Since the advent of Bitcoin, an entire industry has developed around decentralized networks. Where we stand today, in April 2023, is markedly different from how the situation looked a decade — or even a few years — ago. Seemingly every quarter there is a groundbreaking new development that moves the sector forward and expands horizons in unexpected directions.
This dynamic growth pattern has parallels with that which characterized the evolution of computer technology. Computer technology really kicked off nearly a hundred years ago when vacuum tube computers were invented. Today, that technology has come a long way and continues to shift forward, redefining the ways in which we live. In this article, we will take a look at how the development histories of these two industries stack up and use the evolution of computing systems to better understand how blockchain technology has advanced and where that technology is headed.
The origins
Blockchain
The idea of storing data in a chain was first formulated back in 1979, when, Ralph Merkle registered a patent for the prototype of a decentralized network, called the hash tree. To this day, his invention is bears his name as the Merkle Tree. In 1991, Merkle’s idea was taken further when hashes were linked into a chain, where the last cell of a hash becomes part of the next block.
Eight years later, in 1998, software engineer Wei Dai came up with a prototype of digital currency called B-money. Today, Ethereum’s Gwei, which amounts to 1 billion Wei, coins are named Wei Dai, are used to pay commissions for transactions on the ERC20 network.
Bitcoin
In 2008, the Bitcoin whitepaper was published. The author of this whitepaper is still not known. Authorship of the whitepaper is attributed to the still anonymous Satoshi Nakamoto. Bitcoin was a breakthrough because it made transferring digital money possible without the participation of centralized intermediaries, like banks, possible. In addition, transactions are carried out anonymously with bitcoin, and data on the network is impossible to manipulate. What’s more, the bitcoin network is devoid of state control, its issuance is transparent and its accuracy is confirmed by mathematical calculations.
Following the path forged by bitcoin, other cryptocurrencies appeared trying to build upon the successful formula of BTC. However, all the projects that emerged immediately in its wake were still only cryptocurrencies, meaning that each of these blockchains had their own coins. Some developers who liked the idea of Bitcoin, but did not like its implementation, forked off of it. For instance, Litecoin is a fork of BTC, presented as a more advanced version of the original blockchain network.
Issues with first generation blockchains
Expensive fees. As the popularity of blockchain networks grew, so did the price of gas for processing transactions. While the amount of fees on the networks remained unchanged, the actual cost when converted to fiat increased exponentially.
Slow transactions. Each subsequent update (soft and hard forks) sought to increase throughput. Some devs succeeded, but increased scalability led to vulnerabilities. The solutions used were raw, requiring more testing for proper implementation.
Limited functionality. Most users could not imagine how to make use of virtual currencies in their everyday life and these networks could only really be used as a means of tranferring digital currencies.
Non-ecological. The longer a PoW network is functioning, the more powerful the equipment required for its operation has to be. This leads to high energy consumption, which is both polluting and extremely expensive.
CPU — central processing unit
The history of computer processor development, in turn, corresponds to that of the development of other electronic components and circuit production.
Vacuum tube
The first stage of CPU development began with the creation of processors using electromechanical relays, ferrite cores and vacuum tubes. These devices were installed in special connectors on modules assembled in racks. A large number of such racks, connected by conductors, basically represented the first generation processor. Logically, as an incipient technology, they had severe drawbacks, such as low reliability and performance as well as high energy consumption.
Second stage
Ethereum
The Ethereum blockchain appeared in 2014, ushering in the smart contract generation of blockchains. At the time, it was a groundbreaking innovation that radically changed the situation. Smart contract blockchains greatly increased the functionality of decenralized networks.
The innovation, which seemed quite simple, turned out to be a serious shift. Thanks to smart contracts, blockchain networks have almost limitless opportunities, including:
- the issuance of individual tokens based on a parent network.
- the creation of sidechains and protocols.
- The emergence of independent platforms, including exchanges, wallets and applications.
Smart contracts have helped to create a broad infrastructure for a complex and narrowly focused technology.
However, the second generation of blockchains, despite its achievements, also had shortcomings. Ethereum was unable to solve the three problems other problems characteristic of first category blockchains. These are pollution, low throughputs and high fees. In 2022, Ethereum developers abandoned the PoW consensus algorithm, introducing a PoS (Proof-of-Stake) consensus protocol to the network.
The next generation of blockchains focused on improving scalability, reducing the cost of commissions and enabling cross-chain transfers.
Transistors
The second stage of CPU development began with the introduction of transistors. These were assembled on devices closely resembling modern day boards which were installed in racks. As before, the average processor consisted of several such racks. Despite many drawbacks, this second generation had considerable improvements compared to the first stage. These included increased performance and reliability as well as considerably reduced energy consumption.
Third stage
Solana
The industry received a large number of convenient tools with the advent of smart contracts, but could not take full advantage of them. Expensive commissions sometimes exceeded the amount of digital assets that had to be transferred. Additionally, the low throughput of these networks prevented the integration of services with large customer bases on the blockchain.
