The world’s perception of digital interactions is changing in a profound way.
From blockchain to federated data networks, to social media that lets you switch algorithms — the internet is shifting to a much more modular approach when it comes to data.
With hard signatures, and paper contracts, fading into their digital counterparts, the reliance on systems that can properly manage this new paradigm shift is more imperative than ever.
Blockchain in particular has been hailed as the killer of traditional business dealings — as it has been done in the last 20 years — replacing paper with binary, so to speak. Autonomous smart contracts, digital signatures, and verifiable digital identity all are prominent features of this new internet that make it that much easier, and oftentimes safer to conduct business.
This safety, or rather trust, is a crucial factor in ensuring these digital interactions are valid.
The original intent of Bitcoin, the first real usage of blockchain, was to provide a verifiable, digital ledger of truth without any authority. It achieved this through an intense consensus algorithm — or in simple terms, an algorithm that determined whether a transaction or block was legit or not.
Over time, however, people didn’t want to just verify the truth of Bitcoin balances — they craved more. They craved the need to have an undeniable, trustless source of digital truth for interactions beyond finance.
There was a problem — scaling this trust beyond monetary balances, and more importantly, to a world of potentially billions of users, proved to be computationally expensive. Trust was gained, yes, but the cost of running such a system proved too high to be practical.
At least, as it stood, blockchain scalability became the primary issue as of late.
Fundamentally, the concepts of blockchain as a generator of truth are perfect for many applications. The question is, what tradeoffs are needed to achieve a balance of utility, cost, and practicality? Is blockchain the end-all-be-all solution for data aggregation?
Blockchain has three primary components that allow it to be a truthful, state management machine. I’d like to say a huge thanks to the guys over at Chainlink for putting together these crucial aspects — they summed it up really well:
As most know, blockchains are made up of a network of nodes. Most nodes, or rather “full nodes”, are responsible for the following.
- Distributed computation (most often referred to as “decentralization”) — deals with the resources or steps needed in modifying the chain’s state.
- Storage — stores an (often) full copy of the chain’s state*
- Consensus — how nodes reach a conclusion on the correct, or true, state of a network. Consensus algorithms are crucial, as they determine what version of the ledger to propagate.
Each aspect is computationally expensive and tricky to manage in a distributed scenario.
Blockchain’s aim is to balance the following: security, decentralization, performance, and scalability. Usually, when one is increased, for example, security, something else gets sacrificed — such as performance.
A prime example of this war of balance is Bitcoin. It’s very secure with Proof of Work, however, it suffers at the cost of slower block confirmation times and scaling issues. On top of that, the market is looking for applications beyond merely transacting crypto.
With concepts such asWeb5 by Jack Dorsey coming into play, it’s imperative to realize that blockchain is only a piece of the puzzle — however, it is a crucial one. An organized, robust ledger can be invaluable when ensuring the trust is kept within any sort of system.
As established earlier, blockchains, if configured correctly, can serve as a source of truth. In simple terms, they are able to allow anyone to verify the exact time an event took place, all contextual data surrounding it in chronological order.
A common misconception that arises is that web3 or decentralized apps that use the blockchain for non-monetary applications have to store all data on the chain. While for bits of relevant metadata this is fine, in general data should only belinked to the blockchain — not stored.
In order for a sustainable web3 (or 5, or 6) future, it’s necessary to realize that blockchain is simply like a huge, verifiable directory of truth. It does not store the truths themselves, but rather contains methods for validating and storing events in a chronological, accessible order.
Think of it like a search engine — except, everything submitted is correct and true (assuming the data is valid already), and the design of each instance of a ledger is true to specific contexts.
However, with interoperability, we can also ensure that this sort of data compatibility is portable across networks. In other words — if a hospital needed logistical information, they could make the necessary means to get it in a matter of seconds.
Blockchain is merely the tip of the iceberg — but it does represent the future of data interoperability, cohesivity, and security.
It’s not about blockchain or web3.
It’s about control over data, how it propagates, where it ends up, and whether it’s truly considered homogeneously secure or not. The only way for that to change is to change how cutting-edge tech like blockchain is approached. The needs of many industries are now profoundly different than they were a decade ago. The internet is unstructured — its time to structure it again, only with purpose, scalability, and security.
Lead Image source.