I attended the Cryptolina Bitcoin Conference in August and got to hang out with Brian Page from BitShares. We talked about Bitcoin, cryptocurrency, and of course, about BitShares. I had seen these guys around at conferences, and like most people, I didn’t understand what they were trying to accomplish.
I was finally able to find out after speaking to Brian about a few things. I hope to clarify what this often misunderstood group within the Bitcoin community is doing.
What is Bitshares?
Bitshares is a brand of open source software based on the same blockchain technology behind Bitcoin. Unlike Bitcoin, which is based on proof of work, BitShares is based on proof of stake, meaning that miners are not utilized.
Bitshares software is used to launch Decentralized Autonomous Companies (DACs), an idea that was first introduced to the industry by its founder, Daniel Larimer. These unmanned companies issue shares in each company, produce profits and distribute those profits to shareholders. There’s no need to trust anyone to do this, as everything is hard coded into the software.
BitShares is about making profitable companies that people want to own those shares in, and creating returns for shareholders.
In my opinion, the crypto industry feels a lot like the early dot com industry. At the time, there were great ideas with huge valuations, but few of the companies ever made any money.
In our industry today, some ideas are valued very high. But they will eventually have to earn a profit and create revenues, or become worthless. We believe fully that the first rule of business is to earn a profit, to earn revenue, and to produce more than is consumed.
BitSharesX is the first DAC launched this year. BitSharesX is a decentralized asset exchange launched by a group out of Hong Kong called DAC Sun Limited, using BitShares open source code.
Other applications that will be launched on BitShares software include voting, domains, and music.
What do you think about Bitcoin?
When Bitcoin was created five years ago, Satoshi came up with the best system we had at the time. It was a great, brilliant technology. The idea was to decentralize Bitcoin as much as possible by allowing it to run on many computers. Unfortunately, it’s no longer decentralized because the hash power is controlled by just a few big mining companies. In this aspect, Bitcoin is not decentralized as it was originally intended to be and requires some amount of trust in these new powers that be. Also, having to complete these complex algorithms and mathematical problems (proof of work) requires so much money, electricity, and expensive hardware; it’s not a green technology. Moreover, its no longer necessary, because we’ve proved as an industry that proof of stake works.
If you add how much all individuals spend to pay miners, buy hardware and pay for electricity, it comes to hundreds of millions dollars a year burned – just to run the Bitcoin system. It’s no longer necessary and based on assumptions that are now five years old. Since proof of stake requires none of that, all of that money can go to the “shareholders” instead. Hundreds of millions of dollars could go directly in the pockets of those who use Bitcoin if it wasn’t based on mining. Imagine if Bitcoin earned interest! It would go to the people who own the system: the users. By doing this, you can make the Bitcoin idea profitable. That’s what we do, except we apply it to many other industries beyond just “currency.” We believe that proof of stake is the way to go, and Delegated Proof of Stake, our system, is even better.
What is Delegated Proof of Stake?
Delegated Proof of Stake means that instead of decentralizing to every single person who has a stake in the currency, it is decentralized to a certain number of delegates. In BitShares’ case it’s 101 delegates. Delegated Proof of Stake was introduced by BitShares.
The reason you want to do that is because of the costs. The costs get too high when you pay everyone in the entire system. With our system, delegated proof of stake, you have delegates that are voted into position by everyone who uses the system. Similar to Reddit, you upvote those you support. The top 101 with the most votes become the delegates and help run the system by approving blocks.
Its not unlike a representative democracy, where you have a congress, and the congress represents the people. But the one problem with the real congress in Washington, is that you can’t take them out of office very easily. But with our delegates, you can vote the entire group out, if needed. If enough people don’t like what’s going on with the delegates, they can all be voted out immediately and replaced by the next 101 in line.
In our system, once BitShares becomes the size we believe it’s gonna be, being a delegate will pay very well. Those delegates have an incentive to protect the system that’s paying them. Its similar to being a miner except there’s no waste and the entire process is profitable from day one.
What else are you guys doing?
Since bitcoin is too volatile to be used as a daily currency, we’re developing what we call bit assets, which are pegged to real world assets. This includes bit assets like bitUSD, bitYuan, bitGold (not the BitGold company), etc. This allows the user to immediately switch from dollars, to gold to even oil or shares of the exchange itself (BTSX), all within one private, secure and nearly free system. This entire system is called BitsharesX. Think of it as your personal vault where you can store these valuable bit assets, and an exchange where you can trade them. It’s an exchange that itself is more decentralized than Bitcoin. There’s nothing else like it and currently it’s just behind Ripple in terms of overall market cap at #4 in the world. Not bad for being launched two months ago.
We’ve also gotten rid of long public keys by using a new system. This is called TITAN, which stands for Transfer Invisibly To A Name. If you know someone’s username you can send them shares or bitAssets. No need for public keys, all you need is a name, like say, JohnathanSmith or perhaps an anonymous name like techguy233, and you can send and receive shares or bit assets.
Our speed is much faster than bitcoin, with transaction times well under 10 seconds, often only 5 seconds. So we’re hundreds of millions of dollars cheaper, 20 times more decentralized, and ten times faster than Bitcoin.
Add to that a stable bitUSD, which is pegged to the dollar and you have something that is truly next level. No more need for going into and out of crypto constantly as a merchant who doesn’t know if Bitcoin is going to drop like a rock tomorrow in value. You can reasonably expect that 1,000 bitUSD will be worth about $1,000 USD a week, a month or a year from now. BitUSD also pays interest, so just holding and saving in your vault is profitable.
At any point you can get immediately out of the dollar and into another currency like bitYUAN or into bitGLD, tied to the value of one ounce of gold. And this can all be done without ever leaving BitSharesX. The combination of all these solutions makes this the platform with the most potential. Show me companies that solve the biggest problems and I’ll show you the most profitable companies in the world. Profitable or unprofitable solutions. Which would you rather own? Which will the market choose? I believe it will be bit assets. And BitSharesX is just the first of many, many companies that not only we are launching, but others will be launching using our software.
“Bitcoin paved the way for what’s possible in this industry but there’s no example in technology where the first mover always remains the leader. Whether websites, or technology, software or computer hardware, there’s no example where the first big innovation is the one that remains unchallenged. My argument is that there will be something bigger than Bitcoin to come along in our industry. Whether it’s us or not, I don’t know, I have no crystal ball. But we’re addressing the issues that Bitcoin has presented that no one else seems to be solving effectively: the problem of mining by creating DPOS, the issue of profitability, and the volatility solved by bitUSD. While I don’t think bitcoin is going anywhere anytime soon, I think there will be something that comes along that will be much bigger than Bitcoin and we hope what we’re working on may be just that. It’s a ballsy thing to say but we’re gonna aim high. We want to innovate and bring this technology to the next level and I believe the potential is there with BitShares.”