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Blockchain technology was first applied in 2009 when Bitcoin was launched. Since then, businesses from a variety of industries have begun experimenting with the technology. From health records management, to supply chain tracking, to video games, it is currently being used in a variety of fields.
The inclusion of smart contracts in Ethereum and other blockchains has broadened the use cases for this innovative technology. In many respects, blockchain is still in its infancy similar to the early days of PCs, when they were mainly used by enthusiasts.
Since then, technology has advanced to a point where we can do virtually anything online, whether we’re watching shows or buying groceries.
We can expect blockchain to follow the same trajectory in the future. In order for it to prosper in every market, it must first have the features necessary to make it mass-adoptable. Let’s explore these features and see if they can be found in any existing blockchains.
High throughput, low latency and high scalability
Web 3.0 technology must offer consumers more than Web 2.0 technology does today. It is more likely that a crypto project will succeed if it offers faster transaction times.
TPS (transactions per second) is a measurement of how many transactions can be executed on a blockchain network in a second. It is also called, ‘throughput rate.’
For comparison, Visa’s network can process up to 24,000 payments per second, while Mastercard can handle up to 5,000. A recent interview with Visa’s chief financial officer suggested that 65,000 transactions could theoretically be processed per second on the network.
However, when it comes to building DApps (decentralized applications) and using digital assets, it’s more crucial to achieve the lowest latency rather than simply a high number of transactions per second.
The user wants transactions to be completed as quickly as possible. Whatever the network load, it’s always something they want.
In fact, there is even scientific evidence to support it. An article from Nielsen Norman Group from 1993 suggests that application response times determine the user experience.
- A 0.1-second response limit gives the user the impression that the system reacts instantly.
- With a one-second response time limit, the user’s flow of thoughts is uninterrupted, even though the delay will be noticeable to them.
- Users’ attention can only be kept for 10 seconds after a response. During this period, the user might be tempted to do other tasks while waiting for the system to complete the task.
So, as a user, you want the minimum latency or verification time and the highest TPS. That’s what ‘fast’ meansnot just how many transactions are processed every second.
Together, these parameters describe a blockchain network’s scalability or its ability to handle a growing number of transactions over time.
Nevertheless, TPS numbers matter, and we need them in order to understand the potential of a blockchain.
Following is a list of transaction speeds in the top 50 blockchain networks, ranked by market capitalization, as of September 2022.
|14||Basic Attention Token
Average transaction speed (in minutes) of 50 cryptocurrencies with the highest market cap as of September 2022 (Source: Statista.com)
Layer one versus layer two scaling solutions
The most effective way to improve a blockchain’s parameters is to work on its layer one. This requires validators to accept changes via a hard fork, which is a complex process, as we saw with the Ethereum merge not so long ago.
Through layer two scaling techniques, it is possible to achieve scalability faster by tweaking the technical architecture of a base layer blockchain network. This is why the blockchain community is frantically developing layer two scalability methods.
A good example of this is the Bitcoin Lightning Network, which is currently capable of handling over one million TPS, rather than only 7 TPS on Bitcoin itself.
Layer two can, however, compromise much of the security of the original blockchain. When removing aspects of layer one, you often have no choice but to depend on the layer two team and network to keep the system running and secure.
In this light, a significant number of users only trust networks like Bitcoin because of their long-standing track record of security.
In the future, blockchains’ scalability could develop in different wayseither through new consensus mechanisms or through layer two scaling methods that don’t compromise security. If we want to build the most efficient blockchain for the future, testing both routes won’t hurt.
As blockchain technology develops, different consensus algorithms are being exploredincluding proof-of-authority, activity, RBFT and YAC and show promise as alternatives to proof-of-stake and proof-of-work. However, most existing algorithms suffer from some kind of security or performance disadvantage.
Still, if we had to pick just one pillar of blockchain, perhaps it would be security. By default, the highest level of data protection should be prioritized, using open-source blockchain code and top-notch cryptographic algorithms.
