This blog is the second instalment of a three-part series of guest posts by Eddie Mitchell titled ‘Blockchain Generations’. Eddie is a seasoned writer on all things Blockchain and crypto and we’re delighted that he has agreed to become a regular contributor to Rhetoriq.
For a while the word ‘blockchain’ had been overshadowed by terms from Gen 1.0 such as ‘cryptocurrency’ and ‘Bitcoin’; at this point, it was the value of these fascinating digital assets that was garnering global attention, not the technology.
On the surface, Gen 1.0 established the validity of blockchain technology by demonstrating that it can make digital currencies viable, which was achieved with the solving of the double-spend problem.
In January of 2012, J.R. Willet published a document called “The Second Bitcoin Whitepaper”, whilst being rather ambitiously titled, at the time it was becoming apparent that “Bitcoin 2.0” protocols were being developed in a bid to upgrade the nascent bitcoin.
In a 2014 article, Ethereum founder Vitalik Buterin wrote an extensive piece on Ethereum, a network that moved past the Bitcoin 2.0 race, and desired to create a more versatile set of blockchain technologies and if anything, make it easier for other innovators to get on board also.
Vitalik explains what downfalls of Bitcoin that Ethereum intends to fix and how it can be upgraded entirely by making a blockchain network practical, beyond that of finance.
“Ethereum does not intend to be a Swiss Army Knife protocol with hundreds of features to suit every need; instead, Ethereum aims to be a superior foundational protocol, and allow other decentralized applications to build on top of it instead of Bitcoin, giving them more tools to work with and allowing them to gain the full benefits of Ethereum’s scalability and efficiency.”
Second Gen, When?
Reminiscent of the Web 1.0 to Web 2.0 transition, blockchains move through the generations is also hard to clearly define as it has been somewhat seamless and up for debate. With Gen 1.0 protocols still being developed and discussions as to whether or not we are in a third generation, or even approaching a fourth, the lines are a bit blurred.
The discourse appears a little muddied as some blockchain companies claim to be in possession of 3rd or 4th generation technologies and the global communities are engaging broader discussions to define these era’s with bullish optimism and cynicism at the forefronts of debate.
For clarity, the purpose of this piece is to gather evidence for the existence of Gen 2.0 and how it has shaped the industry today. The final instalment in this three-part series will look at Gen 3.0 technologies, if they are even in existence and speculate a fourth should there be substantial proof that Gen 4.0 technologies are at least in development.
Second Gen Tech
Ethereum is thought largely to be where Gen 2.0 technologies began, the introduction of a blockchain that could manage tokenized assets and facilitate trust agreements through Smart Contracts. Furthermore, in this generation, it became entirely possible for anyone to issue shares via the blockchain, thus popularizing the somewhat controversial crowdfunding method known as initial coin offerings (ICOs).
Gemini cryptocurrency exchange co-founders Tyler and Cameron Winklevoss aptly described the difference between these two generations: Bitcoin was referred to as ‘digital gold’ and Ethereum is ‘digital oil’.
‘Smart Contracts’ are often cited as the technology that makes the Ethereum and as mentioned in Blockchain Generations Part 1, the concept had been around prior to even Bitcoin dating back to 1994, created by Nick Szabo.
Smart Contracts remove middlemen and third-parties from traditional business contracts, they are self-managed on the blockchain and are executed by an event such as a date and time or the achievement of a stated aim, as agreed upon by the parties who entered into the contract.
Naturally, smart contracts aren’t perfect, implementing the tech in highly-regulated industries could prove troublesome given the often strict nature of these sectors. Amongst the legal issues surrounding smart contracts, it is argued that they are not prepared for the business world with some major security flaws still in need of correcting.
Furthermore, some argue that small to medium-sized enterprises (SMEs) will struggle to implement the tech due to high costs and technical complexity. Though as to be expected in the blockchain arms race, there are companies attempting to correct these issues that seem to be holding back mainstream adoption.
Decentralized Applications (DApps)
On the Ethereum network, the number of DApps is about to breach 2,000, these are applications built on the Ethereum network and they come in many shapes and sizes. From video games, social networks and media to identity management, insurance, and property, DApps are a major cog in the Gen 2.0 wheel and are supported heavily by smart contracts to accomplish tasks.
The scope of this software model is rather wide; some find it to be a “paradigm shift” with how the world utilizes technology. A successful example of a DApp is the blockchain-based distributed super-computer Golem.
Despite criticism of the technology, it would appear as though enterprises and governments are either adopting or investigating the technology at increasingly high rates.
It can be said for certain that the December 2017 – January 2018 crypto-market bubble extended the lifespan of blockchain technologies indefinitely by launching it into mainstream consciousness.
ICOs launched in 2017 and 2018 have also proven their worth with highly valuable returns for investors despite appropriate regulations in place for a majority of jurisdictions around the world.
Regardless, blockchain technologies are presently finding themselves disrupting almost every industry and sector. In June 2016, one of the ‘Big Four’ auditing and consulting firm Deloitte published a piece that demonstrated use-cases for smart contract technologies across various sectors, indicating that Gen 2.0 is a highly valuable and influential era that has begun turning the wheels of mass-adoption.
According to a report from Deloitte, the reality of mainstream adoption is stuck behind five barriers such as entry costs and legalities; the article believes that these can be overcome if appropriate steps are taken.
It is arguable that the potential of Gen 2.0 blockchain has not completely run its course due to the fact that the technologies or legalities of smart contracts have been fully explored and realized.
Though much like the move from Gen 1.0 to 2.0, it is almost impossible to tell how and when the advance to 3.0 will take place if it hasn’t already.
In the final part of Blockchain Generations, we’ll be taking a look at technologies that position themselves as 3.0 blockchains and break down some of the theories and beliefs of what this third era should look like.