What’s Next? Pushing the Boundaries of Blockchain Technology

Cryptocurrency could be running on a “different” blockchain, far better than its predecessors. Ethereum, became the first to have a “programmable” blockchain which made the currency in a class of its own. Today, we are entering into a new era of blockchain technology which promises scalability, interoperability, and sustainability with a first-of-its-kind third generation decentralized currency, Cardano.

We’ll explore the possibilities as well as the challenges in this new development in blockchain technology – what can it do to solve the prevailing issue of scalability and how far can it push the boundaries.

 

Blockchain Scaling and Its Challenges

Blockchain redefined the meaning of currency as a “trust-less” and “decentralized” medium of exchange allowing people to exchange value on a peer-to-peer network without a third party. It also solved the problem of double spending and fraud when dealing with digital assets in a virtual space with the combined strength of cryptographic functions and distributed consensus. But having such a high level of security also comes at the expense of speed and computing power.

Blockchain is difficult to scale because the exponential growth of the ever-increasing size, the necessary bandwidth to update all the ledgers across the network, and the proof of work algorithm which is self-limiting in terms of the number of transactions it can accommodate at a given time.

Some of the proposed solutions are, to take mining out of the picture, and use an alternative method of confirmation such as proof of stake and consensus protocol. Unfortunately, any attempt to improve scalability which takes mining and proof of work out of the way also tends to become convoluted and unsecure. There seems there is no way to create a blockchain that is both scalable, secure, and decentralized without losing some of its properties, one way or the other, or, writing a blockchain protocol from the ground up using an entirely different programming language.

Tinkering with the block size could only worsen the situation as bigger blocks would increase the blockchain size exponentially, thus consuming more bandwith and slowing down the network even more. The Bitcoin Cash hard fork of August 2017 attempts to solve Bitcoin’s scalability problem by following this route. However, it is doubtful that such measure could sustain the impact of mass adoption.

Some developers are now taking a different approach in their efforts to make a scalable, interoperable (communicates with other blockchains), and sustainable blockchain.

 

Making Blockchain a Lot “Smarter”

The simplicity of Bitcoin’s algorithm proved to be its greatest strength in terms of security. It is less prone to have errors and is more secure compared to other complex systems. Consequently, this would also mean less room for innovation within the blockchain itself (scripting used in Bitcoin is not “Turing-complete”). Moreover, developers couldn’t make drastic changes to the code without causing a fork in the blockchain. In such a case, the best scalability solution is to have a second layer for micro-transactions which “clears” each time these bundled transactions are broadcasted as one to the first layer, i.e. the blockchain. This is the idea behind Lightning Network.

However, to make this work, it should remain “trust-less,” secure, and shouldn’t involve a third party by adding a set of rules on top of the Bitcoin network to ensure that every transaction between two parties is settled upon meeting the conditions, or they can be rolled back if one of them refused to cooperate. Some of these rules include opening and pre-funding off-chain payment channels (or side-chains), “time-locks,” and having a “refund addresses” in case it fails to execute the agreement.

Ethereum accomplished the task with the idea of a “smart contract” between two or more people. After mining, the contract comes into force and becomes an immutable part of the blockchain. It uses a proprietary programming language (Solidity) which is more flexible than the script used by Bitcoin, and is primarily used for ICOs to fund projects and issue tokens to contributors. Some developers can make some interesting use of smart contracts such as the popular online blockchain game, Cryptokitties, where people can buy, sell, or breed virtual kittens on the Ethereum blockchain for profit.

Ethereum is regarded by developers as the second generation of blockchain technology for making such remarkable achievement. Blockchain technology is no longer just a method of making secure payments and storing value like Bitcoin, but also a more secure way of creating immutable, automated contracts without requiring a mediator in a physical sense. This opens up a world of possibilities for blockchain as a versatile platform for business and everyday use.

 

 

The Third Generation of Blockchain Technology

Cardano is considered by some as the third generation of blockchain technology for several reasons. First of all, it has a blockchain built with scalability in mind and uses a programming language known only to a few developers (Haskell and Plutus). Unlike the programming languages used in second generation blockchain which goes through a number loops and procedures one string at a time, it deals with the process of creating smart contracts and verification using a functional language which is more efficient. In other words, instead of commands, it uses mathematical formulas, i.e. functions.

An Ethereum smart contract, for instance, can go through a hundred iterations and procedures before coming up with a single output. This results in higher computational cost and could easily overload the network without some sort of regulatory mechanism that limits the number of loops or strings on a given contract. Ethereum came up with the idea of “gas”, which is the equivalent of mining fees for Bitcoin. This way, users cannot arbitrarily overload the network with excessive number of iterations. However, like Bitcoin, it also brings up the issue of scalability, computational cost, and sustainability

Cardano seeks to address this problem by revising the way blockchains should work. However, nothing is set in stone as of the moment and we couldn’t know for certain whether such proposal will have enough support from developers and the cryptocurrency community. Haskell and Plutus programming language is not so popular but can be extremely useful when applied to blockchains because it offers more flexibility.

There’s also a learning curve, should developers choose to support Cardano’s vision of a scalable blockchain, and it would have to compete with the developers’ attention who are fully engrossed in perfecting Lightning Network for Bitcoin, and the proof of stake scalability solution for Ethereum. One possible scenario is that all three of them will come to fruition about the same time, and by then we would have three or more fully scalable currencies which use different methods in achieving the same goal. Or, we may come up with just one solution that would annihilate other currencies and become the gold standard of future blockchain-based currencies. Could it be Cardano, Ethereum’s updated proof of stake version, or Bitcoin running on Lightning Network? The world watches as the story continues to unfold.

Interested in mining? Learn the basics of cryptocurrency mining at CryptEdu.com or start  hassle-free cloud mining at Cryptmin.com today.

Leave a Reply

Your email address will not be published. Required fields are marked *