Blockchains of Tomorrow: Where the Cryptocurrency Industry Is Heading

We talk about the main problems of the blockchain industry, as well as what solutions are offered by leading industry projects

The end of 2020 and the beginning of 2021 were marked by a fantastic hype around cryptocurrencies and blockchain technology. They even drew the attention of “traditional” companies. In the fall, PayPal bought the startup Curv, adding the ability to carry out transactions with bitcoin and other cryptocurrencies within the service. In the spring of this year, Elon Musk offered to sell Tesla electric cars for bitcoins, the rate at the time of the announcement was one car — one bitcoin. Visa has launched a pilot project together with Crypto.com, which will use the USDC stablecoin. The movement of cryptocurrencies towards the financial sector is becoming more and more confident.

Such announcements cause an avalanche of publications in the press, information about cryptocurrencies and their distribution among ordinary users inflames even skeptics. Yesterday’s crypto adepts turn into today’s crypto millionaires, and little-known digital artists sell their works in the form of collectible NFTs for millions and tens of millions of dollars at the largest auction sites. Interfaces for interacting with blockchains are being simplified, and news about the explosive growth of bitcoin and other digital assets is attracting new users to the industry.

Read also: How to make an NFT token and sell it profitably on the marketplace

Which blockchains work on bugs

Meanwhile, behind the smoke screen of hype, blockchain teams with a serious fundamental approach continue to solve the problems that face the entire industry, regardless of the state of the market. These are speed, scalability, compatibility, and privacy.

Oddly enough, only a few projects are working on the bottlenecks of blockchain technologies — Cosmos, Polkadot, Solana, NEAR, Free TON and Etherium 2.0. The launch of the latter is tentatively scheduled for 2022, so you can only guess what problems will be solved in the second most famous network in the world. But other projects from the list already offer technological solutions that will allow blockchains to become massively applicable on a par with traditional computer networks and off-chain developments.

How to solve the problem of scalability

The problem of scalability is particularly acute in cases where there is a comparison of off-chain with on-chain solutions — a large number of transactions processed per unit of time. This problem is most relevant for large companies that need to perform a large number of operations without losing speed. The architecture of such large networks as Bitcoin and Ethereum does not allow you to achieve the required indicators.

The average number of transactions per block in the bitcoin network is 2100, and the block time is 600 seconds, which gives us 3.5 transactions per second. In the Ethereum network, the indicators are higher — 162 transactions with a block time of 14 seconds, that is, 11.5 transactions per second. For comparison, the VISA network can process 65 thousand transactions per second. The gap between the number of transactions per unit of time in the first and second generation networks, which include bitcoin and Ethereum, respectively, and the off-chain looks frightening.

The current transaction rate in the bitcoin network is 2.87 transactions per second. Source: Blockchain.com

In May 2020, two new — generation blockchains were launched-NEAR and Free TON, whose indicators for the number of transactions per second are close to off-chain networks. NEAR processes an average of up to 4,000 transactions per second. At the same time, Free TON can reach a record 100,000 transactions per second. Such figures were achieved through the use of dynamic sharding (from the English shard — shard).

Read also: How TON turned into Free TON

Why do Blockchains Need Compatibility

Blockchain technology was conceived as open and decentralized, but at the same time, some networks were locked inside themselves — communicating with the outside world is a non-trivial task for them. Your transaction types, consensus models, and hashing algorithms for a single network can be customized to meet specific needs. Add here the regulation, management mechanisms, and fundamental technological differences between different blockchains, and the solution to the compatibility problem becomes not obvious.

The cost of a transaction in the bitcoin and ether networks directly depends on the exchange rate of coins, the higher it is — the more expensive the transfers are. Add here the load on the network and we get that at the current ETH rate, the transaction cost can reach up to 200 or more dollars.

The current value of transactions in the Ethereum network is $10. Source: BitInfoCharts

How can I reduce the cost and increase the speed? Build a “bridge” (from the English bridge — bridge), through which to transfer assets from a slow and expensive network to a fast and cheap one, in order to perform all operations in a more comfortable environment. In fact, tokens do not actually leave their network, but are transferred to a separate address of the smart contract, if they are supported, and a mirror copy of the same value is issued in the attached network by the same mechanism. When a user wants to return to the original network, the mirror tokens are burned, and the original ones are transferred to their wallet.

Developers in the Cosmos, Polkadot, and Free TON networks are actively working on creating bridges. Developers from the Althea Network announced their Gravity Bridge project earlier this year, which is supposed to combine the Ethereum and Cosmos blockchains. Now the bridge is being checked for correct operation in the testnet, its official launch is scheduled for the second quarter of this year.

Polkadot funds the development of such solutions through grants that have already been awarded to four independent teams to connect with Bitcoin, Ethereum, EOS and Tendermint. The Free TON blockchain does not use a grant model, instead the community organizes contests. The first stage of the competition to create a bridge in Ethereum was held at the beginning of the year, which resulted in the MVP of the bridge in the air from the developers of the company Broxus. At the second stage, which ended in early April, the solution was finalized to a full-scale working product.

What the coming day has in store for us

Solving the fundamental problems of performance and compatibility of blockchain networks will allow you to combine the power and resources of all the combined networks into a single ecosystem, which will attract even more capital, improve user interaction with the blockchain and the number of developers of services and services built on the blockchain. It is difficult to say which of the blockchains is now leading in solving this set of tasks, but one thing is clear — this year we will already be able to change DOT coins to TON Crystal, and user cases will not take long to wait.

Disclaimer


All information contained on our website is published in good faith and objectively, and for informational purposes only. The reader is solely responsible for any actions taken on the basis of the information received on our website.

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