In my previous post Cardano: A Blockchain with Privacy and Regulation, I laid out in broad strokes how we at Cardano are building a new kind of blockchain, which we believe will be a significant upgrade on the version of the technology we have now.
But why do we think we need to update blockchain, and what, in our opinion, does such an upgrade entail?
These are important questions because they lie at the heart of how we are approaching our work. In this post I would therefore like to examine in more detail some of the issues we are addressing.
A better technology
There is no question that Bitcoin, and the original blockchain that was invented to make it work, are technological and conceptual masterstrokes. By introducing a viable means of exchanging value directly without intermediaries, and so enabling decentralised economies, the blockchain has potential to become a truly transformative technology.
But blockchain technology is young, and first use – not to mention the fantastic success this technology has already had – has revealed shortcomings.
The situation is not unlike that in the 15th Century when Gutenberg introduced printing to Europe. The idea of printing sparked an intellectual revolution that changed everything. But almost immediately upon its release, people saw how Gutenberg’s original printing technology could be improved upon, and began trying to build better presses.
Having now had a decade of experience with cryptocurrencies and blockchain projects in many forms, we – along with many others in the community – see several key areas for improvement. In terms of the technology, we think these are the most important:
Speed. Because they offer direct value exchange, blockchains can settle financial transactions far more quickly than traditional intermediaries (where settlement can take days). But the consensus mechanisms they deploy tend to be too slow and cumbersome for things like point-of-sale payments or micropayments. Blockchains should be able to process high volumes of transactions of any size very quickly.
Scale. Successful blockchains can grow to impressive proportions, especially if they are meant for public use. Some are creaking under the strain, a lesson for designers of blockchains with aspirations of hosting global platforms. We think blockchains must be highly, if not infinitely, scalable.
Cost. The original blockchain technology forces those who want to validate transactions (and so win rewards) to carry out costly computations. This is an effective safeguard against fraud, but requires inordinate amounts of electricity. That makes the network costly to run and a harm to the environment. We believe blockchain technology should be inexpensive and environmentally friendly.
Security. The original blockchain was invented by a pseudonymous person or persons and the network has since been developed and maintained by a loose group of volunteers. Such open source approaches to large software projects can and do work remarkably well. But, as I wrote in my previous post, such an experimental “hacker” mentality cannot guarantee absolute security and safety of the network. We believe blockchain-based platforms must be able to provide such guarantees.
A better concept
The above are important technological requirements. At Cardano, we also believe in a set of what we might call ‘conceptual’ requirements that are equally important to what we are trying to achieve. Among these:
Privacy vs. regulation mix. The original blockchain was meant to be a way for individuals to transact directly and anonymously with each other outside the control of banks and governments. This guarantees privacy in financial dealings, a fundamental individual right. But full anonymity can be counterproductive, as can complete lack of regulatory oversight. Today most blockchain projects look to further either the aims of privacy or of regulation. To be effective globally, we must square the circle by finding the right mix of individual privacy protection and provision for regulatory control.
Governance. Public, decentralized blockchain projects rely on crowd-based governance models. This allows for democratic control of the network by its participants, which is essential to building truly decentralised economies. But if not carefully designed, such governance can go awry – leading to schisms and in some cases splits in the protocol and community. We believe that blockchain platforms must have airtight governance models that allow the community to engage in productive debate and then democratically take clear and binding decisions.
Funding. Many of today’s blockchain projects are designed for single use cases, and are developed and maintained by their communities. Large-scale networks designed for multiple or more sophisticated use cases will likely have more sophisticated maintenance and development needs. To be successful, a blockchain project should be able to adequately fund itself, both in terms of running costs and new investment.
In our opinion, addressing the issues mentioned above will be key to ensuring that blockchain technology can reach its full potential.