The old ERC20 token standard have bugs and disadvantages resulting in thousands of ERC20 tokens to be lost annually. These design mistakes has been addressed in the new ERC223 token which is fully compatible with ERC20 wallets and exchanges.
What is ERC?
ERC means Ethereum Request for Comments. It practically allows for smart contracts to be built on the Ethereum platform based on certain standards thus creating a common interface for all Ethereum tokens. Ethereum developers recommend that any Ethereum developer who wants to create a new token should follow this set of standards to ensure that their tokens are easily recognizable on both the Ethereum network and other third-party service providers such as crypto-wallets. These ERC20 tokens can be received, and sent just like any other cryptocurrency like Bitcoin, Litecoin and Ethereum.
The ERC20 standard is programmed software and accordingly contains some bugs and logic errors. Two different ways to handle tokens were taken into account in the creation. On the one hand, tokens can be sent to another address. A smart contract is paid by using the “approve” and “transferFrom” functions. Thereafter, the contract may be approved to allow the tokens to be withdrawn. Afterwards the token is filled or lifted by means of “transferFrom”.
When transferring tokens for a contract with “transferFrom” this transaction is basically valid. However, the contract does not recognize it by the user, resulting in the tokens not being loaded into your account. Normally, an emergency token function is stored in the exchange contract (decentralized). If this is not the case, the tokens can not be returned and are lost forever.
ERC20 will continue to be used
Most token based projects have used the original ERC20 token standard as it is with faults. This include even well known projects.
At present many developers are still unaware of the design mistakes and bugs in the old ERC20 tokens standard so they continue to use it in new developments.
Can the ERC223 standard solve the problems?
ERC223 is a new token standard that seeks to address the design mistakes / errors of ERC20. These problems are:
ERC20 provides no programmatic interface to handle incoming transactions in smart contracts.
ERC20 handling smart contracts typically require you to trust them with all your funds in order to use them. This is unlike native ether, which has excellent support for trustless transactions.
Nothing prevents the user to send ERC20 tokens to a smart contract, such as an exchange. However, due to the inability to handle incoming transactions these sent tokens will not alter the state of the smart contract (such as balance on the exchange), and it will be impossible to retrieve them from the smart contract. Effectively, these tokens get burned resulting in multi millions of USD losses in ERC20 tokens. Because of the deflationary nature of cryptocurrencies this losses will continue to accumulate.
The main improvement of ERC223
On top of offering the same level convenience as ERC20 tokens, it also offers its holders protection against losing tokens by introducing a revert option or altogether blocking the transfer of tokens to random contracts. Tokens can no longer be sent to non supporting contracts with the ERC223 standard.
ERC223 allows to deposit tokens into a contract with a single transaction (function) which reduces the use of resources. This again reduce the cost and running time of the transaction to about half compared to that of the old ERC20 standard.
ERC223 is created to be compatible with existing blockchain infrastructure, such as wallets like Mist, Parity, MyEtherWallet and MetaMask, and blockchain explorers such as Etherscan and Ethplorer.
Most people likely agree that Mahatma Gandhi knew a thing or two about perseverance. Gandhi offered this to say which can certainly relate to fighting for and standing up for a monumental change you believe in:
“First they ignore you, then they laugh at you, then they fight you, then you win.”
It is plausible that Bitcoin will have a much greater impact on humanity over time than that of the internet, but it is difficult to argue that the internet ever faced as many attacks as Bitcoin has and continues to face. The attacks started out rather superficial and well, obvious, but this analysis surmises that they eventually became indirect, obtuse, and something one might see in an episode of the excellent TV series “Blacklist”. Entrenched, status quo hugging opponents of anything that can increase economic and political freedom moved past the uneducated and flimsy attacks on Bitcoin to intentionally developing alternatives that are in part designed to slow or impede the adoption of Bitcoin.
The people and organizations behind private and permissioned blockchains, central bank backed cryptocurrencies, and AltCoins may very well truly stand behind their offerings and this analysis is open to that reality. However, one can’t help but explore that one of the primary motives of these people and organizations is to simply present something, anything really, that will create distractions, fear of Bitcoin, and doubts about Bitcoin with the intent of slowing or even blocking the adoption of Bitcoin.
Private Blockchains to the Rescue
Let’s start with private and permissioned blockchains. Those supporting private and permissioned blockchains are essentially running with these marketing points:
Bitcoin has tremendous features but you don’t need Bitcoin
Come join us with our private and permissioned blockchain because it’s better and did we say it is “private” and “proprietary”?
We can get other firms on board to help us secure our private and permissioned blockchain so don’t worry about scaling or security or any of that stuff
You don’t need Bitcoin but you really need the underlying technology supporting Bitcoin so just join our consortium and we will tell you what to do and how to do it
It’s not that crazy to think that the world’s major financial institutions would throw a few hundred million dollars of “VC money” into ventures that are promoting private and permissioned blockchains for the financial markets. These companies rely on the Federal Reserve’s printing press to bail them out in times of extreme stress, lend them money at 0% or close to 0%, and use the Federal Reserve Note to fleece the global economy and its participants. What’s a few hundred million if it can buy you a few years while people get lost and bogged down in the private, permissioned blockchains versus Bitcoin debate? That’s pocket change to the Primary Dealers of the Federal Reserve System.
