No scalability and no user experience of the current decentralized apps – these are part of the reasons why probably none of the currently existing blockchains will be the one system that business and society will use in five years, once the technology goes mainstream. There will probably be a hybrid form that will reach mass adoption.
The basics: there are two main types of blockchains. One of them is private, which is mainly used by enterprises and supported by platforms like Hyperledger (heavily supported by IBM), Hashgraph and R3 Corda. This type is mostly used by financial institutions. The other is general purpose blockchain such as Bitcoin and Ethereum – expected to be around for longer and evolve.
“They are here to stay, but none of them can take the volume of transactions required for banking and insurance industries,” says Nicolas Vereecke, Head of Crypto at the Y Combinator-backed payment platform Cashfree, during the NextBlock conference in Sofia last week.
However, before any blockchain technology ever reaches mainstream adoption, there are several hurdles it needs to overcome.
Performance and scalability
We still lack solutions to scale DApps. The main issue related to that: the lower the transaction capacity of the ecosystem of the app, the more expensive it is to make a transaction.
In terms of which is the best consensus mechanism, the early adopters of the technology are divided. On one hand, Proof of Work is secure but energy-intensive. On the other – Proof of Stake does not use any electrical power but is not that secure. Eran Tirer, Founder and CEO of Ledgertech AG, a consulting company for blockchain projects related to the insurance sector, is convinced we are far away from any kind of standardization.
Good example why we are not there yet is CryptoKitties, a cat-trading game underlying Ethereum’s blockchain network, that went viral and slowed down the transaction times of the entire Ethereum network.
When we talk about performance it’s actually a discussion about the balance between scalability and decentralization. “At the end of the day, BlockChain is a really expensive database. We have to be careful when to use that technology and when not,” warns Dimitar Dzhurenov of Infinite X Labs, pioneers in EOS blockchain integrations and development.
Despite the whole talk about blockchain and its applications, the fact is – DApps don’t really have an interface. The problem here is that yet there’s no mechanisms to easily onboard new users.
Thinking about the businesses and the end users, these are the people that are going to use the DApps, but they do not need to know that they are blockchain based. We need DApps that could work fast, without any lagging, with well-polished design.
Currently making a transaction could be a painful process for a non-technical person. Then there comes the fear of losing the transaction value if the sender makes a mistake. Transactions in blockchain, by design, cannot be turned back, which is a very stressful thought for the majority of the potential users.
The not solved Trilemma
Blockchain is said to offer the highest security as it’s decentralized. But. The security that no data entry could be manipulated is proportional to the decentralization. The more decentralized, the less scalable and more expensive, vulnerable to system failures etc.
“Most of our data has now been kept by the companies. Blockchain provides a solution where we oversee our own data. We can know and decide who can get access, and to what exactly he gets access and for how long. Blockchain could empower us”, Tirer explained.
But the “Blockchain Trilemma”, a term discussed by Ethereum founder Vitalik Buterin, that addresses the problem of how scalability, security, and decentralization work together without compromising either one is still unsolved, as blockchain can only achieve 2 out of 3.
The Ubiquitous Blockchain Touch
“Most of us can agree that in three years every kind of industry would be touched in some way by blockchain,” states Tirer. The blockchain that can add the most value to that sphere will be the most successful one.
Currently when we trade and move assets a lot of fees go into the pockets of centralized systems. With blockchain, we can optimize how the exchange of assets fundamentally works.
Marco Calicchia, CEO and Co-Founder at MaZee, advisory company helping cryptocurrency projects build their go-to-market and business strategies, points out that adding stable coins to the equation, as cryptocurrencies being the only established use case for public blockchain, can play a huge role in bringing more mainstream adoption, as in the future enterprises can explore the option to pay salaries in crypto.
“There is also a place for a blockchain that makes the links between different blockchains,” explains Eran Tirer.
Use me if you can
Yet, the blockchain world needs to face the truth: “Currently we are at a point where we have not yet seen the tech that is solving the main problems,” explains Dzhurenov. The technology is still too young to give concrete solutions to real-world problems, most of the talk is based on predictions, hypotheses, and experiments, and supported by more hype than implementation.