There is some amazing stuff taking place that often gets overlooked.
Most are aware there is another Hard Fork (#26) coming up in a little over a month. Like most, this includes a great deal of changes to operations at that base layer that will enhance the functionality of Hive.
For the majority of us, a lot of this is just techie mumbo jumbo that doesn't mean a lot. While this is the case, it is important to highlight the knowledge of the core development team along with what they are putting together.
When it comes to technical capabilities, there are not too many chains that will outshine Hive.
This is vital when building a foundation. Obviously, anything that is constructed on top of Hive is enhanced the more robust and powerful the base layer.
In this article we will discuss one of the additions and, more importantly, what it means.
One Block Irreversibility
Here we have a prime example where the technical stuff can override the use case in the minds of many. Nevertheless, we are seeing something very important developing.
In the most recent post, Blocktrades gave this updated:
Further optimization of OBI (one-block irreversibility) protocol
The optimizations to the OBI protocol are mostly done, but the dev for this work is currently tied up with another Hive-related coding task, so it still needs to be fully tested.
We can only presume this means it is basically ready for inclusion in the fork, once some testing is done.
So what does this really mean?
Here is a full explanation of what One Block Irreversibility.
For a quick overview, it is basically condensing the time that is required to make a block irreversible. That occurs when 75% (15 or 16) of the block producers produce blocks. Since Hive has 3 second block times, this means it is a 45 second lapse before a block reaches this state.
This, of course, is much better than chains like Bitcoin and Ethereum. Yet, it is about to get a lot better.
In a normally well-connected Hive p2p network, this should result in most blocks becoming irreversible on a node within a second or less after they are produced. The exact time required depends on the message latency between nodes and number of network hops between the node and the block producers. (emphasis mine)
Essentially we are looking at blocks becoming irreversible within a few hundred nanoseconds of being produced. Again, to contrast, since Bitcoin's time is so long, people are working on a layer 2 solution, i.e. Lightning Network to be competitive.
With Hive, this is all base layer. It is also moving it to the top of the list.
As far as I’m aware, the One-block Irreversibility protocol will put Hive at the forefront in terms of transaction confirmation time.
Financial Settlements
Over the last 6 months or so, we delved into the plumbing of the financial system. While many notice the front end activities, such as swiping a credit card, they really do not consider what happens on the back end.
With this move, Hive is truly inserting itself at the "plumbing" level.
Before getting into that, let us highlight what was said about the front end:
Hive already had one of the fastest average blockchain confirmation times at 45 seconds, so you may be wondering while I think it’s so important to speed it up further. The biggest benefit comes for 2nd layer apps:
First, 2nd layer apps can now be more interactive with their users, since they have faster guarantees of irreversibility.
This is rather obvious. Who wants to stand at a counter waiting 45 seconds for a transactions to confirm? This is why the credit card networks are so powerful. They approve the transactions in a few seconds.
Naturally, for now, Hive's payment system ($HIVE and HBD), is mostly web based. While waiting 45 seconds for one's subscription to renew is not the end of the world, it might be when it comes to gaming. If one is looking to buy a weapon, the benefit of block irreversibility under a second is obvious.
Things get really interesting when we start to dig deeper into this.
Let us use the example of a check. In the banking system, there are two layers to deal with. Here we will presume one is writing a check for $50K for an automobile.
The process looks something like this:
- Buyer writes out check
- Dealership deposits check
- $50K removed from buyer's account
- $50K deposited in dealership's account
This is a process most of us can envision. The problem is how long does this take? If we are dealing with checks from outside the area, the money might not be available for days. Why is this?
It all comes down to settlement. The banking system can take anywhere from a couple days to a week to fully settle the transaction.
We have another layer to consider. Since the banks all have reserve requirements, another settlement is required between the banks to adjust their reserve levels.
All of this is due to friction in the system.
Hive As One Of The Leading Settlement Systems
One of the key aspects to our monetary system is communications. In this era, that means computer networks. Blockchain epitomizes this. It is also one of the reasons why, when the US wants to sanction a country, one of the first things they threaten is to kick them off the SWIFT network. Why would they do this since that is nothing more than a messenger service? The answer is because communications is vital to money.
Having Hive as one of the fastest settlement systems is a real bonus. Consider the fact that trillions of dollars is moved around the world daily. All of banking (along with the associated networks that were built) are designed to simply arrive at consensus. Effectively, we have global ledgers run by a few different outfits that tell us who holds what and where it came from.
We are now looking at blockchains opening that up to a lot more players. Instead of a few major banks controlling the ledger, it is permissionless and immutable. We also see how it is decentralized.
It is rather obvious how this blockchain will lap the banking system. When you take settlement times from a few days to under a second, that is a massive increase in efficiency. Consider the global impact of having money available in a fraction of a second.
We also have to acknowledge how this stands out compared to other chains.
Look at something like high frequency trading. To disrupt this, would something like Bitcoin work? Obviously not. The idea behind NFT is to have computers operating milliseconds ahead of others. This means having a settlement system that is under a second is imperative. At present, it uses the same old banking system, settling at day's end.
Perhaps a more relevant example is paying for a rental car. Do you want to stand at the counter for an hour while the Bitcoin transactions is confirmed? The answer is no. This is why people are looking at joining Bitcoin with Visa cards. Here we have the Visa network being used for its confirmation time. The Bitcoin settlement takes place on the back end.
For this service, Visa takes a cut.
With Hive and OBI, this is all eliminated. Within a few seconds from hitting send, the transaction will be fully completed.
All of this positions Hive for core level money transmittal. With swaps, it is easy to see how one could flip into $HBD, use Hive to send it, then swap back to the other token (or whatever) on the other end.
Of course, since HBD is a stablecoin, there might not be a need to swap it on the other end.
The possibilities really open up with the addition of One Block Irreversibility. One of the keys is this is global system which, overall, trails those within developed countries.
Hive is about to offer the potential to upgrade the entire global settlement system to a level not see before.
It is rather impressive when you think about it.
One final point: We discussed speed of settlement but omitted the cost. The fact there are no direct transaction fees on Hive also cannot be matched.
What advantage does that provide to the global financial system?
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