Blockchain, the Future IT Unicorn vs. Energy Consumption
This blog post gives you an easy-to-understand, quick overview of the past, present and future of cryptocurrencies focusing on their role in people’s lives.
Let’s get started.
Since its inception in 2009, blockchain technology has been heralded as one of the most disruptive innovations of this century. While the technology is best known for providing foundational support for cryptocurrencies, it also holds promise for a number of varying industries. Examples of these include governance, identity management, the Internet of Things, and supply chain management to name a few.
In recent years, the discourse surrounding the technological innovation has morphed from one centered on potential gains to one focusing on the implementation of said promise. There has been some success in this regard, as there is evidence of the adoption of blockchain-based solutions in various industries. Additionally, enterprise-ready blockchain solutions are being developed and deployed by well-known, respected firms in the technology sector.
However, by and large, the consensus is that blockchain technology is yet to deliver on much of its potential. This is not to say that innovation has not had significant effects on certain industries. To claim so would be absurd.
Bitcoin: A New Day
The release of the bitcoin whitepaper in 2008 heralded the dawn of a new day with regard to the paradigms and definitions attached to money and the transfer of value. Bitcoin, underpinned by blockchain technology, was the first implementation of the innovation.
The digital currency revolutionized the concept of money, especially as it pertains to the concept of central control. Prior to the genesis block of the Bitcoin blockchain being mined, the idea that a value system outside the control of governments or any single party could effectively function to meet the need of society was just that, an idea.
Considered a fever dream of cypherpunks and crypto-anarchists on the fringes of society, Bitcoin’s pseudonymous creator Satoshi Nakamoto amalgamated a number of preexisting technologies, such as time-stamped networks and cryptography, with his proprietary innovation, the blockchain, to bring the idea to life. He created a network where any number of independent parties could transact securely in a pseudonymous manner. Nakamoto had succeeded in creating a value system, backed by sound science and mathematics, where different parties, each acting with their own interest in mind, would work towards the same goal.
The launch of the Ethereum platform in 2015 catapulted the industry into the age of the blockchain-powered smart contract. Dubbed ‘Blockchain 2.0’ the entry of self-executing agreements powered by code into the market created a whole new host of opportunities with regard to the myriad ways the technology could be integrated into different industries.
In the same way that bitcoin turned a dream into reality, anonymous cryptocurrencies are showing that it is possible to have decentralized currency that also supports privacy and security, contributing to the greater conversation on the definition and features of money.
Privacy-centric projects can be characterized as the more idealistic players of the cryptocurrency market. These projects are also more likely to implement consensus algorithms that keep the underlying blockchain resistant to ASICs, the machines designed to maximize the mining process for the good of the owner. ASICs are considered worrisome as there are fears that they promote centralization within a blockchain network. In this way, privacy-centric projects are also tackling the problem of centralization within blockchain networks.
A Look Into the Future
It is an indisputable fact that blockchain technology is a very disruptive technology. However, it is not without its challenges. Digital currencies are grappling with fungibility and privacy issues while fears of centralization continue to grow. For blockchain technology itself, major challenges center on security fears and energy consumption.
Blockchain-powered platforms have been on the receiving end of a number of security breaches. From 51 percent attacks to vulnerable software, it is becoming increasingly clear that great care needs to be taken when crafting a blockchain network. Moreover, the threat of quantum computing continues to cast its shadow over present-day cryptography, every day bringing us closer to a world where past security practices are rendered ineffective.
Lastly, energy considerations are a significant challenge for the sector. Due to their design, public blockchains typically require a significant amount of energy to achieve a universal state. While the amounts needed are dependent on the specific consensus algorithm employed within the distributed ledger, many of the most popular blockchain-powered networks, such as Bitcoin and Ethereum, require large amounts of energy to operate.
In today’s reality, of growing worries over scarce resources and the global push to both reduce over-reliance on unsustainable sources of energy as well as reducing the total energy consumption, networks that require large amounts of energy are infeasible at worst and irresponsible at best.
What is clear is that the next blockchain unicorn must make intentional considerations, right from the design phase, to counter these challenges, in order to effectively serve its user base while ensuring its technology can stand the test of time.