Internet of Blockchains: How Networks of Distributed Ledgers Will Enable Scalability and Cross-Chain Value Exchange
A few years ago – in the early days of Blockchain – a lot of people were taken with the idea of a multifunctional chain on which all transactions could be handled.
After Ethereum was launched in 2014, its advocates were talking themselves hoarse about the transformative opportunities the platform introduced. Decentralized applications, they predicted, along with all sorts of value transfers would be executed exclusively on Ethereum from that point on, and no other networks would ever be needed.
However, that belief didn’t last long: experts saw major networks facing scalability issues when trying to increase their user bases and, also, they saw the frequent hacking.
After a while, there were but a few people left who supported the concept of the “one mighty chain”.
Now, most leaders in the industry embrace, quite sensibly, the idea of a multitude of blockchains. They encourage and often fund generously the developers who come up with promising and innovative blockchain tech, and they stress repeatedly the need to make these networks interoperable.
There are several projects out there that, seeing the market fit, concern themselves with bringing “Internet of Blockchains” to life. Today, we’ll discuss a few of them.
Why a Single Blockchain Won’t Suffice
Decentralization on Ethereum, some think, is not properly to be called decentralization. Even though there’s modularity on the blockchain, which stems from the smart contracts functionality it enables, the blockchain users are still protected by a single network. And if there’s ever a fail in terms of governance (check the DAO incident to see what we are getting at) people might incur disastrous losses.
There are also strict rules and a constant need to maintain consensus across Ethereum. Its developers, therefore, have not a freedom to experiment; they can’t implement changes quickly and test out, with immediate feedback, their innovations.
Bitcoin is too a prime example of how inefficient governance might lead to prolonged stagnation. The network, that was once expected to reshape our whole economy, has been suffering for years from the lack of meaningful improvements applied to it.
So, What is an “Internet of Blockchains”?
As we’ve mentioned earlier, there are now a few projects in the blockchain space that are planning to bring distributed ledgers closer. They want to launch networks of individual and interoperable chains that, according to the founders, will enable programmers to innovate, allow for quick value transfers and seamless scalability.
Cosmos’ Internet of Blockchains
The first such project we must mention here – one that has done an ICO recently and raised over $17m in about 30 minutes – is Cosmos.
These zones are built in a standardized fashion, sort of like web pages, and, due to their being interoperable, coins and tokens can be transferred across the chains with little effort.
Cosmos blockchains will all use Proof of Stake. A security deposit will be required from validators, malicious actors will be penalized and possibly lose their bonds.
The underlying mechanism behind Cosmos is Tendermint – the general purpose blockchain consensus engine which, too, has been developed by the Cosmos crew. Essentially, Tendermint is a development kit; a template, if you will, on which Byzantine fault tolerant (BFT) blockchains can be quickly manufactured.
Cosmos hubs, on the other hand, are blockchains that glue the zones together; they administer, efficiently, the communication between sub-chains and coordinate their interactions.
Initially, there will just be one Cosmos hub, to which multiple zones will be plugged into. But, eventually – once the network’s user base grows large – users will be encouraged to create their own hubs, too, using the open-source technology that Cosmos provides.
The native tokens of the Cosmos networks are called Atoms. A portion of them have already been distributed via an ICO the project has run earlier this year. The tokens will grant access to Cosmos’ decentralized organization, and, also, they’ll be used to pay transaction fees within the network when the system is running.
Those with staked tokens will be able to secure the network themselves, by validating blocks, or delegate their assets to others and earn commission afterward.
Besides that, Cosmos seeks to access the existing cryptocurrencies such as Bitcoin or Ethereum. It plans to do so via pegged derivatives – the blockchains with the same codebase as these large networks yet with an altered validator set.
Polkadot’s Internet of Blockchains
Note: The terminology the Polkadot project introduces varies completely from that on the Cosmos network: instead of zones Polkadot has Parachains; instead of a hub it provides a Relayer chain; instead of derivative chains it offers bridges and, finally, instead of Atom its token is named Dot.
Polkadot’s functionality resembles a lot the ways of Cosmos, yet there are a few distinctive features we should mention. Namely:
- It won’t allow as much sovereignty to its parachains as Cosmos does to its zones; it will require every element of its network to be plugged into the Polkadot security model and consensus
- It seeks to permit transferring data across different chains; not just tokens and coins.
The project is quite known in Ethereum circles. The pioneer engineer behind it, Gavin Wood, is also one of the main people behind Ethereum and the co-founder of the Parity Wallet.
The distributed consensus on Polkatod will be reached through PoS. So, validators will have to stake Dots – Polkadot’s intrinsic tokens – before they are given governing rights (staked tokens will allow voting to add, change, or remove parachains hooked to the relay chain).
Polkadot’s policy to have all sub-blockchains plugged into one consensus engine has both advantages and drawbacks to it. It allows programmers to focus on building features and not worry about the p2p consensus, but it also limits, substantially, the blockchains’ flexibility.
There are 4 roles on the Polkadot network that its members might assume after staking their tokens. They might be:
- Validators who secure the network and write to its history
- Nominators who give their bonds to validators thus indicating trust
- Collators who bundle transactions from all parachains into the proof of validity blocks and then submit them, unsealed, to validators
- Fishermen who are the network’s police; who try to weed out bad actors from the Polkadot ecosphere and, upon that, get a significant reward.
Polkadot and Cosmos are not competitors. They do provide similar services but, at the same time, they might complement each other and, conjointly, help boost innovation in the blockchain world.
Polkadot, too, ran an ICO which ended on October 27. On November 8, however, there’s been a hack (the second one) of the Parity multi-sig on Ethereum, and, as a result, the Polkadot ICO was frozen.
As of now, the founders, are still trying to figure out what happened and find a solution as to how unlock funds from the destroyed smart contract. Most likely, we’ll see Ethereum developers harf forking the network, once again, and rolling back the unnecessary changes.
Neither Cosmos nor Polkadot has yet launched a public-facing blockchain. We hope sincerely that the technology gives birth to a new generation of versatile blockchains and establish, smoothly, the interchain communication. But, being realistic, we also expect these projects to quite a few bumps on the way to bootstrapping the blockchain networks. Let’s wait and see how things pan out.
Would you like to learn more about the Internet of Blockchains concept? Have an idea for a blockchain application yourself? Reach out, we’ll gladly help you turn it into reality.