Ravencoin vs. Bitcoin: How to Transfer Truth

Two years ago, a team of developers from Medici Ventures launched Ravencoin, a blockchain forked from the code used to write Bitcoin. Ravencoin, like Bitcoin, is a proof-of-work network, and its block times and total coin supply are 10x and 1000x multiples, respectively, of the Bitcoin equivalents.

Ravencoin is designed to handle transactions faster than Bitcoin, but it’s not simply an alternative version of the parent project. The sole aim of Ravencoin is to allow users to tokenize assets on-chain and transfer ownership via blockchain transactions. This is something that can be handled by other blockchains in only a rudimentary way; Ravencoin was an answer to the problems faced when trying to tokenize assets on a more general-purpose network like Bitcoin or Ethereum.

Ravencoin users can tokenize physical or digital assets — including gold, real estate, royalties, intellectual property rights, and in-game assets — for easy transfer and management. The project solves many pain points encountered when trying to use Bitcoin to transfer asset ownership, and Ravencoin has carved out its own niche in the cryptocurrency markets.

The developers clearly outlined their reasoning and vision for the project in the Ravencoin whitepaper:

If the global economy is influenced by actors using various blockchains, then the way capital markets work today could also change. Borders and jurisdictions may become less relevant as more assets become tradable and trading across borders grows increasingly frictionless. In an age where people can move significant amounts of wealth instantly using Bitcoin, global consumers will likely demand the same efficiency for their securities and similar asset holdings.

To understand more about how exactly Ravencoin differs from Bitcoin, we need to dive into the data. Here’s how Ravencoin compared to Bitcoin one month after Ravencoin was listed on its first exchange (April 4th, 2018):

Below is a table showing how Ravencoin and Bitcoin compare as of April 23rd, 2020:

To understand how these figures have shaped Ravencoin and Bitcoin, as well as how they may continue to indicate performance in the future, we need to consider three separate aspects of each network:

  • The use-case: What differences are there between the purposes for Ravencoin and for Bitcoin?
  • Scalability: How does each project approach the challenge of scaling over time?
  • Mining: How does the mining infrastructure compare, and what does this say about each project?

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The Use-Case: Similar Code, Different Ideologies

Ravencoin and Bitcoin had very different upbringings. Ravencoin’s creation was supported by known developers from Medici Ventures, a blockchain technology company and a subsidiary of Overstock. Bitcoin, on the other hand, was created by a developer or developers unknown, directly after the 2007–2008 financial crisis that challenged people’s trust in the banking system.

Bitcoin can be used for a number of purposes. However, the main use-case is stated in the first line of the whitepaper:

A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.

Bitcoin was meant to be used as a means of exchange. Today, it is variously used as a means of exchange, a store of value, and a speculative asset, among other uses. It can also be used to tokenize and transfer assets, although doing so is expensive and resource-hungry, as well as potentially unsafe.

To transfer ownership of an asset, one needs to spend Bitcoin on-chain, which is an inelegant solution that creates congestion. It’s also possible, and not uncommon, to lose Bitcoin by sending it to the wrong address, and this could spell disaster for misdirected asset transfers.

Ravencoin was created to solve this problem. The whitepaper states:

Ravencoin is a use-case focused blockchain designed to carry statements of truth about who owns what assets.

Ravencoin is more user-friendly than Bitcoin and is designed to support use by major institutions. It’s designed to easily mint assets by burning RVN to a specific address. This allows users to name and register those assets on the network, and assign sub-assets to a main asset, such as COMPANY and COMPANY_SHARE.

Ravencoin has a native client that tracks assets on-chain, and the network protects the assets on-chain against being lost accidentally. This solves a major pain point for tokenized securities, and a $3.6 million equity transfer by Medici Ventures has already been carried out on the Ravencoin network.

The firm used Ravencoin to transfer ownership of a 29% stake in Chainstone Labs, highlighting the use-case potential for securities transfers. At the moment, over 23,000 assets have been tokenized and represented on the Ravencoin network.

It’s also possible to create restricted assets, which can only be transferred to known good actors, the identities of whom can be kept private until issuers choose to release them. This is designed to enable compliance with SEC regulations and other international securities regulators, allowing for the creation and management of securities on-chain.

It’s also possible to broadcast messages on the network and alert asset stakeholders to a vote, which can also be held on-chain.

A key takeaway here is that Ravencoin aims to work with financial institutions, whereas Bitcoin was created to work without them. This is a core ideological difference between the two projects, and it has shaped how Ravencoin has evolved and differentiated itself from its parent project.

