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Bitcoin is dead. Long live Bitcoin. A counterintuitive feature of the groundbreaking cryptocurrency—and there are many—is that both statements may simultaneously be true. The Bitcoin economy is robust and growing, with access to Bitcoin-denominated services expanding and more and more startups and established businesses seeking to capitalize on its popularity. At the same time, the Bitcoin network—literally, the interconnected web of computers that records transactions in Bitcoin’s distributed ledger known as the “blockchain”—is showing the strain of the currency’s success, while disagreements threaten to stymie efforts to expand Bitcoin usage further.
But even as political disputes threaten disruption of the core Bitcoin blockchain, developers are beginning to introduce a new wave of innovation that has the potential to replace political stalemate with market competition. Alternative blockchains, or “alt-chains,” act as replacements for the Bitcoin network and blockchain that facilitate Bitcoin-based transactions off the core blockchain—in the same way that stocks can be traded on a myriad of competing electric trading networks, apart from primary exchanges like NYSE and NASDAQ. Alt-chains and related technologies may be central to preserving Bitcoin’s key speed and cost advantages over traditional financial networks in the years ahead.
As in many innovative fields, some of the greatest barriers to alt-chain success are legal and regulatory uncertainty, far more than technological issues. In a recent Federalist Society White Paper, David Rivkin and Andrew Grossman attempt to resolve some of this uncertainty by cataloguing the diversity of potential applications for blockchain alternatives and addressing the issues raised by alt-chains and other blockchain supplements and replacements under federal and state law. They discussed their paper with Federalist Society members on a Teleforum conference call.
- Andrew M. Grossman, Partner, Baker & Hostetler LLP and Adjunct Scholar, The Cato Institute
- David B. Rivkin, Jr., Partner, Baker & Hostetler LLP