The Possibilities and Future of Blockchain

The near-collapse of the crypto market has been the most talked about topic in the blockchain community, mainly how Luna Coin’s worth went from $85 to now being worth just a penny. Staying current on recent news and implementations of blockchain technology is essential. But it is equally important understanding the history of where it began and how it has rapidly evolved over the last thirty years. 

Blockchain promises security, flexibility, and access for all, but also a more innovative way to exchange data and goods by eliminating the middleman. As the hype around blockchain technology continues to grow, the idea of adopting it seems more and more enticing for businesses all over the world. Plenty of data is available about blockchain’s benefits and possibilities, but there are challenges and considerations to be aware of, too. 

This article will discuss how blockchain technology has evolved, the pros and cons, and where blockchain is taking us. 

Blockchain’s Evolution 

The history of blockchain technology dates back to the early 90s. It is now a mainstream topic with crypto pioneers like Bitcoin and Ethereum leveraging the technology to build a future of distributed ledger technology (DLT) or decentralized peer-to-peer networks. Cryptocurrency is just one example of the uses of blockchain technology, albeit one of the most widely known. The earliest idea of a blockchain was by co-inventors Stuart Haber and W. Scott Stornetta at Bell Communications Research (Bellcore). To build a technique that would prevent digital records from being compromised, they pioneered the first version of the blockchain, which authenticated digital documents by cryptographically securing them. 

 In 2008, Satoshi Nakomoto piggybacked off of the existing blockchain framework from the 90s and introduced Bitcoin, the world’s first cryptocurrency application on a blockchain framework. Since its inception, Bitcoin has grown to become one of the largest public blockchains in the world.

The third wave of blockchain technology was in 2015 with Ethereum, a decentralized platform for cryptocurrency and decentralized application (dApp) development. The founder of Ethereum, Vitalik Buterin, believed that Bitcoin was not fully utilizing blockchain’s potential and decided to develop the technology with smart contracts further. Smart contracts are programs that run on the Ethereum blockchain and execute transactions automatically after meeting specific criteria.

In 2016, another advancement in blockchain technology arose with the creation of hyper ledger fabric. The Hyperledger Foundation is an open-source community hosted by the Linux Foundation focused on providing solutions of stable frameworks, tools, and libraries for enterprise-grade blockchain deployments for leaders in finance, banking, Internet of Things, supply chains, and manufacturing. 

This rapid progression of blockchain over the last 30 years has birthed two leading public blockchains that have transformed money management. Both Ethereum and Bitcoin have disrupted the digital banking industry and process nearly 1.1 million transactions per day for Ethereum and around 250,000 transactions per day for Bitcoin. These platforms have become new ways of trading money for individuals, creators, and businesses like Amazon, Tesla, and Square. 

Blockchain Takeover 

The adoption of blockchain technology by companies has been swift, especially in industries like trade finance, data security, IoT, payment processing, banking, supply chain, and logistics. According to Forkast, at least 81 of the top 100 companies are now using blockchain technology, and around 65 are developing proprietary blockchain frameworks. Forkast also shared that many of these companies have poured investments toward blockchain, with “36 of the top 100 public companies” investing “a collective US $3.5 billion in 101 blockchain companies through 140 investment rounds.”

Along with businesses and individuals adopting blockchain technology, state and international governments are following suit. Though some countries like Japan and Estonia have been using blockchain in some shape or form for over a decade, other countries like Dubai, the Netherlands, and many countries in South America are implementing plans to become blockchain-based governments soon. Though many governments are exploring their options with blockchain as an entire country, the United States has seen a slower pace but is moving at the state level to pass crypto-friendly legislation. For example, Florida recently approved a bill that makes it easier to buy and sell cryptocurrency. This ruling followed a few months after Governor Jared Polis of Colorado spoke at the 2022 Denver ETH conference and announced his vision to make Colorado the “first digital state” in the US by allowing residents to pay state income tax and other fees with cryptocurrency.

Emerging Technologies 

Since the evolution of Ethereum and smart contracts, there’s been a surge in the diversity and use cases for blockchain. While it’s arguable whether blockchain offers a use case for every industry, there are promising opportunities, especially in finance, software, healthcare, government services, and personal data management.

