Crypto and blockchains are only used by 1% of the world population. However, the growth is exponential and that is a success that the current blockchain systems cannot handle. You see this because systems become too slow or too expensive (gas parties) or because they even fall out completely. If blockchain wants to serve the other 99% of the world’s population, it will have to switch to something new.
In this blog I explain why we are switching to something else and what evolution awaits us.
Why we should switch to something else
An important goal of blockchain technology is to ensure that the 1.7 billion people who currently do not have a bank account will have access to financial traffic. This becomes ‘banking the unbanked‘ and would ensure that that 1.7 billion, just like us, has access to the world’s economy and data. That goal cannot be achieved with systems that are not fast or cheap enough when scaling up. After all, if a transaction costs more than 1 dollar, it will only be accessible to a limited extent for a third of the world. Many transactions on the blockchain are even more expensive now.
Current blockchain systems cannot develop further
Just a comparison. Blockchain systems are a bit like the Google play store/App store. They are a kind of basic layers on which programmers can build applications. In this case, the Google Play store/App Store is the blockchain itself, and the applications are the Dapps (Decentralized Apps) that are built on it. This building literally takes place on the bottom layer of a blockchain (the base layer). This base layer contains the rules that determine the blockchain. With the blockchain we program (write) new rules in the internet. As a programmer you can build layers afterwards. However, these layers will always have to comply with the rules of the base layer. This keeps a blockchain safe, but of course makes it difficult to develop it further.
Blockchain trillema
This trillema contains three aspects: 1 security, 2 decentralization and 3 scalability. Scaling in particular causes problems for many blockchains. Bitcoin is becoming too slow, Ethereum too expensive or even falling out. Many ways have been devised to solve this scalability problem. Often by packaging data to be validated differently, such as stacking, merging, cutting and mixing data blocks for transport. This often involves the problem that this is at the expense of the security of sending this data. The more actions you perform with the data, the greater the chance of theft or influence (hacks).
Too much data traffic
You can imagine the problem with scaling as a growing group of data that has to travel over a highway and starts to get stuck at the control gate. Both the control mechanism of Proof of Work (PoW) and Proof of Stake (PoS), which are used in the current blockchains, do not provide a solution for a stream of data at the future size. Incidentally, the way in which data is checked with blockchain technology is not called checking, but validation. This validation happens because a lot of computers or because computers selected at random at the same time evaluate data and its value in the same way and write the transaction (transition) on the blockchain. The fact that all the computers make and describe the same assessment at the same time is called consensus. But as described, this system is at its maximum.
The solution
The solution may be a directed acyclic architecture (DAY). A DAG uses a completely different consensus mechanism. DAG is not a blockchain like Bitcoin (BTC) or Ethereum (ETH) where blocks are placed one after the other. DAG is rather a (spider) web of nodes (blocks) that can all communicate with each other simultaneously and play a role in the validation of data that is sent. Data transactions therefore do not occur one after the other as in a chain (blockchain), but are linked to different blocks that are placed in a network. With new transactions, new nodes are automatically created so that the system grows organically. This growth not only makes the DAG system bigger, it also automatically becomes faster and safer. There are more nodes that will help.
Self-cleaning system for safety
The DAG network uses proof of reputable observation (PRO). PRO is a score that nodes get from state channels (companies) on the network. Each state channel monitors whether legitimate companies are being built on the DAG network. The score of the state channels with a high score outweighs those with a low score. In this way, the users (state channels) of the DAG network for self-cleaning power. Possibly worse companies will lose their influence in the system.
All data from around the world
DAG claims as described that organic growth can make them faster, safer and cheaper. They even claim to be infinitely scalable. With its first version of the network, DAG has shown that 6,000 transactions can take place literally within 1 second. The main network will go live in two months and it will be interesting to follow what happens then. Are they indeed infinitely scalable? They say they can handle all the data traffic in the world. That’s a very big claim. We’ll find out if that’s the case.
Communicate with all the data in the world
In addition to claiming to be able to handle all data, DAG claims to have a solution for the translation for all different blockchain. This is important because one of the biggest problems with blockchain today is that you have all kinds of data islands from different systems. Transferring data or crypto from one system to another has many drawbacks. For example, it can be technically complicated, unsafe or take place via a bridge that is not decentralized. This can lead to losses or hacks.
A step further
At DAG, they claim to have found a method that allows them to communicate with all blockchain and even all data forms in the world! So they are not only tied to blockchain networks, but can be linked to the phenomenon of data itself. They have a kind of translation engine that, as soon as you pull data over their network, automatically makes the translation to their own network. They therefore do not have to have a translation machine placed on the network of another party, like other systems. They say they can pull data from the source and translate it automatically on their own system.
This applies to all types of data. So as soon as something has to do with data, you could place and manage it on the DAG network. You can then have all forms of data available to you in a decentralized way, with its value built in. You can own it, store it, exchange it, send it or trade it with another person. Although I cannot fully comprehend all of the above, I do know one thing. If DAG can live up to its claims, it would be a revolution.
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