Evolution of Public Chain
The Blockchain has opened up a new era in the evolution of not just computing, but the world at large: providing the missing “trust layer” to applications on the Internet. Industry leaders from IBM, JP Morgan have remarked that the blockchain is here to stay. Although this technology itself has a bright future ahead, the hype machine that is the ICO space is not predicted to survive- at least in its present state. Let’s take a look at how this phenomenon started and evolved through innovation.
Bitcoin – The Beginning
B-Money was the first proposal of a decentralized economy via computational problems. Published by Wei Dai in 1998, it was a radical idea far ahead of its time. While the idea was completely novel – the b-money paper didn’t bother with any implementation details.
In 2005 Hal Finney proposed “re-usable proof of work”, a consensus protocol which used Hashcash puzzles to power a cryptocurrency. It was, however, centralized in nature. Till now the idea of a digital-token-based economy seemed very cool and futuristic. In 2009, an anonymous author (to this day) going by the name of Satoshi Nakamoto took the world by storm with his Bitcoin Whitepaper. This laid the groundwork for the blockchain while discussing the protocol for deploying a decentralized currency running on a trustless network without the possible intervention of any government, organization or individual. This experiment – which wasn’t taken seriously outside of the cypherpunk community in its early days, has now seen its market cap rise from a few thousand dollars to $300 billion in 2017. The technology behind Bitcoin has been validated over the years and is now symbolic of the blockchain.
Transactions in Bitcoin are recorded in a data structure called The Merkle Tree. This is built by recursively hashing transaction pairs until the root transaction. These hashes along with other metadata are stored in Blocks. As the transactions increase, blocks keep adding up till it reaches the limit of 1 MB. The new block is then appended to the last added block in the blockchain. Due to the use of hashing, no matter the number of transactions, they can all be summarized in a 32-byte hash.
Bitcoin eventually did exhibit failings with regards to both the community and the technology. After the disappearance of Satoshi Nakamoto, few developers bifurcated the community by creating their own networks. Litecoin and Bitcoin Cash are the most notable results of forks. Bitcoin, however, still holds a special place in the crypto space and has inspired many projects which followed. It has set the stage for the next generation of blockchain based currencies.
Ethereum – Blockchain 2.0
A writer for the Bitcoin Magazine – Vitalik Buterin was watching the rise of Bitcoin from the sidelines. Being a capable developer and analyst, he noticed several limitations in the Bitcoin ecosystem. Some of these were an inefficient use of mining hardware, centralized mining factions, and the absence of scalability in the network. In 2013, he published the whitepaper for Ethereum – his vision of what Bitcoin could have been. Ethereum was more than just a currency. It was a platform where developers could build Distributed Applications (DApps) using Blockchain technology. Ethereum also facilitated the use of Smart Contracts which are computer protocols intended to digitally facilitate, verify, or enforce the negotiation or performance of a contract.
Ethereum brought changes to the underlying structure of the blockchain. A structure called a Block Tree (based on the Merkle Tree) was introduced. Every block in Ethereum contains a “State Root”. This is a hash of a special merkle tree and contains the current state of the Ethereum system. This includes all the accounts, balances and contract code. This enables a client who has recently joined the network to sync up with the network without having to download the entire list of transactions. In essence, the client keeps all the blocks, but only keeps the state trees that he requires. It also helps in faster determination of balance as it can ask nodes for particular instances of the tree unlike Bitcoin which follows a multistep of getting the transactions, then the spending of the transactions and arrives at the balance getting the remainder of this data.
Ethereum records lesser transactions in comparison to Bitcoin translating into a block size of around 2 KB. The block time is also shorter on this account, with transactions being added to the blockchain every 14 seconds. Ethereum rewards all the miners who work out the hash solution, unlike Bitcoin. Ethereum also rewards the longest chain that receives the recognition as well as the one that hasn’t been recognized. The block which is unrecognized hangs on a “leaf node”. This improved immutability as to change the ledger you now have an extra step of changing the hash of the leaf node as well.
Expectations clearly got ahead of reality in Ethereum’s case. Ethereum didn’t improve much with regards to Transactions Per Second (TPS). It saw a marginal increase of 20 TPS compared to the 10 TPS that Bitcoin currently handles. The network couldn’t keep up with the progress expected by the public. Projects like Casper, Sharding, and Staking are still work in progress and should take some time before they get implemented in the network. There still remained a scope for improvement which brings us to IOTA.
IOTA – New Kids on the Block
IOTA changed the blockchain game and is best summarized by them as “No Blockchain, scalable, decentralized, fast, fee-free, quantum secure. The best option for the IoT”. IOTA’s distributed ledger called Tangle uses Directed Acyclic Graph (DAG). This new Block Structure is colloquially known as the Block Diagram. On Tangle, any transaction that needs to be approved must first approve the previous two transactions by conducting a small Proof of Work for them. As more transactions occur, the network scales faster as verifications are now get done parallelly. This means that there is no max-count of transactions in one block and also goodbye block size debate.
IOTA, however, isn’t perfect. The bottleneck for the speed in the IOTA network isn’t storage but the bandwidth. Without the right infrastructure in place, the IOTA network could collapse under a load of transactions. IOTA is definitely the step in the right direction for the future of Blockchain.
The complete graph structure has unparalleled advantages compared to traditional blockchain designs. This doesn’t mean Bitcoin’s blockchain isn’t relevant anymore. The solutions to the underlying P2P transaction issues in current and future networks would still be based on design principles used in Bitcoin. A lot of players in the ICO market are currently busy reinventing the wheel. This behavior needs to change and a discussion about the future of Blockchain should consider the issues that need to be solved. The limitations of current blockchains have led to the implementation of DAG-based models like IOTA. This novel architecture will ensure that decentralized peer to peer network scale rapidly with demand. The future of blockchain looks bright.
Follow us on Telegram!