The Importance of an Immutable Blockchain
On November 2017, 1 million ETH was lost due to a random github contributor accidentally activating a "kill" switch of various smart contracts on the public Ethereum blockchain. This happened because parity multisig wallets all over the world shared the same library. Once it was killed, the ETH became unrecoverable. This recent fiasco has facilitated a spirited debate among the Ethereum community:
- Do they perform a hard fork to recover the funds like they did with the DAO hack?
- Or do they permanently exclude 1 million ETH out of circulation and consequently leave hundreds of thousands of users stranded?
In essence, what they are debating is the importance of "Immutability."
Immutability, as it pertains to blockchains, is the idea that the public ledger can not be altered. This is an important trait for blockchains to have for several reasons:
- The moment the rules of the protocol change for reasons outside of technical improvements, you open up pandora's box: Who's to determine what the criteria is for reversing transactions? Why does one situation fit but not another? Is there a difference between someone who had their coins stolen or sent to the wrong address? If not, how do they prove their LTC was stolen?
- Without immutability, the blockchain itself is no longer a useful tool for verification because it's transactional history is subject to the community and/or developers. The reason for this is because those who break the rules will most likely break it again.
- For example, in June 2016 after the DAO hack, the Ethereum community had a choice: 1) fork away the stolen coins 2) deal with the consequences of the fork remain immutable. The community split which ultimately created Ethereum Classic and Ethereum.
- Fast forward a year and a half later and they are once again considering another fork to refund people their ETH. Not only that, EIP867 is a proposal to develop a standard to recover funds in the future. Therefore, they expect and are even preparing to optionally change a ledger which is supposed to be used to reliably record transactions.
- It maintains fungibility. If a protocol were changed to suddenly "blacklist" LTC addresses because it is assumed those belonged to a thief, 1 LTC would no longer equal 1 LTC. 1 LTC would only equal 1 LTC as long as it's not associated with certain addresses.
- It removes the "god-like" powers of developers. They are no longer able to determine the fate of the blockchain no matter what their intentions may be.
Now you may have heard this term used to describe both Litecoin and Bitcoin as a selling point. However, immutability is more a philosophy and a principle rather than an intrinsic characteristic of blockchain technology. In reality, blockchains can be manipulated quite easily given the right conditions.
- If a network has low hashpower and an attacker has a very powerful computer, they can easily manipulate the ledger in ways that are favorable for them.
- Or the community can decide through consensus to switch to a different version of the blockchain. This is particularly useful in reversing transactions to recover funds like the what is being proposed to resolve the Parity wallet fiasco mentioned above.
Therefore immutability, as a principle in blockchain technology, is a reflection of its community.
As for Litecoin, immutability has been a point of emphasis in the past. In July 2014, 8 million Vericoin were stolen from a exchange called Mintpal. The developers decided to hard fork to recover the funds. In light of this, Charlie wrote the the r/litecoin community and expressed his stance that he will never hard fork Litecoin to reverse transactions:
"In light of what happened with Vericoin recently (http://www.coindesk.com/bitcoin-protected-vericoin-stolen-mintpal-wallet-breach/), I just wanted to make this clear. As developers of a decentralized crypto-currency, it is our duty to make sure that the network is secure and that Litecoin functions well as a easy-to-use and efficient currency. It is not in our rights to decide which coins belong to whom. The rules are set forth since the genesis block and cannot be changed. If a theft happens on top of the network, the developers will not fork the coin to reverse any transactions. It is up to the market to decide on how to handle the theft.
That said, Vericoin developers were put in a bad position. Vericoin is a proof of stake coin, so the thief will actually have a lot of stake and can further attack the coin. So the Vericoin devs almost had to do this to prevent future attacks on the coin. This is why I don't believe PoS is a viable alternative to PoW.
I don't believe in blacklisting (or redlisting) any coins. First of all, there is no way to know for sure that the coins were indeed stolen. The developers should not be put in the position to make this decision, and you wouldn't want us to. Secondly, blacklisting hurts the fungibility of Litecoin, which is critical for Litecoin's success. When someone receives a litecoin for payment, he should not have to worry if that litecoin was ever stolen. Also, in case it wasn't obvious, the developers will not change the core economics of Litecoin. The final number of coins (84 million) and the rate of mining rewards decrease (halving every 4 years) will never be changed." - Charlie Lee
The fact that no more than 84 million coins will ever be created and block rewards will decrease every 4 years are immutable characteristics of Litecoin ensuring it's value as deflationary currency. As Litecoin seeks to become the digital currency for payments, immutability will become even more important. Merchants and consumers all over the world must know that if they use Litecoin's blockchain as a settlement layer, their transaction history will be permanently recorded and will never be changed. Users can also rest assured that their coins will remain fungible and are never at risk of being "blacklisted" no matter how they were used prior. In this way, the ledger removes trust from the process of recording transactions and becomes a reliable tool for verification. Therefore, let us as a community continue to embody and champion immutability for the continued longevity and reliability of Litecoin.