The race to build the best blockchain

Billions of dollars are spent right now to solve a problem we did not know existed a few years ago.

The problem is reduced to the creation of a decentralized app platform that is secure, scalable and governed in a fair and transparent manner. And the solution could change the world in a similar way to the Internet has done a few decades back.

This is the race to build the next blockchain. Blockchain, often referred to as a "digital, decentralized, public ledger", is already a proven technology. But it is all but perfect and the improvements could extend its usefulness far beyond the cryptocurrency.

Bitcoin and Ethereum, the two largest cryptocurrencies for market capitalization, are widely considered to be promising, hindered only by certain obstacles. Unfortunately, these obstacles are not so easy to overcome.

Bitcoin, a decentralized currency and a payment network, is secure and robust, but very limited as an app platform. It also does not have good scalability, and is largely the whim of a couple of large entities known as mining pools. Ethereum is much more versatile and a little faster, but has the same problems as Bitcoin, and is probably less secure.

Give a name to any currently live blockchain-based system and suffer from the same problems, only in different degrees. It is not sufficiently scalable, quite versatile or decentralized enough. Building a system with all three traits is the sacred grail of blockchain technology right now, and a lot of very smart and well-funded people are struggling to be the first to do so.

The thing

Blockchain, as implemented in Bitcoin, is a way to keep records. Instead of having an accountant, everyone in the system has a copy of the book. Once a page is full of records, it is signed and becomes an immutable "block" in the blockchain. The signature is made by solving a math puzzle; the people doing this are special network participants called miners. Thanks to the wonders of cryptography, once someone solves the puzzle, the whole world can easily check if the answer is correct. The history of the book can not be changed; if you rip or edit a page, the math stops and the network discards the version of the book.

This is typically slower and less practical than simply having an entity – a person or a company – who keeps the records themselves. But there are benefits to remove the accountant; once he's gone, he removes the trust from the equation. When there is no way to simulate a transaction, there is no need for an intermediary. You can send and receive money without a bank. You can sign contracts without a lawyer. You can support artists without an editor.

The list does not last forever. You will find sellers of snake oil at every corner, telling you that the blockchain is the future of everything (and probably sells you a kind of token). It is not. But there is something in this technology that promises to usher in a radically new way of doing things.

This is because Ethereum and other decentralized app platforms allow you not only to track financial transactions, but to run entire app on the blockchain. The applications on Ethereum, says the project website, "work exactly as planned without any possibility of downtime, censorship, fraud or interference from third parties".

This paves the way for a new level of corporate and governmental responsibility. Imagine a social network that can not confuse your data as you prefer – at least not without anyone noticing – or a bank that can not increase your interest rate on a whim, because the code will not allow it.

Ethereum is by far the largest platform in terms of adoption at the moment. However, Ethereum is not scalable enough for serious business use, which became painfully evident in December 2017, when the network slowed and transaction fees soared due to the increased interest in a game that allowed people to collect the digital kittens.

Ethereum is working hard to make the system more scalable, robust and energy-intensive. But its foundations were cast when blockchain technology was still relatively immature; many of its competitors have the luxury of being able to build their technology from scratch. Who will win the race?

The chi

Things move incredibly fast in the blockchain world. Ethereum is three years old. Projects like Cardano and EOS, sometimes called "blockchain 2.0" projects, are already considered giants in space. They have a combined token market cap of around $ 11.8 billion, even though they are just operating.

Cardano, which focuses on a slow and steady approach, with each iteration of software being peer-reviewed by the scientists, is promising, but has not yet fully launched its intelligent contract platform.

EOS, an incredibly well-funded startup launched in June, is another big competitor. However, EOS has a complicated process of governance that caused a fair amount of problems immediately after launch, along with a handful of newly discovered bugs. With an estimated $ 4 billion in pocket, EOS has the means to do great things, but it will take time to see if it can keep its promise.

But there is already a new generation of incoming blockchain startups. They worked, often in the shadows, to develop new concepts and technologies that could turn the promise of a fast and decentralized app platform into reality.

Image: Stan Schroeder / Mashable

A startup called Dfinity defines itself as "Internet Computer", stating that it will usher in a new era of cloud computing, which will be more secure and reliable than current computing, with better interoperability and integrated privacy.

It is one of the many blockchain-based startups that make such high claims, but Dfinity supports them with an incredibly strong team of mathematicians, cryptographers and computer scientists. Andreas Rossberg, for example, is an ex-googler and co-designer of WebAssembly, a Web standard that allows developers to run complex high-performance apps within the browser. Ben Lynn, another ex-Googler, is a pioneer of cryptography, the co-creator of the BLS signature scheme.

