Can Blockchain Ever Be As Disruptive As The Internet Is To The World?

There is a lot of chatter on blockchain, both online and offline and the one question that seems to have aroused in these conversations is whether blockchain will change the world as the Internet did in the '90s, and the automobile in the '20s!

Many might argue that it has?¡ª?it has given rise to so many projects with so much potential. Its applications are wide and organizations are now getting privy of that. Blockchain technology has begun to empower industries with its countless benefits and is radically transforming them.

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The blockchain revolution came to light in three phrases. Firstly, Bitcoins showed the world what digital currency is. Secondly, Ethereum showed us how to build decentralized assets, essentially the thousands of altcoins we know. The third phase is what so many blockchain companies are trying to do now by bringing the performance of blockchain to a whole new level - transaction speed, throughput, sharding etc. It is changing the course of traditional industries ?including the Internet and others.

Everytime a new technology replaces an old one it is expected to showcase a 10X improvement, whether it¡¯s ten times faster, or ten times cheaper. Floppy discs, VHS, optic cables have proven the 10X equation in their attempt to change the standard.

It all comes down to sharding

Any blockchain that offers small multiples of speed improvement is unlikely to displace a tried-and-tested system. For example, Visa can run 7,000¨C20,000 transactions-per-second (TPS) and a 10X increase means 200,000 TPS has to be achieved for any company to revamp a legacy system into blockchain. There are several blockchains out there that are trying to do this; in fact, many claim a significant improvement. If we launch a blockchain, we have to make sure we are comparable if not faster.

In real life application, is 200,000 TPS doable? Let¡¯s analyze: Sharding is a process of dividing a global network into pieces of a local network. Each local network would then take charge of two-thirds consensus so that a particular transaction is verified in the local network and then broadcasted to the global network. This is one of the best methods blockchain companies are working on to increase speed. Hence the 10X increase to current offerings is not hard to achieve.

Since sharding depends heavily on the availability of nodes, confirmation processes increase by an order of magnitude when you increase node counts. If a blockchain has 21 nodes and takes 1 second to confirm, then 210 nodes (a ten times increase in node numbers) will take much more than 10 seconds to verify. Unless a mathematician has proven that there is a better way than the Byzantine General Problem, it is safe to assume that whenever you increase your nodes, confirmation time slows down significantly.

Therefore, to Ethereum¡¯s defence, even though Ethereum has a 20 TPS speed, it is working with many more nodes than other blockchains. A 20 TPS solution with 20,000 nodes is better than a 200 TPS solutions with only 21 nodes.

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Taking a hypothetical assumption, all blockchain companies can only do, say, 1 TPS. If each company breaks their network into two, all of these companies can do 2 TPS (1 TPS for one network). Assume we need at least 20 nodes each in a local network, thus for all the companies to achieve 2 TPS they need to have at least 40 nodes. If we want to make a speedy transaction in an imaginary city called City of Z, we need a lot of devices to shard and make the transaction really fast.

Reaching scale

Scalability in a restaurant means how fast can you serve your meals, the faster you can scale, the more business you can have. Therefore, companies like McDonald¡¯s spend a lot of effort shortening the time between ordering and checkout to serve its customers.

Scalability in blockchain is similar: it depends on the code (how fast can the burgers be flipped) and also nodes (how many cashiers can confirm the order). So whose code is the best? We will only know when proven. And what about nodes? The blockchain with the largest nodes will prevail. Currently Ethereum has the most nodes, but maybe not for long.

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Building consensus for blockchain

Consensus is a big deal. As we know from real-life politics, the bigger the crowd, the slower the consensus. If a smaller crowd can decide for the bigger crowd, like in a parliament, then consensus can be sped up. But how do we choose the wisdom of the smaller crowd?

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A consensus process cannot always be in the select hands of a few. Suppose of all the nodes we have in City of Z, we will randomly choose, say, 1% of the nodes: a set of random nodes agree on the two-third consensus. Very importantly, the consensus process has to break geographic boundaries. If a blockchain has over 10,000 nodes they are also in a good position to reach consensus easily and globally like Ethereum.

But there is a catch. The nodes cannot collude. An effective way to prevent collusion is to bring in nodes from different locations (or via a different autonomous system when a person does a tracert / traceroute command). We believe Ethereum is so far the only blockchain with a real global reach of nodes, the rest are centralized in a local geography which makes consensus less ideal. With a diverse area of large volume of nodes, it will create speed with real decentralization.

The future of blockchain is open

Blockchain is an open platform and decentralized. With this in mind, companies are building the infrastructure to serve all the public chains. Another hypothetical example is that the mayor in City of Z wants to implement a smart ticketing system for the city.

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What the developer team needs to do is to upload the smart contract into the blockchain and get merchants in City of Z to download the smart contract and voila the whole city now has a smart ticketing system. Anything and everything should be on the blockchain, perhaps even the code for the blockchain.

Every piece of disruptive technology has to present a total shift in paradigm, and while blockchain has shown the doors of that paradigm, everyday people will need to see a true benefit to alter their deep-rooted behavior.

Author: Zac Cheah is the CEO of Pundi X, trying to disrupt businesses through implementing blockchain-based technologies.