I have spent past few year observing and digesting what is happening in the blockchain industry. I am fascinated with level of innovations we see appearing month after month, year after year.
All started with Bitcoin (state free money), then came Ethereum (world super-computer), and tons of projects trying to be the next Ethereum (as a platform for smart contracts) or improve inefficiencies of Bitcoin.
Would be superficial to say that we apart from Ethereum and Bitcoin we have not seen other innovations. Just to name a few trends
- focus on privacy: Enigma, Zcash, Monereo, Tetryon, EY Nightfall
- focus on enterprises : Hyperleder, R3 Corda, Quorum
- focus on remittences: XRP, Stellar,
- Focus on gaming/gambling: EOS, Tron, XXXXXXX
- focus on supply chain: VeChain, Waltonchain,
- focus on new way of banking: Celsius, BlockFi, Compound,
- focus on becoming next “Amazon” : Dfinity, Open Application Network
- focus on DeFi: Algorand, Cardano, Eth2.0, Rootstock
You can also look on what is happening in the industry from a bit different angle. Private chains vs Public chains. The sole distinction between public and private blockchain is related to who is allowed to participate in the network, execute the consensus protocol and maintain the shared ledger.
A public blockchain network is completely open, anyone can join and participate in the network. The network has an incentivizing mechanism to encourage more participants to join the network. Bitcoin and Ethereum are one of the largest public blockchain networks in production today.
Drawbacks of a public blockchains?
- substantial amount of computational power that is necessary to maintain a distributed ledger at a large scale.
- openness of public blockchain, which implies little to no privacy for transactions and only supports a weak notion of security.
Advantages of a public blockchains?
A private blockchain network on th other hand requires an invitation and must be validated by either the network starter or by a set of rules. Businesses who set up a private blockchain, will generally set up a permissioned network.
Drawbacks of private blockchains:
- restrictions on who is allowed to participate in the network.
- Participants need to obtain an invitation or permission to join.
- Limited / narrowed use cases due to the fact of limited group of participants.
Advantages of private blockchains?
While personally I am believer than long term we will see majority of the most exiciting use cases being invented on top of the public chains, in the interim period we the “old school” way of doing business will still chose private chains, if they ever consider blockchain network as a part of their infractucture.
To make it even more complex, you can further distinguish:
TU WSTAWIE ZDJECIE 2X2 PODZIAL ALGORAND NA ROZNE BLCOCKAINSKNN
Private chains for sure have the bright future short term. Possible use cases?
- Military and Governent applications
- Supply Chain Tracking platforms
Providing the fact we have so many different requirements and business cases, we have observed this specialization in the industry, the because it is difficult to marry all the features like speed x privacy x decentralization x costs x security x inclusiveness x flexibility x XYZ in on chains.
On this trends of blockchains becoming specialized is a norm.
Few challenges though. Providing we have blockchain per use case, what if we want to build a application that is mulit use case driven?
For example insurance app, that on one hand will have to collect and analyze senstive data (income, health, personal data) on te other hand will need to incorporate other source of data from social media, public networks, user behaviours etc..
Well.. Here we jump to the key part of this article. How to deal with the challange of connnecting the chains to other chains or to other source of data.
For now I can think of 3 ways of addressing this challange:
- cross-blockchain interoperability
- connecting blockchain to external sources via Oracles
- Private + Public chains interoperability
Regarding #1, I am thinking of projects like Cosmos, Polkadot, OAN or Quant, who provide a way to connect various blockchains into a bigger network. They come up with different approachs (Hub-Spoke model, Zones, APIs) and still deal with their own challanges (e.g. how to do it in a decentralized manner). This is definitelly exciting direction and deservesa seprate article.
Regarding #2, I think it might be complemenary approach to #1 and #3 in the interrim period. Certainly for a next few years if not decades, we will seco-existing blockchain netowrks and infrastructure and platforms create by giants like Google, Microsoft, Amazon, IBM, SAP, HP so connecting blockchains and “legacy” infrastructure via oracles, will be a MUST if you are thinking about serious use cases at scale.
Regareding #3, if you believe that one chain becomes dominant enough to attract both many applications to its public offering (gaming, currencies, media, finance) and to its private offering (voting, gov solutions, enterprise and banking solutions, health care) then interopearbility of public and prviate chains which are built on top of one platform becomes really big thing.
Algorand seems to be chasing #3 and here is wher Algorand’s Co-Chain architecture comes into play.
Algorand have been developing co-chain architecture to enjoy the advantages of both private and public chains.
I am not going to introduce Algorand here, i do encourage to you study my articles to understand more deeply what stays behind this platform:
or what my summary video… afdfaf XXXXX
Recently they released their co-chain architecture, so let me cover what it means. Algorand’s mainnet is live since mid 2019 and it is open, public, decentralized network, bases on pure proof of stake consensus protocol. But other than that it enables you to built a private chain and connect it to the main chain of Algorand, if your business cases require that.
- co-chain is totally independent from the public chain, shields its transactions from all outsiders, chooses its own validators, and runs its own Algorand consensus algorithm;
- co-chain n interoperates with the Algorand main chain to transact with other co-chains, and everyone else, with the same ease and security with which the members of Algorand’s permissionless chain transact with each other;
- co-chain enjoys the same atomic transactions, layer-1 smart contracts, and all other primitives and tools offered by the permissionless Algorand protocol. In fact, it automatically inherits all the improvements and upgrades that will be added to Algorand’s permissionless protocol.
Algorand believes that the world needs both permissionless and permissioned blockchains and provides implementations for both, guarantees their synergy.
No matter how scalable, distributed, and secure a permissioned chain may be, its members may not want to interact only with each other, but also with other chains and with the rest of the world.
Coming back for a while to my thesis regarding connecting blockchains (1. Blockchain Interoperability 2. Oracles to external world 3.Private/Public on one chain) this is definitelly pre-mature to say if we will see one “uber” blockchain to rule them all, or rather many specialized blockchains connected into (hopefully decentralized) network, it is highly probable that chains like Algorand are one the way to market dominance, thanks to their flexibility provided by public/private capabilites. When you add to this fact their SDKs are up an running for
- Java Scrip
- (coming soon) .NET
seems theyare open for developers from both worlds permisioned and permisionless.
I still believe that the end goal for the industry is <100 blockchains, interconnected in decentralized manner, public and open “as a default”, but in the interim period (next 5-10 years) platforms like Algorand, Rootstock or Open Application Network will become the most attractive choice for enterprises, befure they are “future ready” and “pragmatic enough” at the same time.
Exciting years ahead of us.