Bitcoin (BCH) is a Peer to Peer Electronic Cash System . That has always been its main purpose and killer application. Lately, there's been a lot of buzz and debate within the community about tokens, and in this article I want to examine an important question that I think hasn't received enough discussion.

I'm one of 6 people who recently created a specification called Simple Ledger Protocol . We were motivated to do this because there was seemingly no progress in the Bitcoin Cash community on tokens. Not that we necessarily needed a brand new token protocol, but we didn't love any of the existing ones, so our thought was "why not do it right?" We received some praise from the some of the community who liked the spec. However, there were others who did not like it. Their concerns were not so much about our particular paper, but more about the broader type of solution it is -- they want something like GROUP, which is a Bitcoin protocol level change... a miner enforced way to do tokens.

Their argument is that the security model for all OP_RETURN based tokens is weak (or unproven at best), and it would be much stronger if we had the full security model of Bitcoin behind tokens.

Just As Good As Bitcoin?

While it is true that OP_RETURN tokens aren't as secure as Bitcoin, the unstated assumption is that they need to be, or should be. This is an assumption I find myself questioning today. Is it even a good idea to make tokens "just as good as Bitcoin?"

On one hand, security is a good thing, but maybe tokens shouldn't be too much like Bitcoin. It could become a type of inflation if anyone can come in and create tokens with all the same properties. One of the biggest problems of the cryptocurrency movement is that Bitcoin splintered into 1000 different blockchains -- classic divide and conquer dynamics. Would we be encouraging, inviting, and enabling more of that with unlimited tokens that enjoy "full Bitcoin status"?

Until now, I have been thinking along the lines of "GROUP isn't bad because if people want to send tokens they still have to pay the fees just like any other Bitcoin transaction". But it seems that there might be broader considerations we should make to maximize the success of Bitcoin as cash.

Is It Okay To Have Different Security Models?

I want to challenge this idea that tokens necessarily need to have the same security model as BCH itself. After all, Bitcoin Cash and tokens really are two different things. Not only is Bitcoin Cash itself more important, but it also requires the highest level of distributed consensus due to its nature as a public good. There are a variety of uses for tokens, but many (or most) of them do require some trust in the token issuer when it comes to redemption. This is one reason that tokens do not necessarily need to have the strongest consensus model and can still work just fine. The main difference between the SLP consensus model and the Bitcoin consensus model is the filtering out of invalid data. This is one of the reasons why we suggested issuers add hash commitments. It's a way for the issuer themselves to bolster the consensus model for a token that they have a large economic stake in.

Avoiding the Risks and Reaping the Rewards

Some of these issues, we're just starting to scratch the surface on really understanding.

In a recent video, Ryan X. pondered "what if a token asset becomes more valuable than Bitcoin and the miners are only getting paid in Bitcoin?" It's a very interesting question. There may be economic risks with tokens regardless of the security model, but it seems that those risks would only be worsened by requiring miner enforcement.