Blockchain is much bigger than bitcoin. There is staggering innovation in the area of distributed ledgers, but most of it will be under the radar for anyone who hasn’t immersed themselves in that world. Here are five technologies and trends to watch.
Bitcoin decentralises money, removing the requirement for a middleman and enabling trustless peer-to-peer transactions. Now, imagine you could do the same for computer code. The result would be a programme that executed instructions when certain conditions were met. No one could stop it because it ran on a virtual computer distributed on thousands of different machines across the planet.
Smart contracts do just that. Ethereum is the most famous smart contracts platform, though that reputation tipped over into infamy when its flagship application went rogue. Smart contracts do exactly what you tell them to; they operate under a ‘code is law’ model.
The DAO – a virtual ‘company’ that managed well over a hundred million dollars worth of Ethereum based on the collective decisions of it holders – was exploited, and tens of millions of dollars drained from it. It caused an existential crisis for Ethereum, whose community had to decide whether to rewrite the supposedly immutable blockchain to reverse the damage. (In the end, they did – a decision which was hugely controversial and that has had far-reaching ramifications.) Amongst other issues, it raised the question of how smart ‘smart’ contracts really are.
There are also questions about the scalability and energy cost of creating a planet-sized computer to run relatively simple programmes, though other platforms, like Lisk, take a different and more efficient approach. Bottom line: smart contracts are a powerful idea and we’ll be seeing a lot more of them.
Creating and maintaining your own blockchain is a pain. It’s a specialist business to code the software, and you need a whole network of computers running it to secure your network. No surprise, then, that the same approach that has driven cloud services – everything from file storage to running software – has started to appear in the blockchain sector too. The new ‘blockchain-as-a-service’ (BaaS) platforms aim to bring the benefits of blockchain to businesses and organizations that don’t have the resources to create their own.
Microsoft has been spearheading the BaaS approach with Azure, which makes different blockchains available to users. But specific platforms are being designed that will enable anyone to launch their own bespoke blockchain. They can do this with their own parameters, on the back of an existing blockchain. You get the functionality you want, just without the hassle of maintaining the network. Stratis is one such BaaS platform, which aims to bring a ‘cloud computing’ approach to blockchain deployment. Ardor, too, will offer an ‘off-the-peg’ approach to launching new blockchains.
Bitcoin as a protocol is remarkably secure, but that strength comes tons of expended energy. By some estimates, the bitcoin network consumes as much power as Ireland. Many other cryptocurrencies operate on the same ‘proof-of-work’ principle – albeit on a far smaller scale – but more energy efficient alternatives like proof-of-stake are being trialled.
Another approach is to ‘recycle’ bitcoin’s energy usage by using its network to validate transactions on other blockchains. Komodo, a new privacy-centric blockchain project which is just launching its crowd-fund, is pioneering this approach: digests of batches of transactions on its own blockchain are periodically logged on the bitcoin blockchain to engrave the historical record in stone. That offers both the flexibility and innovation made possible by using a new blockchain, along with the unassailable security of bitcoin’s chain.
There’s no doubt that blockchain can and already is disrupting the existing ecash payments system. Banks and governments are catching onto the efficiencies and other advantages. They don’t generally like the idea of giving up control of money they create and oversee, similar to bitcoin. On the bitcoin ledger, once a transaction has been made it’s permanent. There are no do-overs, no reversibility. And so central and commercial banks are researching and creating their own kind of blockchains. These are so-called permissioned ledgers that can restrict who makes transactions and intervene when they want to. Depending on where you stand, these are either a wonderful improvement on the classic blockchain. However, there’s also an unthinkable oxymoron that flies in the face of everything bitcoin stands for. Wherever you stand, though, permissioned ledgers are coming down the track fast.
Tangle: the blockchain that isn’t a blockchain
Blockchain is great, but it has problems. It’s hard to scale up, since there’s so much information stored on the ledger. There are various ways to address this. One is the Tangle, pioneered by Iota, which – if you really want to know – is a form of Directed Acyclic Graph (DAG). It’s less of a block-chain than a block-braid. One is a lightweight, scalable approach that circumvents some of the blockchain’s limitations. However, it still allows peer-to-peer transfers of information.
Over the coming months and years, we can expect greater evolution of the technology to include more forms of blockchains-that-aren’t-quite-blockchains.