Built to Scale

Ravencoin’s current block size limit of 2 MB is double that of Bitcoin. While factions of the Bitcoin community are notoriously protective of Bitcoin’s 1-MB block size limit, Ravencoin developer Tron Black told SFOX that the Ravencoin community would probably increase block size to scale if necessary. In addition to the larger blocks, Ravencoin’s block time is much faster, averaging one new block every minute compared to one new block every 10 minutes for Bitcoin.

In theory, this should allow Ravencoin to process a much higher volume of transactions per day than Bitcoin. However, this has yet to be put to the test, as Ravencoin’s average block sizes do not currently approach their full capacity. The average size of a Ravencoin block is 0.87 KB out of a total available 2 MB, compared to Bitcoin’s 814 KB out of 1 MB available.`

Below, we have a chart displaying Bitcoin block sizes in kilobytes:

Source: Bitinfocharts

(Note that a mainstream resource for chart Ravencoin average block size is not yet available, and this article will be updated if and when that changes.)

The following charts indicate the block capacity utilization for each project:

As we can see, Bitcoin is close to capacity, while Ravencoin transactions are nowhere near capacity yet. However, the infrastructure set up to handle volume does give us an indication of the ideology behind each project when it comes to scaling, with the Ravencoin team giving the network plenty of room to grow from the beginning.

Ravencoin transactions have seen a huge increase over the last month, spiking from below 10,000 per day to above 80,000. Meanwhile, those of Bitcoin have kept a more stable range of between 209,000 and 350,000 per day.

Source: Ravencoin.network
Source: Bitinfocharts.com

Ravencoin is unlikely to have an issue with scaling in the near future thanks to its faster block times and larger blocks. Bitcoin, on the other hand, favors second-layer solutions like SegWit and the Lightning Network to tackle scaling. Bitcoin’s solutions to these problems are not yet refined, and scaling is a pressing issue for the project.

The core Bitcoin dev team and community are unwilling to increase block sizes for fear of introducing more latency, centralizing the network by placing power in the hands of major mining operations capable of running larger nodes and mining larger blocks. A BitFury study showed that 95% of nodes would be excluded from the network within 6 months if a proposed 8MB block increase were implemented. Meanwhile, Ravencoin’s solution to the problem of balancing centralization with scalability lies in its unique approach to mining.

Not So Democratic After All

Bitcoin uses the SHA-256 algorithm to reach network consensus, and a major difference in the Ravencoin infrastructure is its deviation from this algorithm. There is now an abundance of ASIC hardware capable of mining on the SHA-256 algorithm, allowing major mining operations and mining pools to corner most of the hashpower. This has led to the rise of regional Bitcoin mining hubs such as those in China, where over 65% of the Bitcoin hashrate comes from.

Ravencoin, on the other hand, uses a unique ASIC-resistant algorithm called X16R. The plan was to keep ASIC miners off the network, but this has recently proved unsuccessful.

Let’s take a look at the hashrate and difficulty on the Ravencoin network.

Source: RVN.cryptoscope.cc

Mining difficulty has exceeded the hashrate consistently over the past week. Ravencoin developer Tron Black has confirmed that there are now ASIC miners on the Ravencoin network. However, due to community backlash against ASICs, a May 6th hard fork to the new KawPow algorithm was set in motion in order to make the network ASIC-resistant once more.

Source: Bitinfocharts.com

The community elected to use an ASIC-resistant algorithm in order to keep mining in the hands of small-scale operations. The Ravencoin whitepaper refers to democratized mining, and this is one of the ways the project has attempted to maintain decentralization. Black states that the existence of ASIC mining on the network is not an existential threat to Ravencoin:

For the sake of argument, let’s say that the algo never changes from here. The worst-case scenario is that Ravencoin starts to look more like Bitcoin with some concentration of mining power in the hands of data farms with specialized hardware and low power rates.

The current block reward for Ravencoin is 5,000 RVN compared to 12.5 BTC for Bitcoin. For context, the current supply for the networks is around 5.7 billion RVN vs. 18.2 million BTC. Coincalculator.io estimates that, given the same electricity costs, Ravencoin becomes profitable to mine at around 150 MH/s, whereas Bitcoin becomes profitable at around 125 TH/s.

While the true benefit to miners depends on fluctuating market values, the Ravencoin dev team made a conscious decision to give miners a greater incentive for mining Ravencoin rather than Bitcoin, while simultaneously attempting to keep mining open to smaller miners. All of this speaks to the ethos behind the project.

Moving Ahead

The Ravencoin project has seen strong growth in recent years, with many excited about the promising use case. However, it’s fair to say that the project is still in its early days. The block capacity hasn’t really been put to the test, and it remains to be seen how the community and developers will handle any pressure that may come with scaling, disputes over the mining or consensus, and all of the other problems faced by a developing cryptocurrency.

For now, the project has stood up well to the challenges faced so far, making it an interesting one to follow into the future.

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