Bitcoin scaling solutions are not all that difficult to come by these days. Segregated Witness, Bitcoin Unlimited, BIP 100, and Extensions Blocks are just a few of the possible solutions. Plus, there is also the user-activated soft fork to take into account. However, it appears a new solution is on the horizon which claims to have the potential of scaling bitcoin in “mere weeks”. Time to take a look at what Moonbeam has to offer.
What Is Moonbeam And How Does it Work?
It has to be said, the Moonbeam solution offers a rather elegant solution to make bitcoin scale. Rather than focus on a direct block size increases, this project uses Bitcoin payment channels to provide off-chain transactions. Moreover, this solution can operate between different platforms without friction. In a way, it removes the need for all of the aforementioned scaling solutions as well as bigger blocks. On paper, there is nothing not to like about this concept, assuming it can gain some traction.
Moving certain bitcoin transactions off the main blockchain will effectively create room for other bitcoin transfers. Moreover, MoonBeam is – in theory – capable of providing virtually instant off-chain payments for high-volume platforms, such as bitcoin exchanges, conversion platforms, and companies dealing with bitcoin debit cards. It is always refreshing to see such a solution come from someone else other than Bitcoin developers, as more solutions to make bitcoin grow is never a bad thing.
Regular bitcoin transactions revolve around a user sending a payment with a unique transaction ID. These transactions always include a fee for the miners so they will include it in the next network block. Moonbeam, on the other hand, sends bitcoin payments in the form of batches, while still settling them as one individual transaction. The miner fee associated with the transfer is paid only once the settlement transfer is accepted by the miners. This results in a practical solution that offers benefits for everyone involved in making transactions happen on the network.
Note from the author: SegWit does things differently, as it removes transaction signatures and carries those separately. While this allows for more transactions in the same block, it is very different from creating transaction “batches”.
It is important to note Moonbeam is not designed to compete with the Lightning Network, should that ever come to fruition. The two concepts can peacefully coexist, even though they both offer a similar solution. Making payments faster at a lower cost is more than welcome, yet Moonbeam does not require fundamental changes to bitcoin, unlike the Lightning Network. As a short-term solution, this project seems to be well worth considering, as it can effectively be deployed within minutes from now.
One major change the Moonbeam protocol would bring to bitcoin is how it uses a different wallet structure. Regular bitcoin addresses start with “1” – or “3′ if its multisig – whereas Moonbeam addresses start with “m”. However, these addresses will also be compatible with traditional wallet software not supporting this implementation. A part of the address – after the “+” sign – can be pasted into the recipient field of a regular bitcoin transaction. It’s nice to see this protocol being backward compatible and provide service providers with an option to either use Moonbeam or not.
Last but not least, the Moonbeam code is all but ready to go right now. The developers have deployed a reference implementation on the testnet, yet it will take a bit more work to create a production-ready version for the mainnet. This process should only take a few weeks, though. It will be interesting to see if service providers and bitcoin users will give Moonbeam a try once it goes live on the mainnet. There are clear advantages to this project, that much is certain.
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