Also, blockchain security audits are critical for identifying loopholes and eliminating vulnerabilities in the system. The public discussion of security solutions is also important for identifying those that are not feasible. Blockchains that do this have a bright future ahead of them.
When users send crypto, they don’t want it to be lost somewhere between them and the recipient. So, an important aspect of a network is its reliability.
As an example, Solana is popular for its speed and great solutions uptime tracker, there were 14 outages in 2022, totaling four days, 12 hours and 21 minutes of downtime.but it’s notorious for its network outages. According to Solana’s
Surely, a blockchain of the future cannot be like this. There’s a tendency for newer chains to be less reliable, and that is a concern.
Low or non-existent network fees
Visa charges businesses around three percent for processing payments. Among other things, we need to offer lower fees if we want these businesses to ditch Visa for crypto. In the same way, for everyday users, network fees are currently a huge barrier to entry.
For example, when first-time users realize they need Ether to send USDT to someone, they typically give up on crypto altogether. Similarly, the fact that users must own Ether to access DeFi applications and other DApps poses considerable access and usability challenges.
Meta transactions could be the solution to this problem, allowing users to interact with a public blockchain without paying transaction fees. Transactions made with meta transactions are still authenticated and sent using users’ signatures.
The difference is that when this happens, the transaction is managed by the relayer, who pays the fee and sends the transaction to the recipient. There is a high probability that a blockchain that implements this concept will succeed.
Adaptability to new use cases
It is important that the blockchain of the future not only stores information but also enables new use cases to be explored and developed. An example might be programmable money, which can only be spent under the rules laid out in a smart contract.
Unlike Web 2.0 banking, blockchains with specific MCCs (merchant category codes) can offer this capability. The technology can be used not only by governments but also by companies to reward their employees, for instance.
In spite of the controversy surrounding programmable money, there is a clear trend toward its implementation in the future, and blockchains must adapt to meet this need.
In the future, blockchain technology is expected to be very user-centric, with simplified authorizations, meta transactions, HRAs (human-readable addresses) and other features.
The crypto addresses we have today are difficult to send without QR codes or text messages. In the event of a single error, a transfer could be sent to the wrong recipient and lost forever.
A more general adoption is stymied by these difficult-to-remember strings of code targeted at computersnot people. Future blockchains must address this, and some are already doing so, like NEAR Protocol, which provides HRA functionality.
In some crypto wallets, sending cryptocurrency to a recipient’s phone number is already possible, even if the recipient does not have a wallet address.
Users without a wallet can create one via an intuitive interface. This method may be questionable from a pseudo-anonymity perspectivebut it is sure to boost usability and adoption.
Blockchains don’t have a built-in ability to communicate with other blockchains. Known as the oracle problem, this limitation prevents blockchains from interacting both with traditional systems and with each other.
In order for various blockchain networks to exist in the future, they need to exchange data and move unique types of digital assets between each other.
Ideally, public blockchains should be designed interoperable from the ground upbut it doesn’t always happen that way. Blockchain project developers must realize, however, that they need to share information and collaborate in order to thrive in the future.
There are many good examples here, including Metakey and Immutable X’s Web 3.0 gaming blockchains, which are creating an interoperable gaming ecosystem, and ChainLink’s oracle infrastructure that connects existing systems to all major blockchains.
Perhaps there won’t be a perfect blockchain for the future that does everything for everyone. Instead, just as there are different industries for various uses in the real world, there would be different blockchains for different applications.
Numerous blockchains are expected to continue to cater to specific needsgaming blockchains, supply chain blockchains, etc.
While there are even more features that a blockchain of the future should have than what I listed above, these are the most crucial. A bright Web 3.0 future depends on striking the right balance between security and usability while always keeping the user and the crypto community at heart.
Taras Dovgal is a serial entrepreneur with over 10 years of experience in systems development. With a passion for crypto since 2017, he has co-founded several crypto-related companies and is currently developing a crypto-fiat platform. As a lifelong startup and web development enthusiast, his goal is to make crypto products accessible to mainstream consumers not just techies.
Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any loses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.
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