The landscape of blockchain infrastructure has rapidly evolved in recent years, driven by the growing demand for secure and decentralised solutions for various industries.
Blockchain as a distributed ledger technology that powers so-called cryptocurrencies has gained mainstream attention for its potential to revolutionise industries beyond finance, including supply chain management, healthcare, real estate, and more.
However, the diversity of blockchains is only temporary and a reflection of the fact that the market has not yet found the best solution. In this article, we take a closer look at the blockchain infrastructure landscape and question common narratives that define blockchain technology.
The current blockchain landscape and its narratives
Blockchain infrastructure refers to the underlying hardware, software and protocols that enable the operation and management of blockchain networks. It includes various components such as consensus algorithms, wallets, nodes, and application programming interfaces (APIs), among others.
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The blockchain infrastructure landscape is diverse, with a wide range of platforms, protocols, and tools available for developers, enterprises, and users to build, deploy, and interact with blockchain applications.
The potential of blockchains as an infrastructure for applications and services has been known for some time. For business purposes, the scalability of a blockchain is its most important aspect. However, ideological narratives have shifted the focus from scalability to other aspects.
For example, many crypto advocates are trying to establish cryptocurrencies as an anti-institutional payment medium that can neither be tracked nor censored. Other narratives focus on the supposedly too-high energy consumption of proof-of-work, the consensus model, which was part of the original Bitcoin protocol.
Scalability and compliance in today’s blockchain landscape
The anti-bank narrative of so-called cryptocurrencies and the rejection of public records - the actual purpose of a blockchain - disqualify such digital assets as a publicly accepted medium and an infrastructure for enterprises. Regulation and compatibility with the law are an important backbone of every business. Furthermore, it has been proven that off-chain and second-layer solutions achieve only limited or severely limited scaling, which makes them unsuitable as a global infrastructure or a payment solution.
The view that proof-of-work does not scale and has an unnecessarily high energy consumption are justified judgments of the Bitcoin fork BTC, which made significant changes to Bitcoin's original protocol with Seg-Wit, among others. With the introduction of the block size limit, the developers of BTC have simultaneously abolished the scalability of this altered version of Bitcoin.
The fact that the original Bitcoin protocol scales very well is overlooked and can also be backed by a quote from Satoshi Nakamoto, a pseudonym of Dr Craig S. Wright, in a response to now-retired Bitcoin developer Mike Hearn in an email:
'The existing Visa credit card network processes about 15 million Internet purchases per day worldwide. Bitcoin can already scale much larger than that with existing hardware for a fraction of the cost. It never really hits a scale ceiling.' (Source)
The scalability of the original Bitcoin protocol (now implemented exclusively by Bitcoin SV), can be explained simply. Basically, the amount of energy needed to mine a block remains the same regardless of whether it contains only one or a billion transactions.
At scale, Bitcoin SV thus achieves an energy efficiency that even presumably energy-friendly consensus models such as proof-of-stake cannot match. Especially as the undisputed advantages of proof-of-work in terms of security, utility and reliability remain.
This raises the question of why several blockchains are needed at all if the question of scalability has already been solved by the original version of Bitcoin. A possible answer could be that different blockchains serve different purposes.
Blockchain Infrastructure Landscape - private, public or consortium blockchain?
It is a general assumption that private blockchains or consortium blockchains are more suitable for enterprise purposes for reasons such as security, privacy, transaction speed and cost-efficiency. However, all of these factors can be fulfilled by a scalable, public blockchain such as the Bitcoin SV blockchain.
For example, several strategies can be applied to ensure privacy in a public blockchain, such as encryption, off-chain storage of data that is referenced on the blockchain or Zero-Knowledge-Proofs. An interesting approach employed by the Blockchain-as-a-Service company ELAS is to create a private ledger on top of the public ledger, without limiting the type or quantity of data that can be processed.
If you want to learn more about the advantages of a scalable public blockchain over private permissioned blockchains, our eBook The fallacy of private, permissioned blockchains goes in-depth about the subject. A major topic that we would highlight here, as it is connected to the issue of having a versatile blockchain landscape, is interoperability.
Interoperability - The overlooked aspect when choosing a blockchain
Dr Craig S. Wright, the inventor of Bitcoin, often discusses the matter of interoperability in his presentations. For example in his talk about Industrial IoT (between min. 1:00 - 3:00), which he held recently at the IOTAIS Conference in Bali, Indonesia. To briefly summarise, he compares blockchain to the Internet, where there is just one standardised solution with the protocols TCP/IP. In the past, there had been several competing protocols - very similar to the blockchain market now.
The diversity of network protocols has unnecessarily complicated the interoperability of web applications. Companies that were supposedly sold better network protocols in the past subsequently had to incur additional costs and effort when they had to ensure interoperability with other networks.
The lesson is that most parts of today's blockchain infrastructure landscape - just like the network landscape in past decades - are unnecessary, and the vast majority will no longer exist in the future. Instead, it is the best choice to rely on the most secure, efficient and scalable blockchain available, which is Bitcoin SV.