From the very beginning, the Solana network was built on the innovative PoS consensus. Currently, it operates on a PoH (proof-of-history) and PoS consensus algorithm. PoS allows validators to check transactions in accordance with the amount of tokens they hold, while PoH allows transactions to be timestamped and quickly verified. This theoretically allows the platform to process up to 710 000 TPS. However, this theoretical level of high performance has not been achieved in practice yet.
Microprocessors
The third stage of CPU development was ushered in with the use of microprocessors. Initially, microcircuits of a low degree of integration containing simple transistor assemblies were used. Then, as technology advanced, microcircuits implemented individual elements of digital circuitry, first elementary keys and logic elements, then more complex elements, such as, elementary registers and counters. Later, microcircuits containing functional processor blocks appeared. These were firmware devices and arithmetic logic devices as well as registers and devices for working with data.
Fourth generation
Near
The next generation of blockchains delivered the sharding mechanism. Near, perhaps the most notable fourth-gen blockchain, uses a delegated PoS blockchain with support for smart contracts with a sharding mechanism called Nightshade. Instead of creating separate chains (workchains), a feature of Everscale, Near chains are constructed as a single blockchain. Simply put, each block created on Near contains snapshots of transactions occurring on each segment of the other chain.
Each segment is supported by its own dedicated network of validators, and all these segments work in parallel. This means that Near can process about 100 000 transactions per second. Although this figure represents a high throughput, capable of supporting a wide range of use cases, it is hardly sufficient for accommodating large customer databases. Therefore, in order to accomplish the vision of Web3, making decentralized solutions available for each user and use case, a different architectural construct is needed. The main blockchains that emerged to resolve this issue by offering infinite scalability are Everscale, Cosmos and Polkadot.
Multi-core
The next stage in computer processor advancement is multi-core. These cores are basically processor units, which are part of any computer’s CPU. A multi-core processor, in turn, is a processor chip that has more than one processor on a single chip contained in a single package. A processor or core is a circuit that executes instructions or calculations. Due to the fact that a multi-core processor has more than one processing unit, it can perform calculations and run programs much faster than a single processor chip. A multi-core processor provides multiprocessing in a single physical package.
Fifth generation — the current stage
Everscale
Everscale achieves almost infinite scalability with the help of three distinctive solutions: dynamic sharding, multithreading and distributed programming. Together, they allow the platform to potentially process millions of transactions per second. This level of performance makes Everscale one of the few layer-one blockchains technologically suited for hosting large customer and data bases. Everscale can even be used for the issuance of digital currencies for countries with populations over 100 million people. Also, it is perfectly suited for almost any use case tied to the enterprise sector.
Speaking of the enterprise sector, Everscale’s architecture allows developers to create separate blockchains (workchains) for specific use cases. The respective workcains are endowed with maximum flexibility. They can be isolated from the rest of the network or set to communicate with other workchains inside the network. These workchains, in turn, communicate with the masterchain by sending block proofs. Additionally, they can be customized to have their own digital currency, virtual machine and fee structure. In terms of scalability, due to parallel smart contract execution, each blockchain (workchain) for a specific use case is capable of processing almost any number of transactions. When the number of transactions is high, the workchain just splits into threads (up to 256) to be able to handle all transactions.
Everscale’s high-performing technological stack has given it precedence at the forefront of Web3 solution development by virtue of its ability to adequately handle millions of users.
Cluster
A cluster is a group of computers connected by high-speed communication channels, representing a single hardware resource from a user point of view. Its principle of work resembles that of Eversclale’s parallel smart contracts execution. For instance, let’s say a project has grown to a size where one server cannot cope with the load alone, and there are no opportunities for vertical resource growth.
In this case, the further development of project infrastructure requires more servers of the same type with load distribution between them. This approach not only solves the resource problem, but also substantially increases reliability. Namely, If one or more components fail, its performance as a whole will not be disrupted.
It is important to provide the following key requirements:
Fault tolerance. There is the need for at least two servers that are simultaneously engaged in requests/traffic distribution.
Scaling. Adding new servers to the system should proportionally increase resources.
The future
Both blockchain and CPU technology are set to advance much further in the coming years. As for blockchain technology, we are strongly convinced that in the next five years, the following will occur:
- Most countries will implement their own digital currencies (CBDCs).
- There will be a mass rollout of Self-Sovereign Identities, or autonomous digital identities for all platforms. Thanks to this technology, enabled by blockchains, users will be able to independently determine what information they want to share with which platform.
- Most international trade will be conducted with the help of blockchain technology.
As for computer processors, the material part of processors will change due to technological processes reaching their physical limits. Once that occurs, there are a number of possible directions the evolution of the technology could head in:
- Optical computers in which light streams (photons) are processed instead of electrical signals.
- Quantum computers, whose work is entirely based on quantum mechanics. Currently, efforts are underway to create working versions of quantum processors.
- Molecular computers, or computing systems that use the computational capabilities of molecules (mainly organic ones). Molecular computers are modelled on the computational capabilities of the arrangement of atoms in space.
