Blockchain 1.0 provided the underlying technology for the first cryptocurrency, Bitcoin, which was issued in 2009. Six years later, in mid-2015, Ethereum was launched, making use of an improved blockchain architecture and promising a faster and lighter proof-of-stake protocol for validating transactions. Thus blockchain 2.0 was born.
The first two iterations of this innovative technology promised to be scalable, interoperable, sustainable, secure, cost-effective, and governed transparently and publicly. So far, not all of these promises have been kept. Though bitcoin was the first and has always promoted itself as an effective payment system, it is overly energy intensive and slow. Users often find it to be prohibitively complicated and it often simply won’t meet their needs. Ethereum, which offered the first smart contracts to its users, and eventually the concept of a streamlined proof-of-stake protocol for validating transactions, has its own problems. It is somewhat vulnerable to outside interference and is sometimes considered to be an expensive and impractical solution. This has opened the door to new and further-improved implementations of blockchain and its cryptocurrency hitchhikers.
An excellent example of a third-generation blockchain implementation is Cardano, along with its ADA cryptocurrency. Prior to its development and release, a great deal of research went into the technology it embodies, including peer-reviewed whitepapers by other researchers and mathematicians around the world. This “research-first” approach has led to a platform that delivers on most of blockchain’s promises. Cardano is fully open-source and provides a number of advanced features not available from the previous generations of blockchain, particularly in relation to its smart-contract implementation.
But Cardano isn’t the only example of new and improved blockchain technologies. Zilliqua, designed with speed and scalability in mind, uses sharding techniques to overcome some of the implementation challenges of large blockchains. Shards are separate database partitions stored on individual database instances. This spreads the transaction load out to numerous servers rather than requiring each server to process everything. Some of the blockchain data is located on a single shard, and some lives on all the shards at once. This won’t be the final solution to network speed, as it has several endemic problems associated with the architecture, but it is a worthy effort nonetheless.
ICON must also be mentioned in this conversation. It uses what it calls “loopchain technology” in an attempt to create the largest decentralized network in the world. In fact, it hopes to interconnect all existing and future blockchains into a single ecosystem using what it envisions as “connective bridges”.
Another notable player in the third-generation race to the front is EOS, which emphasizes its ability to contain tremendous amounts of data over its “decentralized autonomous communities” or DACs.
ArcBlock is also in the conversation as an up-and-coming blockchain option, along with its cryptocurrency ABT. It introduced the concepts of “cloud nodes”, “open chain access”, and “blocklets” in an attempt to make different blockchain technologies more compatible with each other.
Aion, another important player, offers what it considers to be the true solution to the original promise of interoperability, scalability, and privacy by using a proprietary multi-tier blockchain approach. It offers interoperability to the Ethereum network in particular but has been designed specifically to enable cross-blockchain transactions, both public and private, while allowing local control of consensus mechanisms and governance.
Wanchain provides another example of an ambitious attempt to increase both scalability and interoperability. Its architecture enables blindingly fast transactions, and its smart contract implementation addresses the problems posed by isolated blockchains being unable to communicate with each other.
It’s important to recognize that there is still plenty of room for improvements in technologies, architectures, policies, and implementations, as the full promise of blockchain and cryptocurrencies for changing the world are more nearly realized. This includes the adoption and widespread use by central banks of cryptocurrencies; the move by large institutions such as NASDAQ into the use of distributed digital ledgers to enhance their capabilities; the realization of vast efficiency gains by both public and private institutions through the use of blockchain technology; a dramatic increase in data security due to the immutable nature of blockchain transactions; a significant increase in cyber-security due to blockchain-enabled identity authentication; instant commerce across borders; the ongoing reduction in barriers to economic transactions due to the elimination of middlemen and associated costs and fees; and the democratization of elections as fraud and tampering are eliminated.