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Blockchains Of Tomorrow — Challenges And Solutions

by Serge Shlykov

The blockchain is considered to be the foundation stone of decentralization in the twenty-first century. With distributed ledger technology becoming more and more popular every day and blockchain technology touching all areas of human life, new applications in this field are constantly emerging. Some people call blockchain technology the second generation of the Internet, and we can even say that blockchain has become the core technology of the Internet of Things.

We are facing one of the greatest challenges since the invention of the Internet: the distributed database system of tomorrow, the Blockchain. The Blockchain is a distributed database that allows anyone to store and exchange data without the need for intermediaries. It is the solution, the Holy Grail, to the problem of trust that has plagued the Internet since its inception.

In the late 2020s and early 2021s, there was a huge hype around cryptocurrencies, which were eventually accepted by some traditional businesses as a means of payment. For example, PayPal acquired the startup Curv, which allows users of the service to make transactions in bitcoin and other cryptocurrencies. In March, Elon Musk announced that electric cars could now be bought in bitcoins, with one car costing one coin. Visa is partnering with Crypto.com to launch a pilot project that will use USDC stablecoin. The movement of cryptocurrencies into the financial sector is gaining momentum. This trend has given rise to media publications attracting non-cryptocurrency users to the industry, and the biggest skeptics are showing interest in the money of the future. The hysteria in the media, combined with the efforts of developers to improve the user experience, is accelerating the movement of betting, farming and sharing. The crypto-geeks of yesterday are becoming crypto-millionaires. Unknown digital artists are selling their work as NTFs for tens of millions of dollars on the major traditional auction platforms. The air thickens as Ludomania penetrates the crowd: Buy a brownie, trade it for a watch, skewer it and get beef or salt at a higher API rate. Behind the appearance of incredible gains, many tend to forget that a bull market can be hit by a bearish reversal, and that a global correction will not spare bitcoin and altcoin holders. Those who remember the crypto winter of 2018 are behaving more cautiously, keeping one eye on popular and hyped coins and price capitalization, and the other on emerging fundamental blockchain initiatives. These address the challenges facing the whole sector: Speed, compatibility and scalability, and the greatest chance of surviving any market disruption. A small handful of developers manage to solve these problems: Etherium 2.0, Cosmos, Polkadot, Solana, NEAR and Free TON. Ethereum 2.0 comes out in 2022, which leads us to wonder what problems and how will be solved on the world’s second most popular blockchain network. Other projects have already proposed a number of technological solutions that will enable the mass adoption of blockchain networks alongside traditional (offchain) solutions.

Next, please

Scalability, i.e. the ability to process a large number of transactions simultaneously, seems to be a key issue when it comes to blockchain networks. This problem is critical for large enterprises that need to complete a large number of transactions without delay. The architecture of the Bitcoin and Ethereum networks does not allow for large bandwidth. The average number of transactions per block on the Bitcoin network is 2100 in 600 seconds, which amounts to only 3.5 tps. The Ethereum network is a bit faster: 162 transactions in 14 seconds, which is 11.5 tps. By the way: The VISA network can process 65,000 transactions per second. As you can see, there is a huge gap between these numbers. In May 2020, two next-generation blockchains, NEAR and Free TON, were launched with transaction processing capabilities approaching those of offchain networks. NEAR processes an average of 4,000 tpd, while Free TON has a record of 100,000 tpd. This is made possible by the use of dynamic sharding. You can use sharding to distribute the load of transactions among nodes in the network. Each node is responsible only for its part of the computation and not for processing the entire network load, allowing other nodes to process other states in parallel. Dynamic sharding can be compared to a store that easily adapts to the changing customer flow and immediately opens new cash registers (next generation blockchain), while other stores (old generation blockchain) have only one cash register. Free TON technologies also allow the shards to split as the load increases. The number of shards in this network is not limited by the architecture; in a recent load test, the number exceeded 200. The NEAR network supports the following B. only 8 shards. among others.

Raise your hands

Blockchain technology is designed to be open and decentralized. However, some networks are cut off and cannot communicate with the outside world, which is contrary to the principle of decentralisation. The transaction types, consensus algorithms, and hashes of a given network are designed to solve specific problems. Add in regulation, governance models, and fundamental design differences, and the scale contains too many ingredients that don’t go together. The cost of transactions on the Bitcoin and Ethereum networks depends on the exchange rate of the tokens and the current network load. Given the continued upward trend, the cost could exceed $200. How can costs be reduced and transactions accelerated? The solution could be a gateway to move assets from a slow, expensive network to a fast, economical one. The tokens themselves don’t leave their home network, they are included in a separate smart contract (if the network allows it) and a mirror copy is struck in the target network. When the user wishes to return to the original network, the mirror copies of the tokens are burned and the original tokens are unlocked and returned to the owner’s wallet. Gateways to the Cosmos, Polkadot and Free TON networks are being actively developed. Earlier this year, developers at Althea Network announced the Gravity Bridge project, which aims to connect Ethereum and Cosmos. The bridge is currently in the test network and is expected to be operational in the second quarter of 2021. Polkadot is funding the development of such solutions by awarding grants to four independent teams to connect Bitcoin, Ethereum, EOS and Tendermint. Free TON, a decentralized network developed by the community, uses contests as incentives. The first phase of the Ethereum Bridge competition took place in early 2021. The winning team was Broxus, which presented the FT-ETH MVP bridge. In the second phase, completed in early April, the solution was developed into a fully functional product. Ethereum users can now transfer their tokens for pennies to the free TON network.

Bright prospects

By solving the fundamental problems of speed, latency and interoperability, networks can be interconnected as a single ecosystem. This will facilitate interaction with users and attract more investors, thus stimulating the development of blockchain-based services. While it is unlikely that a market leader will emerge for this set of tasks, it is safe to say that by this year we will be able to replace DOT with TON Crystal without third party intervention. It won’t be long before onchain products and services are available to the general public.

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