Incessant bickering over how best to scale the Bitcoin network is why we have more than one version of Bitcoin today, with many more in the pipeline as the previous network deviations have evidently failed to solve anything. The Bitcoin ‘Civil War’ shows no sign of abating, and the hard-fork has become every splinter faction’s weapon of choice since the August 1st, 2017 hard fork created Bitcoin Cash. Researchers have theorized the existence of a type of fork that may bring peace to the Blockchain. A fork to rule them all?
The Velvet Fork, as this protocol upgrade mechanism has been dubbed, was put forward by Imperial College of London researchers, A. Zamyatin and W. J. Knottenbelt and SBA Research’s N. Stifter, A. Judmayer, P. Schindler, and E. Weippl in a paper titled “A Wild Velvet Fork Appears! Inclusive Blockchain Protocol Changes in Practice.”
So how can the Velvet Fork potentially end squabbling? By allowing one to effect rule changes on-chain without affecting the existing protocols or needing consensus. We’re talking about a fork that theoretically allows you to run a Bitcoin transaction, on your own terms, without necessarily diverging the network and creating a new type of coin. Rule changes enacted through a velvet fork are backward compatible (valid on new and legacy blocks) and won’t require any consensus from miners.
Though the Velvet Fork is mostly theoretical at this point, Zamyatin and colleagues believe some variants of Velvet Forks are already in use today. P2Pool for example, which is a protocol for implementing decentralized mining pools. Unlike “conventional mining pools, attestation of each miner’s contribution to solving the next block’s PoW puzzle and the distribution of rewards are accomplished without a trusted operator”.
Other wild Velvet Forks can be found in merged mining, overlay protocols, coloured coins, and sub-chains “weak blocks.”
It’s not all roses however, as ” velvet forks can be utilized to introduce consensus rule changes in a backward compatible way. However, non-upgraded miners may be unaware of these changes and the potential alterations to the incentives of upgraded velvet miners that they entail. As such, blocks produced in accordance with the old rules may no longer have the same (economic) utility for velvet miners, as blocks generated under [the new rules], i.e. velvet miners may be biased towards accepting upgraded over legacy blocks.”
Other theoretic threats posed by the velvet fork may include double spending, a common security implication when it comes to forks but “the necessary thresholds for transaction security assumptions can be shifted in blockchains experiencing a velvet fork, as some blocks may be attributed a higher utility than others by a subset of miners in the system, and must be re-evaluated.”
Then there’s the threat of Selfish Mining, which “allows adversaries to increase their expected revenue by deviating from the correct protocol rules. Thereby, selfish miners intentionally withhold blocks and attempt to create a longer secret chain. Determined by the respective strategy, the selfish miner will only publish a select number of blocks from her secret chain, overriding progress in the public chain and be forcing honest miners into reorganization.”
Velvet Forks could also be used to enact Insidious Soft Forks, where unpopular protocol upgrades could initially be velvet forked into the network then later enforced as support grows.
“Velvet forks present a possible new upgrade path to blockchain consensus rules that could help avoid long-lasting scaling debates and discord in the community. New protocol extensions could be actively deployed without necessitating at least majority agreement by all consensus participants.” States the paper written by Zamyatin and Co. Blockchain wunderkind, and Ethereum cofounder, Vitalik Buterin seems to echo the sentiment of the researchers.
“In my lingo, this would be ‘agreeing on a different state transition function’; I would say it’s definitely a useful kind of fork.” He commented on the research paper’s subreddit on March 11th. Further research and development will need to occur before we see velvet forks being deployed on blockchains or bad actors could potentially use it maliciously.