Speaking of private, permissioned blockchains – can anyone actually point one out that is operational and functional? It remains to be seen if these initiatives ever move beyond vaporware. More importantly, it perhaps merits close watching to see if the entities involved can trust each other and provide more security than that is provided by the open and public Bitcoin blockchain. We are already seeing an escalating patent war where various financial firms are attempting to claim intellectual property on various “blockchain” features and technologies.
Let’s also not forget about immutability – one of the most crucial aspects of Bitcoin. Some may complain about the work and investments required for proof of work and immutability but the whole point is to record and store transactions permanently. There are numerous cases of banks and financial institutions pleading guilty to various crimes and forms of fraud. One can imagine these banks controlling a private blockchain utilizing all of their creativity and deception so that they can go back and alter records to cover up more fraud and criminal activity. Immutability is a tremendous asset and not a liability. However, it is a major threat if your business model relies on fraud.
At least a few Central Banks joined the financial news cycle by touting an upcoming government cryptocurrency or revealing plans to develop their own cryptocurrency. “FedCoin” is on its way if we are to believe everything the media tells us. For any Central Bank or government to deploy their own cryptocurrency a potential question to ask perhaps is the following: Who is going to mine the FedCoin and who is going to support the mining infrastructure for the FedCoin? Some may respond with “not to worry the Fed will simply print Federal Reserve Notes and pay for the mining itself”. That argument begs the question of how on Earth this highly centralized FedCoin could possibly protect itself from constant hacks and theft if it literally had all of the mining centralized under the Fed’s watch. The other major issue is if FedCoin strived for decentralization who would deploy their own hard earned money and assets to build and support mining infrastructure for a cryptocurrency owned and controlled by the Fed or another Central Bank. That is akin to paying a retainer fee to your bank and credit card to show your support for their fleecing of your assets via fees, usury, and inflation. It won’t happen.
“FedCoin” or any government backed cryptocurrency will also have to answer the bell on inflation versus deflation and how and who controls the supply of the coins. Will a “FedCoin” cap the number of coins that will ever exist? If they stated a cap will anyone believe them? How will Central Banks and governments even function if they have to adhere to hard restrictions on the creation of new monetary units?
Crypto Pump and Dump
AltCoins are another very interesting part of the saga surrounding cryptocurrencies in general. The premise that dozens if not hundreds or thousands of AltCoins could in theory exist to support various use cases or niches seems fairly reasonable but there is also the nagging issue of scale and the network effects. If very few people use an AltCoin and its trading lacks liquidity it will be very hard for that AltCoin to ultimately succeed. The reality is more likely that most of the current AltCoins will fail due to lack of use and liquidity and others will come and go over time as well. That said, there are AltCoins that appear to have genuine intent and motivations supporting them.
The bigger challenge with AltCoins is when there is some type of a profit motivation behind the development of the AltCoin by a closed group of early participants. Anyone or any group is free to develop what they choose and the market is also free to judge the offering. Some of the AltCoins making it onto the scene really smell like “pump and dump” schemes and almost like the IPO fever of the internet bubble era when hundreds of companies scrambled to become a Dot Com so they could rush through an IPO. If it looks too good to be true . . . . . . . .
Any AltCoin that is cryptic about how much pre-mining took place or how much supply of the coins currently exists or will exist or how that is controlled deserves extra vigilant scrutiny. What are they hiding? One of Bitcoin’s best features is that despite the existence of large holders of Bitcoin present for years now, there is not a legion of private corporations that claim to “own” Bitcoin or own or control the “Bitcoin blockchain”. Bitcoin is an open architecture. There are AltCoins that essentially launch an IPO after a select group of insiders controls a chunk of the coins while simultaneously not being entirely clear about the protocols or potential supply of coins.
The same argument regarding immutability and proof of work noted above regarding private and permissioned blockchains applies to Altcoins as well. We already have examples of Altcoins making major structural changes after certain initiatives failed to gain traction or perform as desired or expected. This makes it extremely difficult to gain trust and dedication to investment in a surrounding ecosystem and infrastructure. Comparing the development around the Bitcoin protocol to that of Altcoins demonstrates how ecosystems are much more likely to grow and mature around an open and trustworthy architecture.
Crazy Theory or The Obvious Truth?
Although some may scoff at this analysis as a “conspiracy theory” the author finds it quite plausible and even highly likely. The heavily entrenched incumbents and associated “governments” controlling the existing financial system continue to show the world they will ruthlessly commit fraud and engage in criminal behavior while also using currencies as weapons that can impoverish victim nations. It seems quite feasible that if they discovered stopping Bitcoin in its tracks was not possible, they would simply try other strategies.
History outlines quite clearly that humans will create any scheme or business plan possible to exploit transformational changes as we are seeing right now with Altcoins. Entrenched incumbents will deploy any strategy possible to delay or impede the adoption of revolutionary technological changes, and this is what we are seeing with private and permissioned blockchains. “Extend and Pretend” and “Delay and Pray” are two of the strategies powerful incumbents frequently deploy when challenged. Take that into consideration when evaluating if the world has even seen before something as powerful as Bitcoin that threatens so many incumbents while also offering so much opportunity for others to exploit either ethically or deceitfully. Also consider that the people and organizations referred to in this analysis could also seek to impede Bitcoin’s progress so that they themselves could accumulate more Bitcoin as a hedge. If you can’t beat Bitcoin or stop it perhaps your only option is to delay its eventual domination.