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Blockchain 3.0 and Upcoming Updates

Basics of Cryptocurrency
Last updated May 22, 2020

Blockchain is supposed to be a new technology that people still struggle to find application for. Then, how does it come that people are already discussing Blockchain 3.0?

Well, that’s because the standard for Blockchain 2.0 was already established by the Ethereum platform with its dapps and smart contracts. And even if Ethereum expanded the area of possibilities for decentralized ledger technologies, people still felt there is a lot more room for improvement.

What is Blockchain 3.0?

What is Blockchain 3.0

Blockchain 3.0 is the third development phase for blockchain. As the first phase of Blockchain was inaugurated by Bitcoin, the idea of a technology that supports a new financial system evolved even more.

Bitcoin came not as magical internet money but as a digital asset that governments and banks cannot control. The transaction infrastructure has been maintained since then by a network of miners that agrees about a common blockchain through the proof of work consensus.

Although Bitcoin is the most spread and has the highest price on the market, it still is really slow and hard to use. Because of that, developers started coming up with slightly better alternatives. 

The strife for a cryptocurrency that is better than Bitcoin brought new ideas that materialized into the Ethereum platform.

The Ethereum crowd sale took place in 2014 and marked the milestone for Blockchain 2.0. Vitalik Buterin’s Ethereum platform went live on 30th of July, 2015, with 72 million coins minted, and brought smart contracts and decentralized applications to the market. 

This allowed to prove and expand the numerous possibilities blockchain can bring to the business world, aside from cryptocurrency.  

Besides the financial aspects, the community started to look into the blockchain issues 2.0 kept from the first generation and the new issues that appeared.

So, Blockchain 3.0 appeared as a sum of attempts to fix the current problems in the industry regarding privacy, scalability, and interoperability.

What’s expected of it?

Blockchain 3.0 expectations

In terms of Privacy 

As most of the blockchains are public, anyone can take a look and check what’s going on in terms of transactions and addresses. Therefore chain analysis and Dusting attacks are risks everyone has been taking by using cryptocurrencies.

Projects like Monero, Verge, and Zcash have attempted to solve these problems by implementing a mix of stealth addresses, ring signatures, and transaction data mixing. However, they are not considered to be a part of Blockchain 3.0.

But the third generation of blockchain will have to come up with a viable improved privacy solution.

One of them is considered to be MimbleWimble. It appears to be a leading blockchain 3.0 privacy protocol that replaces addresses and contains a scripting language with blocks filled only with inputs, outputs, and signature data.

In terms of Scalability

It’s no secret that Bitcoin is slow and reaches 10 transactions per second at best. And its PoW consensus mechanism mining requires the network to use tremendous resources.

Therefore, solutions like Layer Two, Proof-of-Stake (PoS), Directed Acyclic Graphs (DAGs) come to facilitate the performance of blockchain.

In terms of Interoperability

Blockchain and cryptocurrency are lacking an interoperability protocol. And currently, the only way to jump from a blockchain to another is only to take your cryptocurrency and trade it for another in a third-party exchange.

But for blockchains that would be used for purposes other than cryptocurrencies, this situation would be highly inconvenient.

Therefore, Blockchain 3.0 needs to come with a mechanism for transferring data and assets between blockchains without needing a centralized third-party.

Blockchain 3.0 projects breakthrough attempts

Blockchain 3.0 projects breakthrough attempts

AION

AION is the native cryptocurrency of the Open Application Network public infrastructure. It is based on a multi-tier blockchain system designed to address privacy, transparency, and scalability. Their main focus is on Blockchain Interoperability. 

The platform hosts and connects other blockchains in a similar way the internet connects websites. Its ecosystem is formed of 3 main components:

  1. The token bridge (for exchanging tokens);
  2. The AION virtual machine (which is a modified version of the Ethereum virtual machine that supports applications written in solidity and java);
  3. The AION API (which is an interface for developers to build dapps).

Zilliqa

Zilliqa is a cryptocurrency project that aims to make blockchain more efficient, scalable, and fast by using a hybrid proof-of-work consensus protocol that uses sharding on its mainnet. 

Blockchain bloat is a problem faced by many blockchains including Bitcoin and Ethereum. The bloat slows down the network and hikes the transaction fees. With Zilliqa’s perspective there could be no limit of transactions per second.

The model they are using works by dividing the work done on the network with throughput increasing for every 600 new nodes. Therefore, the network scales as it increases in size.

EOS

EOS is the native cryptocurrency of EOS.IO. 

EOS.IO is a decentralized platform providing fast and free transaction processing, supports smart contracts and dapps, and looks toward developing a platform that works as an operating system. 

The platform’s goal is to give an environment in which it is easy to develop applications and can support millions of transactions per second.

Current issues solving

Blockchain 3.0 solves issues

In terms of scalability and privacy, Blockchain 3.0 is sure to bring the industry to a whole new level. 

As most blockchains can handle tens or hundreds of transactions (and in a few cases thousands), jumping to millions of tps can place blockchain-based payment systems above traditional payment processors like Visa or Mastercard. 

By achieving such performances, blockchain payment systems could get a real chance of supporting a global, widely-adopted financial system.

Also, by improving the level of privacy on the network, Chain analysis and Dusting attacks will be less likely to happen.

And consensus systems, other than Proof of Work – like Proof of Stake or Directed Acyclic Graph – will create a blockchain without mining, hence reducing energy consumption.

Key Takeaways

  • Blockchain 3.0 is the third development phase for blockchain. It represents a sum of attempts to fix the current problems in the industry.
  • The third generation of blockchain is expected to come with superior interoperability, scalability, and privacy.
  • Some of the most prominent crypto projects that have positioned themselves as Blockchain 3.0 are Aion, Zilliqa, and EOS.
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