Blockchain, though new, has already seen three generations. But, that doesn’t mean that every subsequent generation has been more successful than the previous one. Interestingly, all three generations continue to evolve and create their own space in the industry and are trying to emerge as winners in the highly overlapped space. Different factors determine which generation has the best chance. The three blockchain generations are:
- First generation – Bitcoin
- Second generation – Ethereum
- Third generation – Cardano
Let’s take a look at the various aspects that drive the popularity of the blockchain today:
- Early start – Blockchains with an early start (Bitcoin and Ethereum) representing the first and second generations undeniably already have a significant advantage. The blockchain kid inside me has grown up knowing these like family. If someone were to remove these two names from my vocabulary, I would struggle to relate to the blockchain world. However, does that mean that they are the best blockchain networks and generations? Absolutely not! That said, many blockchain enthusiasts would like these to become successful instead of going down the drain These contributions can come in any form, including building academic credentials around them, promoting projects around them, contributing to communities, etc.
The early start has provided a significant advantage in almost every industry, especially in the technology industry.
- Community support – This is a huge driver behind blockchain-adoption initiatives. Irrespective of how strong your blockchain solution is, if there is not enough community built around it, especially given how new this technology is, it is bound to fail. In my view, this is where I see some of the excellent blockchain initiatives go wrong. Compare this – the community of any third- generation blockchain is at least 1/8 to 1/10 of the first- and second-generation of the blockchain.
Blockchain adoption is not merely a technology decision. In the case of Ethereum, I see that there is action happening; there is an attempt to introduce sharding; there are changes in plans – but for of Ethereum, visibility is high and so is trust of the blockchain. Additionally, adopters are going to be wary of getting locked into a small group managing blockchain and dealing with associated challenges.
- Applications ecosystem – Blockchain adoption will fuel further adoption to a large extent. We are already seeing this with Ethereum, where a majority of recent ICOs and projects have been on the Ethereum platform. In fact, initiatives, such as Quorum from JP Morgan Chase, are also based on the Ethereum blockchain. There is a decent applications portfolio we are seeing on Ethereum across multiple industries, including Payments, Telco (check out the DENT Wireless project), supply chain, retail, and others – the wider the applications ecosystem, the higher the adoption opportunities. The world is an integrated space, and if applications don’t talk to each other, they have very limited use. Given the compatibility issues that would probably persist among blockchains, the wave is toward proven blockchains.
- Technology adoption – While this is an adoption battle, it is driven by whoever offers superior technology to the users. We know that scalability, privacy, security, immutability, and similar aspects define today’s blockchains. There is a constant battle to improve the algorithm and move away from proof of work, which is energy-intensive. Some of the new-generation blockchains are already built around architectures and algorithms that address challenges associated with previous-generation blockchains. Take, for example, Cardano, which claims that they beat the Ethereum blockchain hands down. It’s another matter that both still need to be proven in the real world.
The battle between blockchain generations will continue to be driven by technology. While other aspects in this article are quite important, if any specific blockchain generation is not able to address the technical aspects at the pace at which its user (or potential user) community is asking for it, it won’t take long to fade away.
- Real-world use cases – In my view, this is the absolute test of practicality for any blockchain where it solves a real-world example and proves that it can solve problems previously identified as unsolvable. The first-generation blockchain currently offers limited capabilities outside the currency-driven economy, while second- and third generation blockchains are more focused on the industrialization dimension of the blockchain. Ethereum again has got a strong head start. There are tremendous examples in industry where innovations are taking place over offered blockchain capabilities. I keep referring to one of my favorite projects ( DENT Wireless https://www.dentwireless.com/). DENT recently announced their 2019 roadmap as well and it has solutions for many cellphone users around the world, especially from developing countries.
- Exchange value – Now this may raise a few eyebrows. But I do believe that performance on the exchange is an important aspect for the blockchains and their associated tokens/currencies. Money follows the money. On the one hand, it is a clear reflection of the confidence blockchain has among the crypto enthusiasts and potential users. On the other hand, knowing that the market is not really product value-driven and has a speculative dimension to it, it can have a significant impact on the blockchain initiatives of different groups. The significance is higher for new blockchain initiatives. Considering a new blockchain initiative that has raised ICO investments and sees the serious negative performance on an exchange, investor (first set of potential users in many cases) interest and confidence on it will get shaken, doesn’t help anyone.
In no way, I am looking to conclude that the third generation of blockchain is losing this battle among the other generations. However, as explained above, it’s evident that they are struggling to boost adoption for their blockchains. Unless they take a holistic approach and address some of these aspects beyond improving the blockchain technology and capabilities, I don’t expect them to generate significant interest among blockchain enthusiasts to boost their adoptions.
Also, we looked at primarily public blockchains here. There is a whole other generation of permission blockchain (Hyperledger) which we haven’t considered. I will be looking at addressing Hyperledger separately sometime later.
Be mindful, we have the fourth generation of blockchain also coming up soon and this battle is going to get even more interesting. As we are not potentially getting to the phase of increased adoption, winners will emerge faster – or, let’s say losers will fade away faster!