During a recent interview on Let’s Talk Bitcoin, BitPay CEO Stephen Pair discussed his company’s thoughts on the Bitcoin scaling dilemma in deep detail. During the conversation, Pair made it clear that the Bitcoin payment processor understands every Bitcoin transaction cannot be made on chain, claimed that BitPay is working on off-chain payment systems, and discussed the potential concerns bitcoin miners may have with the activation of Segregated Witness (SegWit).
You Can’t Do Everything On Chain
According to Pair, the BitPay team realized that scaling Bitcoin entirely on chain would not work as far back as 2011.
An on-chain bitcoin transaction is a transaction that is confirmed by miners and placed on the blockchain for eternity. Off-chain bitcoin transactions are transactions involving the bitcoin token that are made via payment rails other than the Bitcoin blockchain. An example of an off-chain transaction would be a payment between two Xapo users, but it should be noted that improvements are in the works to make these sorts of payment options require less trust in a third party.
“You just can’t put everything single transaction on chain, especially if you want to do things like streaming payments [or] if you want to do things like paywalls for news sites,” said Pair. “If you recognize that what we’ll do in the future around streaming payments, around paywalls, and all kinds of other payments — all the cool things we could do, then you realize that the volume of payments on the planet is going to expand dramatically.”
“The question [is] not whether you do everything on-chain or not,” Pair continued. “[The question] becomes: How do you do it off-chain?”
BitPay’s Priorities Shift to Off-chain Payment Solutions
According to Pair, scaling Bitcoin has become the main area of focus for BitPay lately. “What’s going on right now with the threat of a hard fork and the fees rising dramatically - it’s shifted [the question of how to scale Bitcoin] to the front of the priority queue at BitPay,” he said.
Pair claimed there will be “some really exciting things” related to off-chain payments that come out of BitPay in the future. “Just because they’re off chain doesn’t mean they lose some of their essential properties like privacy and such,” he added.
In Pair’s view, off-chain payments are, in some ways, superior to on-chain payments. The BitPay CEO pointed to enhanced privacy in off-chain payments as supporting evidence for this claim.
Pair added that BitPay has some ideas unrelated to the Lightning Network that may see some testing in the future. According to Pair, these off-chain solutions do not require any changes to the base Bitcoin protocol.
A Message to Bitcoin Miners About Segregated Witness
One final thought related to off-chain payments shared by Pair during his Let’s Talk Bitcoin interview had to do with bitcoin miners. There have been hints that some miners are not too keen on the adoption of SegWit because it would enhance the usability of the Lightning Network and potentially take profits away from the miners, who make their money from on-chain transactions (in addition to the block subsidy).
“If the concern among miners is that: If we activate SegWit and you activate all this off-chain stuff, what I’d tell miners is that’s going to happen,” Pair said. “SegWit doesn’t have to get activated; it’s happening. We’re building software. That’s the number one thing we’re working on right now at BitPay is software that allows our payments to happen off chain, and we don’t need any changes to the protocol to make that happen.”
Pair clarified that BitPay would definitely like to work with the improvements offered by SegWit, and they also plan to integrate the Lightning Network once that technology is more mature.
“Even if Bitcoin stayed exactly as it is, I can tell you that we can do a lot of very cool things off chain with no changes to the protocol today and that the marketplace will very readily accept,” Pair concluded.
As a late addition to this piece, it should be noted that Pair is listed as a co-author of a new scaling proposal involving extension blocks.
Image adapted from Pixabay.