Alternatives to Blockchain Technology?
Blockchain is the technology making the headlines, but what are the alternatives to blockchain tech?
The rise of crypto, blockchain, and decentralised ledger technology is one of the biggest stories of the last five years. From illicit dark web purchases to a viable store of value, the success of Bitcoin is well known. However, it hasn't always been plain sailing. The road forward has been dogged with issues of scalability, security, and speed. This is what is known as the blockchain trilemma. It assumes that to have strength in one, the other two must be compromised.
As we know, iterations of some of the original chains can be slow and expensive. The expensive cost of Ethereum gas fees is well documented.
This then begs the question – are there any alternatives to blockchain?
Blockchain fans have long argued that 'decentralisation is better'. However, with significant scalability issues, this is often not the case. Centralised databases can combat this problem due to their ability to focus all of their resources at once. Take VISA, for example. The world's largest payment network can process up to 24,000 transactions per second which, compared to Bitcoin's seven and Ethereum's 20, is still light years ahead.
A centralised ledger is a system that tracks and records every transaction controlled or handled by a single authority. This could include assets, liabilities, equity, revenue, and expenses. Like a centralised database, a centralised ledger is used to record anything which holds financial value and acts as a central hub for all financial management. While centralised ledgers are good for efficiency and ready access, they are vulnerable to user mismanagement and hacks.
As the name implies, a distributed database is a database spread across multiple computers and networks. The primary advantage of a distributed database is the ability to provide efficient, low-cost, and secure data access due to the network's design. However, when network traffic is high, distributed databases can also be notoriously slow and expensive to run.
The volume of data stored in backup files continues to grow as our reliance on digital networks expands. The demand for data storage has seen an exponential rise in cloud solutions from tech giants such as Amazon Web Services and Google Drive. A combination of distributed and encrypted segmentation and the use of blockchain basics such as hashing and public/private keys ensures that cloud storage continues to maintain its reputation for robust security against motivated hackers.
In a similar vein to the DLT concept and based on the principle of peer-to-peer technology, decentralised storage solutions provide users with a highly secure and scalable option. As in a nodal network, each user is responsible for managing their portion of the storage system, which provides a resilient and robust filing system.
With Bitcoin recently celebrating its 14th birthday, it is safe to say we are still in the early days of blockchain technology. However, the demand for open-source code and sharing of ideas has meant the industry has developed rapidly since the days of Satoshi Nakamoto's white paper.
Thousands of blockchains are available on the market, resulting in some fascinating iterations of the original concept of a distributed ledger. One of the major developments is that of the Directed Acyclic Graph (DAG), often referred to as 3rd generation blockchain technology (Proof of Work being 1st generation and Proof of Stake being 2nd).
Generally speaking, DAGs rely on a 'conceptual representation' of a series of activities instead of blockchain's linear data structure. With each project developing its own interpretation, DAG-based blockchains are proving infinitely faster than their traditional counterparts.
For example, IOTA uses a DAG protocol known as The Tangle. It allows transactions to be added in parallel rather than in a linear fashion. Meanwhile, DAG blockchain giant Hedera uses a 'gossip' network design that ensures nodes only transmit the minimum of information at random, leading to lightning-fast speeds of 10,000 transactions per second.
As we can see, the expansion of peer-to-peer technology has led to the growth of a broad range of commercial solutions leaving 1st generation protocols such as Bitcoin exposed and seemingly underdeveloped. It is, therefore, easy to see why upgrades like Lightning Network are eagerly anticipated.
Meanwhile, the team behind Ethereum proved the necessity of upgrading dated technology last year when it transitioned from a Proof of Work to a Proof of Stake protocol in an event known as The Merge. The popularity and success of this upgrade, alongside the numerous options, some of which I described above, show that there are many alternative avenues for blockchain technology. This shows that it is imperative that blockchain technology adapts to changing demands.
Author: Brendan Beeken
Moni Talks Founder and Chairman Brendan Beeken is an entrepreneur, commercial strategist, investor, and philanthropist. He writes on a wide range of subjects, including cryptocurrency, decentralised finance, blockchain, business advice, and professional wellbeing, for news and business websites, as well as Latest Moni and his personal site, brendanbeeken.com. Brendan draws from his own research and more than two decades of personal experience in business to offer a unique insight, perspective, and commentary on diverse subjects. He is passionate about making the cryptocurrency space more accessible and encouraging safer and more responsible trading and investing. Brendan's LinkTree is https://linktr.ee/brendanbeeken.