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Solving the Blockspace Challenge to Empower the Next Generation

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A decade ago, Netflix had a physical media library that no other archive of films in the world could match. That library was over 100,000 titles long with a staggering degree of diversity. At its peak, the number of DVD titles Netflix had would have dwarfed the entire streaming libraries of major streamers today. But streaming was the future.

The Future is Decentralized

Organizations are in the adventure of a lifetime. Things are changing forever for the better. Today, getting posts by mail is no longer the norm, it is outdate. Every industry and institution must evolve to address new competitive forces and create value differently. Microsoft identified this before 2018. Since then, their products have had a cloud-first approach. They focused on the early cloud adopters and literally attempted to accommodate those who were late to the party.

As more and more people embrace decentralized finance protocols, NFTs, and cryptocurrency, there is a need for more blockspace. This is similar to the way streaming became possible when there was more bandwidth available. For instance, in 2020, many U.S and E.U cities witnessed over 100% increase in broadband speed.

To Navigate Transformation, Begin with a Pilot

As a matter of necessity, many people worldwide have embraced digital technology. This is the new normal. Future-ready organizations now have a digital-first approach to their products. The next frontier is blockchain. Today, Block space, like bandwidth, is rapidly increasing but costly and limited. This represents an obstacle to scalability in Web 3.0.

The only amount of decentralization that people want is the minimum amount necessary for something to exist. This is the reason the internet apps use the minimum necessary bandwidth to exist. In 2022 many Web 3.0 entities are partially centralized even though they know that decentralization is the future and blockspace is limited.

With a tool cryptofees.info where we can visualize the buy-side demand for block space. The fees can be likened to revenue for each layer of one chain and this gives us some basis for coin valuation. Visualizing growth in cell sites applied for blockspace is more difficult because a block on one chain is not exactly the same as a block on another chain.

Striking a Balance

We understand the arguments on both sides of the blocksize debate. When bitcoin blocks grew to 1MB, other chains arose to provide the need for blockspace. Invariably, Bitcoin alone could not satisfy the need for block space, hence the need for other side chains and other blocks to emerge. The future of blockchain is a multi-platform environment. There need to be many blockchains because no single blockchain can satisfy the need.

At the moment Ethereum has seen its usage rise and it cannot fulfill the demand for its blockspace at the price that users want to pay. At the last count, there were over 184,000,000 unique Ethereum addresses. The daily average growth is close to 100,000 new addresses.

Source: Etherscan

The Bitcoin ecosystem is also working on scaling through the lightning network and other developments. Similarly, the Ethereum ecosystem is also developing through proof of stake optimistic roll-ups zero-knowledge roll-ups. These are the efforts to meet the demand for the increasing demand for block space.

ZK-Rollups

ZK-Rollups are smart contracts that scale the Ethereum network by processing multiple transfers off the main blockchain. This is one of the options being developed for layer 2 to increase scalability. By transferring processing into a single transaction, you increase scalability.

You can bundle hundreds of transfers into a single transaction. This is a major breakthrough because it solves some of the scalability problems. For instance, reduced gas fees because you can now bundle multiple transactions into one. Also, it solves the blockspace challenge as it reduces computing and storage resources for validating blocks.

A zero-knowledge proof approach publicly records the validity of blocks on the Ethereum blockchain. As such, it reduces the amount of data in a transaction. Therefore, we can validate a transaction without exactly seeing the contents- hence the term zero knowledge. It’s like being able to prove you are above 18 without showing your ID.

Increasing Utility

Bitcoin is both a store value and also has utility. Ethereum has utility because it was the first blockchain with smart contract capabilities. Most NFT marketplaces and decentralized exchanges are built upon Ethereum.

As we mentioned earlier, a byte of blockspace on one chain is not the same as a byte on another chain. They are different levels in security based on need. For instance, the Bitcoin network needs to be more secure than most other blockchains because many of the new blockchains do not have information as valuable in them as Bitcoin.

Conclusion

In their most abstract form, blockchains are an innovative approach to organizing economic, social, and political interests. Rather than the next-generation computing platform, blockchains are an institutional technology. Somewhat like the invention of publicly traded joint-stock companies around 1602.

Due to the proliferation of blockchain activity, there is a high demand for blockspace. The strong market demand can be solved by with multichain environment with independent and interoperable layer-one chains that encompass decentralized projects such as identity, DeFi, and smart contracts.

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