The Real Blockchain Trilemma – Tony Vazz
In this article, we’ll explore why blockchain as a technology is still only known within the reigns of crypto-anarchists, VCs and tech enthusiasts. Should we even stop saying blockchain altogether?
Ten years after Satoshi Nakamoto changed the world of value transfers, few outside the crypto bubble would know that he was the inventor of Bitcoin. And even fewer people know how its underlying technology works.
The blockchain has become a buzzword that raises company valuations and suspicious eyebrows at the same rate.
Some see it as the panacea that will make the bankers and politic apparatchiks collapse, while others see blockchain as the missing piece of the puzzle for a global digital dictatorship.
Outside of our little tech bubble, almost nobody knows anything about blockchain. I’ve conducted a little experiment with my dating app pen pals: over half of them quit the conversation instantly after I drop the “b” word.
Yes, that’s exclusively blockchain’s fault.
Jokes aside, if you go ahead and try to talk about blockchain with the average person, you’ll be met with surprised faces. Some may frown their eyebrows upon you. So, why this happen?
Are we failing to communicate blockchain advantages? Is the technology that complicated?
I may have found the reason, the real blockchain trilemma that is holding up adoption.
And no, I don’t mean the traditional blockchain trilemma.
Let’s have a look at both.
From the technology point of view, there is a big issue that blockchains haven’t been able to overcome yet: this is called the blockchain trilemma.
Vitalik Buterin, the founder of Ethereum, was the coiner of the expression, probably inspired by the CAP theorem.
According to Vitalik’s diagnosis, a blockchain can’t be scalable and secure while maintaining decentralisation. You can read the original piece here.
In a nutshell, the trilemma means that a given blockchain can achieve a maximum of two out of these three aspects:
This technological bottleneck has proven especially difficult to overcome so far.
Security + Decentralisation
Bitcoin is one of the most secure and decentralised networks out there. But in its current form, it can’t scale to compete in transactions per second with the likes of Visa. Ethereum and Litecoin fall under this category too, with some variations.
Inability to scale means that the network is too costly or too slow to run global services efficiently.
Scalability + Security
Ripple scales way better, and it’s also reasonably secure, but that comes at the cost of greater centralisation. The same goes for others like EOS with their Delegated-Proof-of-Work (DPoS) consensus.
Lack of decentralisation means that big players or central nodes can censor the network and manipulate its governance.
Decentralisation + Scalability
Smaller networks may be relatively decentralised and potentially scalable, but they have very few nodes operating. A lower number of nodes makes these systems insecure, very susceptible to malicious attacks.
Security is arguably the most crucial aspect of the trilemma: nobody wants to use a faulty, buggy or insecure service.
There have been many solutions proposed to solve this trilemma: sharding, Proof-of-Stake (PoS), Side Chains on Ethereum, Lightning Network on Bitcoin, increasing block size on Bitcoin Cash or Litecoin.
I’m not too worried about this trilemma though.
My vision of the future is an environment where different blockchains work together and complement each other, rather than a one-fits-all world.
Multi-chain and interoperability will make this trilemma look a thing of the past. So this can hardly be the cause of blockchain lack of adoption.
According to the Global Blockchain Business Council latest survey, only 5% of Americans own cryptocurrency. Let’s compare blockchain’s rate of adoption with other technologies:
Do you see that ugly, non-parabolic blockchain line? Something must be wrong here.
Ok, smartphones had lots of marketing behind them with Steve Jobs’ turtleneck keynotes. Having big companies behind technology undoubtedly accelerates adoption. But the cryptocurrency total market cap reached $830 billions in early 2018, that’s not peanuts either.
During the 2017 ICO fever, sports figures like Lionel Messi or Dennis Rodman placed crypto in front of millions of Instagram followers.
We should be reaching the mainstream public by now. So why aren’t we?
“Blockchain is the less understood technology, way ahead of Robo-advisers.”
Maybe it’s that technology is evolving too fast for society to make up its mind about it. Every quarter we get new projects that claim to be the real deal.
They are the chosen ones that will execute the real vision of Satoshi, or to paraphrase Gavin Belson: their vision is to make the world a better place.
Blockchain, Directed Acyclic Graph (DAG), proof-work (PoW), Byzantine Fault Tolerance (BFT)… Too many weird concepts and too many acronyms.
These are the less understood technologies, extracted from HSBC Trust in Technology Report:
1. Blockchain, a digital ledger (80%)
2. Robo-advisers, automated investment advice (69%)
3. Finance applications integrated into social media, like WeChat or Facebook (60%)
Almost one in four people (24%) have not heard of, or do not know what voice activation technology is, despite it being widely available in consumer smartphones.
It seems to me that something is going on here, beyond technology limitations — something like lack of communication and unaligned business interests.
Perhaps we should look at the inside of the blockchain world and look at the mirror to discover where are we failing so that we can improve.
That’s why after much meditation, I believe I’ve found the real blockchain trilemma.
To me, it looks less than a solid pyramid, and more like a moving wheel.
Any development project needs funding to scale their operations.
Developers need to deliver an excellent service that solves real problems for real users.
A critical mass of users is needed to attract more investors and make the development bigger.
And so on.
The good news is that we can easily overcome this trilemma, and there are some already doing it.
Investment + Developers
A blockchain project may have plenty of investment behind it, so they can hire developers to build their vision. But as long as real users don’t download their apps or start using their services, they will burn through cash and die off. Many late 2017 ICOs fall under this category.
The more significant case may be EOS. It raised about $4 billion and has plenty of dev horsepower, yet not many people are using their flagship apps like Voice.
Developers + Real Use Case
Another case is when a few developers put their minds together to create a new blockchain from scratch. Perhaps some members of an existing community split to do their own thing.
They may even have a great idea in mind and the skills to implement it, but they lack the business experience or marketing guidance. Due to these limitations, they rarely get the funding needed to take the operation to the next level, and users never get to see the final app.
This group is formed by thousands of projects whose names we don’t know because they fell into oblivion.
Real Use Case + Investment
The third scenario is a service with lots of users that wants to incorporate blockchain technology to some extent. Maybe because it is a better solution for its business. Perhaps it wants to lure investors into giving them money by using a buzzword.
These companies may have users and investors behind it, but a big chunk of blockchain developers will be scared away if the project is too centralised. Telegram, with its cancelled ICO or most recently, Facebook with Libra are examples that fall in this group.
This trilemma is way easier to overcome than the traditional one.
Some projects are doing it already, let me use one of them to illustrate this: Brave.
Brave is a browser-based in Chrome that is gaining a great deal of traction due to its simple proposal: a better browsing experience.
Published at Thu, 01 Aug 2019 13:42:41 +0000
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