2nd Generation Blockchain Technology has allowed for the rise of many ICOs, where developers build on the Ethereum Virtual Machine to produce their own tokens, with the intention of integrating the blockchain into existing operations, or coming up with new business models based on blockchain technology. However, there are limitations to 2nd Generation Blockchain Technology, and we now head on over to the newest innovations in the crypto-sphere.
3rd Generation Blockchain Technology
To simplify this, let’s take the example of Android and Apple, the dominant operating systems for smart phones. Android applications and Apple applications are coded separately; an Android coded application in Java will not be usable on Apple’s iOS, which requires the application to be coded in Swift.
Then came React Native, which allows for the application to be coded for both Android and Apple at the same time. This is pretty much the essence of what makes a 3rd Generation blockchain different.
While Ethereum is an amazing platform, all applications built on it run on their Ethereum Virtual Machine (EVM), and would take some effort to port over to another smart contract platform, like Lisk.
3rd Generation blockchain technology allows for the interoperability of platforms.
Example 1: Qtum (price as of writing, QTM $69.69)
Qtum currently operates on the Qtum Virtual Machine (QVM), which is a modified version of EVM. Where Qtum stands out is that it has an Account Abstract Layer (AAL) that allows for any smart contract platform to port up to it seamlessly, without having to learn a new code. Any smart contract platform can integrate into Qtum, which allows for connection between separate blockchains.
Earlier this year in the Blockchain Expo in Berlin, Ripple conducted a live demonstration of how a single transaction could go across seven different ledgers, from private blockchains to private blockchains to traditional payment channels.
They accomplished this with their Interledger Protocol (ILP), which is a ‘network of networks’. Rather than having to utilize multiple smart contract platforms to access services that are unique to each one, Ripple allows transactions to cross all platform boundaries.
Example 3: IOTA (price as of writing MIOTA $4.29)
Released in September 2017, IOTA aims to fix flaws in the current blockchain technology. Blockchain technology is poorly equipped to deal with micro-transactions: they are unable to accommodate a high volume of transactions per second, and each transaction will require a transaction fee. The reason for this is that the blockchain technology they use requires transactions to be bundled into ‘blocks’, and these blocks are subsequently verified by miners.
IOTA circumvents that be using a new version called ‘Tangle’, where each transaction is a block on its own that is verified by itself. And in order to do so, it is required to verify two randomly chosen transactions in the network, creating a ‘Directed Acyclix Graph’ (DAG).
This solves the issue of micro-transaction processing and fees, as the model is demand driven. The more transactions are carried out, the more transactions are verified, creating an indefinitely scaled model.
Blockchain technology is much more than just a mechanism that Bitcoin uses. It is a disruptive technology that promises to change the way that business are conducted, finances are transferred, or even how information is stored. Keep up to date with its latest developments at CryptoGrinders!