francisco. Sponsored by Square, the event saw the developers go over some of these scaling technologies and what's in it for the companies that adopt them.
Lee called this workshop a "good proof point" for what they're doing in that more companies showed up than they could have hoped for. Six of the eight San Francisco companies they broached the topic to showed up at the workshop, demonstrating, in his mind, how hungry engineers at these companies are to learn about how to solve these types of problems.
"It's hard to get their attention," he said.
The Bitcoin Optech team stressed, though, that they don't want to be any sort of "central authority" telling bitcoin companies what they should and shouldn't do.
Lee said they're looking to be more of a "catalyst" for change.
By hosting more workshops similar to the above around the world, hopefully to give engineers the tools they need to make these scaling technologies on their own.
Meanwhile, they've been sending out weekly newsletters describing the most recent additions to Bitcoin Core, the most popular bitcoin client. And they have other ideas too, like creating a Slack group where member companies can keep in touch.
Another example of this is they're looking to start what Lee calls an open-source "cookbook," detailing various scaling changes bitcoin companies can adopt.
This documentation would be available to anyone, not just dues-paying members.
All that said, there's a focus to Bitcoin Optech's mission: technologies that businesses can add today
Maybe someday they'll help companies other much-hyped technologies, such as lightning or Schnorr, since many bitcoin companies need to update their software in order to support these improvements.
But Newbery said that might be a while. They're waiting until "they're more advanced in their proposals." Until then, they'll be focused on well-understood strategies that bitcoin companies have yet to adopt.
Bitcoins and calculator image via Shutterstock
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