Public Blockchain Use Cases 

Web3 is the highly anticipated third iteration of the internet that promises to democratize how we compute, interact, and receive information online. If the first iteration of the internet was “read” and the second was “read-write,” the third iteration, or web3, would be “read-write-own.” The fundamental basis of Web3, to democratize how we interact online, requires blockchain technology to function.

While it’s still in its infancy, web3 already has two transformative offerings: cryptocurrency and decentralized applications (dApps). Cryptocurrency, or decentralized money, started with Bitcoin but has evolved into nearly 10,363 active versions in existence today. The concept of decentralized money has transformed ownership, the ways we do business, who we do business with, and the security of our transactions. Even if cryptocurrency isn’t as secure as promised, it’s still become a primary way for millions of people to trade and offers hope of a database that would completely eliminate central authorities like banks, governments, and corporations. 

On the other hand, dApps, exist in categories ranging from exchanges to games to gambling to insurance. dApps provide more control of your privacy by using smart wallets to authenticate your user and store your data on the blockchain where the owner can retain control of it. There are a lot of other potential benefits and use cases of dApps. But very much in its infancy, and right now the biggest benefit is ownership of your data and democratization of decision making.

Private Blockchain Use Cases 

Along with public blockchain, private also offers some promising use cases. A private blockchain is a partially decentralized network of well-defined users granted read and write access by a single organization. Users on a private blockchain are verified by the organization, limiting anonymity between users. Unlike a public blockchain, a private blockchain does not offer any financial benefits for mining. Private blockchains support IoT devices, mesh networks, and internal applications.

There are a lot of other potential benefits and use cases of dApps. But very much in its infancy, and right now the biggest benefit is ownership of your data and democratization of decision making.

Some ways that private blockchain could play a role in our future is with company software as a new wave of private blockchain companies is emerging. Through private blockchain, IoT applications would have better security and management of remote devices, data management would have more security and trust for B2B operations, and finances would have added cryptography and trust to existing transactions. Gaming is also a huge area for potential but would require both private and public chains to be successful.

Current Challenges

Blockchain technology has evolved rapidly over the last thirty years and its adoption by individuals, businesses, and governments doesn’t appear to be slowing down any time soon. With all of the possibilities that blockchain can offer, it’s easy to forget about some of the important considerations associated with it as well. Below is a chart that offers a more balanced outlook on the current pros and cons of blockchain adoption.

As a decentralized database, blockchain technology eliminates the need for third parties. Without governing bodies to regulate transactions, deny permissions, or demand fees, users on a peer-to-peer network do not have to trust each other. Instead, all transactions on the blockchain are immutable and permanent, and integrity is upheld by smart contracts and users on the network. Not only does this decentralized trust increase transparency, but it also upholds security. Instead of existing on a centralized server that is easier to hack, a peer-to-peer network uses data from all users, or nodes, on the network which is difficult to compromise, limiting the opportunity for fraud, double spending, or hacking. By making all network users network anonymous along with a universal recording system that cannot be changed or deleted, blockchain technology rewards and empowers creators, and removes boundaries to collaboration. 

Though blockchain technology offers many benefits, there are also some downsides that many are not aware of like its network issues, carbon footprint, scalability, and expenses for maintenance. Some blockchain technologies, like web3, are still very early stage and will experience a lot of rapid changes over the next few years. This is a big consideration because promises like uncompromised security and ownership are still in their infancy which has led to million-dollar losses as well as a recent crash of Ethereum’s blockchain. 

Another concern around security is for future technologies, like Quantum computers, to break blockchain. Because they’d be faster, smarter, and have the ability to execute computations for longer windows of time than contemporary blockchain technologies, Quantum computers may be advantageous at cracking cryptographic passwords 

An environmental concern for the future of blockchain is energy consumption. Data shows that one public blockchain requires the same amount of energy needed to power a small country, like New Zealand, for a year. Because of the energy that goes into maintaining the blockchain, it is costly to maintain on the backend and as a user too. Gas fees, or the additional fees paid to compensate miners and stakers that make transactions possible, are a major challenge, especially with Ethereum, that are pushing users to other blockchains with lower gas fees

Conclusion 

The possibilities of blockchain are endless and its future looks promising. While there are some big considerations to take into account about its environmental and financial costs, many believe that blockchain technology has the potential to disrupt every industry and grant ownership to people instead of corporations. If nothing else, it is making us all rethink how we build applications, and share and validate data.

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