As you all well may know, Bitcoin has a built-in inflation schedule in the form of a block reward subsidy hardcoded into the protocol itself, that was meant to incentivize early supporters of the network, block producers, to run hardware and act as a network node. This business was inherently risky, as there was no real basis of value in the token that they were getting as a reward. This is why the original business was likened to “mining” because it was a venture business. Profitability wasn’t guaranteed. The risk was not only in the ability to win bitcoins but the fact that the value of bitcoin was questionable. This regime is changing, and the need for “miners” to convert to the transaction processing business is exactly what drives our vision and strategy at TAAL.
What is the transaction processing business?
As the blockchain ecosystem grows to a global scale and more and more companies and industries look at using the Bitcoin blockchain to empower their existing businesses, there will be an increasing demand for infrastructure service providers, such as TAAL, to provide enterprise-grade services and turn-key solutions taking the mystery out of blockchain. Some of the services that enterprises will need include guaranteed processing service level agreements, fiat-based pricing, and volume-based contracts.
Service Level Agreements (“SLA’S”)
One of the fundamental things about traditional payment and financial networks is the notion of the End-Of-Day (“EOD”) transaction settlement. If Bitcoin is to become a foundational technical platform for financial settlements the technology must guarantee that transactions will be settled or finalized (minimally) by EOD. Therefore there is an inherent need for infrastructure companies such as TAAL to provide enterprise clients with Service Level Agreements that will guarantee transactions are confirmed and reflected on the blockchain in a set period of time.
Companies and entire industries are exploring blockchain applications to enhance the ways they do business. These projects are increasingly common, however, a challenge for most when it comes to utilizing the public blockchain are the network fees which are priced in units of a Satoshi and not in dollars, and therefore subject to the fluctuation of the market price of the underlying digital asset causing unpredictable and variable operating costs. Additionally, institutions and enterprises do not or cannot hold digital assets on their balance sheets due to corporate policies and accounting difficulties. TAAL offers enterprise users attractive monthly, volume-based, transaction processing contracts with terms in fiat-based rates to stabilize operating costs and eliminate interaction with digital assets.
Why hash power isn’t as important as how you manage it.
Traditionally the blockchain computing business has been a race to have the most hash power so that operational profit from the blockchain reward subsidy can be maximized. Going forward it will be more about which transaction processors can process the most transactions on the network, as the dominance of the reward subsidy will wane compared to the transactional fee portion of the block rewards. Companies that can offer the best, most efficient, and innovative services to support the growing industry will succeed rather than companies that just have the greatest raw computing power. While speculative miners who bet on the price appreciation of digital assets will always exist, the companies that reposition themselves as stable transaction processors and infrastructure providers for the industry do not need to engage in such a risky activity as a material part of their businesses.
Moreover, we don’t just want to switch to transaction processing, we have positioned TAAL to be the leader in this transformation.
How do we plan to achieve this?
At TAAL we have been planning for this transition for a while, we have worked on strategic deals and positioning to be able to set us apart from the competition. One of those deals was the recent strategic partnership with nChain, the leader in blockchain research, with a portfolio of patents that will allow us to bring innovative solutions that will set us apart.
Another initiative was TAAL’s BETA program launched in connection to our transaction processing services allowing application developers building businesses and projects on the Bitcoin SV blockchain to send their transactions directly to TAAL for processing.
What are the aspects that make a successful transaction processor?
In order to promote the growth of the ecosystem built on blockchain technology to be economically significant globally, a primary objective is ensuring the blockchain protocol allows the volume of information processed to scale to global levels of transactional volume. What this means is that every human on the planet should be able to execute 50 transactions a day. A transaction could be a coffee purchased, a contract signed, a delivery made, or a movie streamed. While it may take some time for the network to grow to this size, we firmly believe that it can, and will. This is why TAAL is building on top of the only globally scalable blockchain technology, Bitcoin SV.
In order to have a global ledger that is truly useful, it needs to be reliable for all use cases. Use cases differ significantly in terms of transaction finality requirements and different levels of transactional immutability guarantees.
One term that is hotly debated in digital asset communities is the notion of ‘zero-conf’. This has to do with the finality of a transaction which does not yet have block confirmations. As Bitcoin blocks come at an average of 1 block every 10min, many believe that transactions cannot be final until it has been confirmed in a block, and sometimes even confirmed more than once. This results in transactions recorded on the Bitcoin blockchain for large amounts sometimes not being accepted as final until 6 blocks or more have been written to the ledger, making 1 hour the accepted ‘safe’ amount of time a merchant must wait until they can consider the transaction immutable. Many attempts (by the developers of competing bitcoin platforms) to try and ‘fix’ Bitcoin in order to eliminate this perceived flaw in the system have been made, but they were ultimately unnecessary or unsuccessful as there is a very simple and elegant solution to the issue.
The solution like most was sitting in plain sight though few had the insight to notice it. It was detailed in the original Bitcoin whitepaper, under the section titled “Simplified Payment Verification” (SPV). Although it has been more than 10 years since the introduction of Bitcoin, no one has yet implemented a widely adopted and safe SPV system. This is something that TAAL is aggressively pursuing as the importance to the ecosystem of having a merchant/retail solution to the payment finality problem is required to spur growth and adoption of the platform in traditional payment sectors.
Finally, the third important element of developing the transaction processing business is the pursuit of innovative blockchain technology applications to solve problems in industries external to blockchain. This includes financial derivatives, insurance, IoT, media streaming, data storage, and content. The internet, while opening up the door to e-commerce, and the ability for most businesses to move their operations to the cloud has not addressed through its protocol the issues of data ownership, piracy, copyright, and intellectual property rights. This is something that Bitcoin SV with nChain’s Metanet technologies can provide. With effective data ownership tracking, it will finally be possible to fully monetize data, by rewarding the owners of the data, not intermediaries such as social networking sites or internet search engines. This is just part of an exciting future that Bitcoin promises, and TAAL is the leader in this emerging industry. We hope that you will join us in helping grow this ecosystem together.
Jerry D. Chan