New Ethereum Project ‘Off-Chain Network’ Aims to Power Smart Contracts

Rage Review : Since it may be too expensive to process most transactions directly on the blockchain, the idea of ​​an off-chain network (or state channel) was born, which means that transactions can be executed on an independent network layer. Hash time lock contract encryption technology should be trustless, use as little on-chain storage as possible, and be "parallelizable", which means that users can pay for multiple goods at the same time through multiple channels, rather than just one channel.

Translation: Nicole

Newly released research suggests that the top-layer network, often described as a future scaled-up version of Bitcoin and Ethereum, could actually increase blockchain transaction volume.

However, while these proposals can apply to all blockchains, they are most relevant to Ethereum, the second largest public blockchain. As a "world computer", it is not surprising that it needs to expand - with such a determination, it needs not only expanded services, but also richer smart contracts.

Now there's a new project that could help solve that problem.

At EDCON 2017 this week, Ledger Labs technical director Jeff Coleman proposed an abstract state channel approach that he believes will help develop use cases beyond payments.

Jeff Coleman

He introduced his idea:

"Today, I want to talk about something a little more advanced."

Coleman, a long-time researcher on the project, continued:

“Initially, a lot of the things that people were talking about through the national corridor were focused on financial applications. I was more interested in how to develop this idea and how to solve some of the more complex things in a practical way.”

Since off-chain payment channels are a multifaceted technology, Coleman’s idea is just one part of a wave of research aimed at enhancing the top layer of blockchain networks. However, his idea comes at a time when many similar ideas are beginning to be announced.

Coleman's talk was the second time this week that researchers have proposed revisions to the technology.

Channel Wish List

The idea behind off-chain networks (or "state channels") is that in the future, it may be too expensive to process most transactions directly on the blockchain. Instead, these transactions will be performed on a separate network layer that is connected to a blockchain through a cryptographic technique called 'hashed timelock contracts'.

This design initially gained traction after the release of the Bitcoin Lightning Network whitepaper in 2015, and the authors of the Raiden Network later ported the idea to Ethereum.

Coleman said that it is possible to build state channels for specific applications on ethereum today, but it is a bit more difficult. Coleman wants to avoid this problem by defining an implementation that can be applied to all applications, not just a specific type.

In his talk, Coleman listed at least six criteria that ethereum channels should have. For example, the technology should be trustless, use as little on-chain storage as possible, and be “parallelizable,” meaning that users can pay for multiple goods at the same time through multiple channels, rather than just one.

Additionally, they should not reduce privacy and should limit so-called “reverse psychology” by ensuring that malicious actors cannot create rules that cause others to lose money for no reason.

Too large a range

Coleman's ambitious proposal aims to help address all of these issues.

“My goal is to take advantage of all the best technology currently being demonstrated,” he said, joking about the project’s name, “counterfactual instantiation.”

Still, he makes his dialogue stand up, describing the project in simple terms.

Coleman said:

“We’re going to use incentives to make both parties think that the contract already exists on the blockchain. That’s the basic idea.”

By using these incentives, users can pretend that their smart contracts have been added to the blockchain even when they are not. Parties can put contracts on the blockchain if they want, but hopefully they won’t unless there are security concerns or they are worried about the other party cheating.

But they are discouraged from doing so because of the fees and penalties they face, which echoes another topic raised by Ethereum creator Vitalik Buterin.

Coleman went on to joke that it was a psychological phenomenon, with off-blockchain contracts existing “in our collective imagination” — but the move would allow smart contracts to run even without actually being added to a blockchain.

Future consensus

While some may be skeptical of these statements, there is consensus that such “counterexamples” can advance the implementation of smart contracts.

Coleman told CoinDesk that the technology has been discussed at length and that several groups are working on implementing state channels on ethereum, with all agreeing that the concept can be executed securely.

He explained that the technology should work for most applications that require a national corridor, with payments being able to cross over to other underfunded corridors.

For example, suppose a user has two channels, one for a video streaming service and one for "real-time renegotiation of a financial instrument." If the video channel runs out of funds, the state channel can replenish itself by dipping into the financial instrument channel.

However, it will take some time to reach this point.

Coleman said,

"More work is still needed to make this technology more accessible in applications."

But he noted that a "partial implementation" for educational purposes is already underway.