At the time of the launch, the value of the Dfinity tokens – its market capitalization – will be just under $ 2 billion.

Dfinity's president and supreme scientist, Dominic Williams, says that assembling a team of superstars like this is difficult. "We have a lot of superstar researchers and engineers and we see that Dfinity is a semi-similar building to Google, and we believe that if you really want to have a computer on the Internet that runs the world's software, it's not just about releasing some protocols: it's about having an organization able to support that network, which is big enough to give people the security they need to build a production system at the top of the network, "he told me over a long period of time. period. perspicacious conversation in June.

Moreover, it is not easy to get hundreds of millions of dollars from the best investors without a functioning product (unless you have private beta), but Dfinity did it. Williams told me that the company has raised about $ 150 million in funding so far from a range of investors that include Andreessen Horowitz and Polychain Capital. More importantly, the money raised enhances the Dfinity tokens – yet to be released – "just under $ 2 billion", which will immediately make Dfinity an important blockchain project at launch.

If this is not enough for you, you can turn to projects like Ava. Led by Professor Cornell and a remarkable voice in cryptographic space, Emin Gün Sirer, it is a new kind of decentralized system based on Avalanche, a technology created a few months ago by an anonymous team of developers called "Team Rocket" (Bitcoin itself and Even the Mimblewimble protocols are created by anonymous developers, do you notice a trend here?).

Image: Stan Schroeder / MashabLE

"Avalanche offers three or four orders of magnitude of acceleration compared to most of the blockchain systems in use today," Sirer told me at a café. Again, this is made possible with intelligent mathematics, with the result that, ideally, it is an incredibly fast and scalable network and does not waste energy. Like so many emerging blockchain projects, it has not yet been tested in the real world.

Where

I took Williams and Sirer during the Crypto Valley Conference, in the Swiss city of Zug (the capital of the Swiss canton of the same name), where the old world of the Swiss banking system is trying to reconcile with the new driving world of blockchain technology. Zug, a tax haven in Switzerland, has attracted thousands of companies and some of the most important blockchain projects, including the Ethereum Foundation, which regulates the development of Ethereum. The conference was opened by the mayor of Zug Dolfi Müller, who promptly admitted that only a few years ago, a couple of young people taught the leaders of the city the importance of Bitcoin.

But a lot has happened since then. In June of this year – in just one example, how serious this blockchain stuff is in these parts – the city of Zug, together with a company called Luxoft and Lucerne University of Applied Sciences in Switzerland, launched a voting system electronic based on the blockchain.

I did not go to the Crypto Valley by chance. Blockchain conferences are a dozen or so days, but it is not very often that some of the most promising and promising projects come together in one place. In addition to Dfinity and Avalanche, visitors had the chance to see an incredibly ambitious Aeternity presentation, led by Yanislav Malahov, a blockchain expert who claims to be one of the first influences on Ethereum. Also Stefan Thomas, ex-CTO of the enormous cryptocurrency Ripple, oriented to the biz, presented his new project Codius, an open source platform for hosting applications.

Image: Stan Schroeder / Mashable

In a truly decentralized way, however, things are also happening for blockchain in many other places; Silicon Valley, despite being a hub and an extremely important source of VC funding, is not the only place to stay. Malta has recently created a regulatory framework for blockchain technology. Luxembourg and Gibraltar are also important European hubs; in Asia, Singapore and Japan are leading the way. Each of these countries – many of them small, flexible, fast-acting and far-sighted – has attracted numerous cryptocurrency projects, trying to open stores in a place that will support their ambitious ambitions.

The how

Are these ambitions based on reality, or is it the vision of the ultra-fast blockchain that powers demanding apps with hundreds of thousands of users in a mirage?

I asked Sirer if a scalable, decentralized, energy efficient and well governed blockchain is even possible, or is it a case of "taking two, maybe three". Rise, implying that I was very wrong. "Just because a problem is hard to solve right now, does not mean it can not be solved, there are things I can give you a proof of impossibility, but this is not one of them." He said.

"Just because a problem is hard to solve right now, does not mean it can not be solved."

The foundation of its Ava project, Avalanche, is not technically a blockchain. It is based on a DAG or a direct acyclic graph, a system in which the data spread laterally rather than being stacked in blocks. It has a new way of reaching consensus on the network, with a bit of cold math that supports it (check here for a comprehensive explanation) and is radically different from well established consensus mechanisms. It promises to be much faster than most, with 1,300 transactions per second achieved in a test scenario, while remaining safe from attack.

