The growth of blockchain technology
With the invention of Bitcoin in 2008, the world was introduced to a new concept that revolutionized the whole of society. It was something that promised to have an impact upon every industry. This new concept was blockchain, the underlying technology that underpins Bitcoin.
Some describe blockchain as a revolution, whereas another school of thought believes that it is going to be more evolutionary, and it will take many years before any practical benefits of blockchain reach fruition. This thinking is correct to some extent, but, in my opinion, the revolution has already begun.
It is a technology that has an impact on current technologies too and possesses the ability to change them at a fundamental level.
Progress towards maturity
Around 2013, some ideas emerged regarding using blockchain technology for other applications instead of only cryptocurrencies. Then, in 2014, some research and experimentation began, which led to proofs of concept, further research, and full-scale trial projects between 2015 and 2017. In 2015, Ethereum was launched as the first smart contract programmable blockchain, which unlocked many possibilities. Interest in enterprise-grade blockchains originated around the same time. Around that time, we also saw several projects, such as Everledger, Quorum, and Corda.
In addition, the development of novel monolithic and multichain architectures rapidly evolved after 2018. Some key examples of novel protocols include Solana, Avalanche, and Polkadot, which we will discuss later in this book.
Currently, as of the second quarter of 2023, decentralized finance (DeFi), non-fungible tokens (NFTs), and tokenization in general are very popular applications of blockchain. They are already in mainstream usage by millions of users around the world who are engaging in DeFi services. It is expected that within three years or so, DeFi will stabilize into a mature mainstream technology. With all the activity and adoption in DeFi and NFT trading, we can say that to some extent blockchain is already part of our daily lives. Of course, further maturity is required, especially from a regulation and security perspective, but millions of users are already using blockchain regularly, either to make payments, trade NFTs, get loans, or play games.
See the following article for details on which platforms these millions are making use of: https://beincrypto.com/ethereum-defi-users-reach-new-highs-over-4m-growing-roughly-8x-in-a-year/
This trend is only expected to grow and, during 2022 and onwards, more and more research and development will be carried out. There will be more focus on the regulation and standardization of blockchain technology. Numerous projects are already production ready, and more adoption is expected in the coming years.
Progress in blockchain technology almost feels like the internet dot-com boom of the late 1990s.
Research in the scalability of blockchains, where blockchains can handle many transactions like traditional financial networks, has led to the development of layer 2 architectures and multi-chain architectures. Advancement in making zero-knowledge proofs practical helped tremendously in making layer 2 solutions a reality. Layer 2 solutions are under heavy research and development now, and many mechanisms have been introduced, such as Plasma, rollups, sidechains, Lightning Network, and many others.
As of 2022, blockchain is already something that many people use every day. With DeFi, NFTs, cryptocurrencies, and Metaverses, blockchain has attracted millions of users. Most of the attraction is because of financial incentives gained by the trading and investment of digital assets such as NFTs and other DeFi services; however, researchers and academics are also interested in studying and developing the theory of these applications and relevant protocols.
Undoubtedly, further maturation and the adoption of blockchain technology is expected in the coming years.
Rising interest
Interest in blockchain technology has risen quite significantly over the last few years. Once dismissed by some simply as “geek money” from a cryptocurrency point of view or as something that was just not considered worth pursuing, blockchain is now being researched by the largest companies and organizations around the world. Millions of dollars are being spent to adopt and experiment with this technology.
Also, the interest in blockchain within academia is astounding, and many educational establishments—including prestigious universities around the world—are conducting research and development on blockchain technology. There are not only educational courses being offered by many institutions, but academics are also conducting high-quality research and producing many insightful research papers on the topic. There are also several research groups and conferences worldwide that specifically focus on blockchain research. This research community is beneficial for the growth of the entire blockchain ecosystem. A simple online search of “blockchain research groups” would reveal hundreds, if not thousands, of these research groups.
There are also various consortiums, such as Enterprise Ethereum Alliance (EEA) at https://entethalliance.org and Hyperledger at https://www.hyperledger.org, that have been established for the research, development, and standardization of blockchain technology. Moreover, the Institute of Electrical and Electronics Engineers (IEEE) and the International Standards Organization (ISO) have also started their attempts to standardize various aspects of blockchain technology.
Many start-ups are providing blockchain-based solutions already. A simple trend search on Google reveals the immense scale of interest in blockchain technology over the last few years. Hot topics include decentralized autonomous organizations (DAOs), fully autonomous and transparent member-governed entities developed using smart contracts with no central authority. Meanwhile, NFTs, through which digital art is routinely bought and sold for millions of dollars, and Metaverses have been making the news.
A Metaverse is a computer-simulated three-dimensional environment. A convergence of our digital and real-world life, they provide a virtual world for the users to perform activities such as social interactions, engaging in business, and shopping. This virtual world is usually accessible via specialized hardware called VR headsets, enhancing the virtual world experience.
This is not a new concept; in the Web 2.0 days (the usual internet that we know and use daily), Second Life, World of Warcraft, and quite a few other similar platforms rose to prominence, as entities centrally owned by shareholders. In the Web 3.0 era (post blockchain), Decentraland and the Sandbox, among many others, are becoming popular, based on decentralized foundations and community governance.
In this book, we are going to learn what exactly blockchain technology is and how it can reshape businesses, multiple industries, and indeed everyday life by bringing about a plenitude of benefits such as decentralized trust, efficiency, cost savings, transparency, and security. We will also explore what decentralization is, smart contracts, and how solutions can be developed and implemented using blockchain platforms such as Ethereum.
While there are many benefits of blockchain technology, there are some challenges too that can cause hurdles in adoption and are being actively researched, such as scalability, privacy, and security. We’ll also take a critical look at blockchain and discuss its limitations and challenges.
We shall begin our exploration of blockchain by looking at distributed systems in the following section. This is a foundational paradigm on which blockchain is based, and we must have a good grasp of what distributed systems are before we can meaningfully discuss blockchain in detail.