‘Blockchain’ is fast becoming something of a buzzword – especially in those industries (financial services for example) that currently rely on third party intermediaries (e.g. commercial banks) to facilitate transactions and which are therefore most susceptible of being radically disrupted and transformed by this revolutionary new technology.

A chart about the web searches for bitcoin, blockchain, and cryptocurrency

New examples of blockchain technologies are now springing up all over the place; a few take centre stage, while others more or less quietly fade into the background. The pace of innovation is fast and furious. So much so that the number of coins, tokens, and assets has been steadily increasing and this trend looks set to continue.

A chart about total market capitalization of cryptocurrencies

Although the digital currency industry is still very much in its infancy, it has already become clear that one blockchain – or one coin – cannot contain all the features required to satisfy all the use cases being envisioned. The ‘Swiss army knife’ approach to problem solving usually doesn’t work, and we shouldn’t expect it to work this time either. Thus instead of there being just one coin with all the solutions we will continue to see more and more coins being developed each with their own specific solution and service.

So far, digital currencies have more or less been connected to the old infrastructure and to each other by centralized third parties. The digital currencies and blockchain applications do not yet offer that much advantage compared to the services already in operation (such as central banking, cloud storage). To deliver on their superior potential they (or at least the best of them) need to become part of a self-sustaining blockchain network.

An easy way to understand the blockchain and what it needs for widespread adoption is to compare it to the Internet. There are a number of similarities between them, in particular they are both disruptive innovations, open sourced, and decentralized. Moreover, the Internet is made up of individual websites, while the blockchain network is made up of individual blockchains. Together, websites form a network and it’s reasonable to assume that the same will happen with blockchains as well.

The different digital currencies (or blockchain applications) aren’t so much competing with each other as they are competing with the old infrastructure and its established ways of doing business. The Internet is competing against the traditional means of communicating information, and the blockchain is competing against the traditional means of verifying ownership*. When one blockchain gains mainstream adoption, all the other blockchains benefit as well.

A website in itself doesn’t offer the consumer much if it’s not connected to the whole network of other websites. Each blockchain also has its own purpose, and the more developed the network of blockchains becomes, the more achievable the purpose will be. In the future there will be more and more individual services that couldn’t function without the support of other blockchains. You wouldn’t build an ‘all-in-one’ website, that for example tried to function as an independent search engine (in competition with Google etc.) and also as a merchant website. Similarly you shouldn’t try to create an ‘all-in-one’ blockchain platform that tried to meet all possible use cases. You can’t be all things to all people and it’s counter-productive to try.

The Internet made its first public appearance in the early 1990’s, but it wasn’t until the start of the 21th century that it really started to disrupt the market. There are still phone lines, radio towers, and TV antennas, but they are becoming less and less relevant. Will they still be here in 30 years? Why would a radio show continue to be broadcast using the old infrastructure if everyone has access to the Internet? Put another way: why would anyone continue using third party dependent systems with all their attendant risks if they didn’t have to?

At first it might have been hard to imagine how individual and mostly isolated Internet websites could ever form a network of interconnected services and how they would disrupt the established markets of that time. Yet they did, and so will blockchain technology.

Conclusion: there won’t be one coin – but many, with each delivering a specific service in competition with any alternative blockchain solutions, whilst at the same time doing so as part of an independent, self-sustaining network of blockchains. It will only be as part of such a network that blockchain technologies will be able to gain mass market adoption and thrive.
*Traditionally ownership of assets or other property is verified by a trusted third party, but this is no longer necessary as the job can now be done much better and cheaper by a peer to peer network, the ‘blockchain’, that provides a permanent, mathematically enforced, cryptographically secure, unchangeable record of who owns what.

 


Author: Audo Kryptowitz

Editor: Robert Bold