If you are confusing, do not blame yourself. Here is a (very simplified) explanation of what these projects aim to achieve and the practical problems they face:

The DAG and blockchain are only ways to organize data in a decentralized network. Furthermore, a consensus mechanism is needed, a way to ensure that network participants agree on what is happening within the network. In Bitcoin, for example, this is done through something called Proof-of-Work, in which special network participants called miners employ computing power to solve a difficult math problem, whose solution "signs" a block of transactions. This makes it difficult for someone to create a transaction on the Bitcoin network, but it is also a terrible waste of energy.

An authorized consent mechanism is easier to protect, as it only accepts transactions from pre-approved participants. But the types of blockchain we are looking at here are unlicensed, which means that their consent mechanism must be resistant to certain types of attacks. For example, it must be tolerant to Byzantine failures, which means it can withstand a certain number of nodes on the network that are harmful (eg spread false information). It must also resist a Sybil attack, which reduces to falsifying identities to gain undeserved influence on the network.

When you have scalability and security in place (having in mind that the objectives are always moving), you still have the problem of governance. Ethereum, for example, does so centrally, with the Ethereum Foundation calling the shots (although it is always possible that the community "bursts" in a different direction, as it once was when Ethereum Classic was created). But it is also possible to insert a governance algorithm into the system itself.

Dfinity, Williams told me, invented new ways to achieve each of these goals. The project's whitepaper is a hard read for space experts, but Williams sat with me (for much longer than I expected) and explained it until I showed signs of understanding the basics. The Dfinity team has invented a completely new way of creating randomness, a difficult problem in cryptography. This, in turn, allows a new consent algorithm, allowing a very rapid definition (ie the amount of time necessary for a complete control of the network). Finally, for governance, Dfinity employs something called "blockchain nervy system", which is a type of democracy in which network participants can choose to automate their decisions based on the decisions of other participants they trust. It should ideally result in a fair system that self-regulates itself.

"It's not necessarily about being better than Ethereum, but about doing things in a different way."

For the layman, it is impossible to decide which of these systems is the best – and there are dozens of others that I have not even touched here. In fact, even the experts do not agree – they follow people like Dfinity's Dominic Williams, Ava Emin Gün Sirer, Of Ethereum Vitalik Buterin is Vlad Zamfir, EOS Dan Larimerand of Cardano Charles Hoskinson on Twitter, and you'll see that they continue to aim for each other, finding flaws in the technology of the other team. The adoption and use of real life will eventually solve this debate, but until then, all that most of us can do is follow it from the sidelines (ideally with some popcorn).

Ultimately, it does not necessarily have to be a winning situation. I asked Williams if Dfinity and Ethereum can coexist and he told me they can do it.

"It's not necessarily about being better than Ethereum, but about doing things in a different way," he said.

The when

Understanding when the debate will end up settling is just as difficult. But even with all the funding that went into space – ICOs collected a total of $ 6.3 billion in the first quarter of 2018 from the CoinDesk count – it seems it will take a few years for the next generation of blockchain technology to really mature.

Ethereum is planning to implement major changes in two or three years, but its roadmap is quite fluid. After its great launch, EOS must optimize and start showing results that has been promising; Cardano seems to be slightly behind, but his leaders hope that their slow, constant peer evaluation process will win in the end.

Projects like Ava and Dfinity have much darker street maps.

"We have such a revolutionary technology, we do not want to share it publicly until we're ready, who knows, we could have a big Apple-style event, when we're ready, to show everything we have," he told me. He never gave me a precise estimate, but Dfinity documents quote the first quarter of 2019 as a possible date for the launch.

As for Ava, Sirer told me that the project is currently in the early stages of fundraising. There will probably be an ICO along the line, but no date is set. "People contacted me as soon as the whitepaper hit the airwaves.There's already a lot of interest," he said.

This kind of optimism is common in space, even for projects that are far from being ready for the market. "Massively oversubscribed" is a phrase I heard about funding: VCs have entered the space and are now looking for the next big thing and often take advantage of the ICO run.

But beyond the ICO mania, some of these teams may be able to build something that deserves the name of "internet computer": a decentralized and democratic platform that allows you to run censorship-resistant apps, whose internal mechanisms they are transparent to everyone.

Disclosure: the author of this text has or has recently owned a number of cryptocurrencies, including BTC and ETH. The author has no interest, and has not recently had an interest, in EOS, Cardano, Dfinity, Ava, Aeternity or Codius.