The next big thing in blockchain and crypto? (Hint: It’s not NFTs)
Kyiv, Ukraine –News Direct– Blaize Technology
By Jad Malaeb, Benzinga
Every few years, a form of technology emerges that reshapes how people view and interact with the world. In 1983, that technology was the internet; today many say it is the blockchain.
A blockchain is a distributed ledger that stores data and validates transfers over an interconnected network. All information placed in a blockchain is first formulated into a “block”.
Blocks are added to the blockchain only after they are validated by network nodes. The requirement for consensus between the nodes before a block is placed ensures that the information is accurate and reliable. Additionally, any modification to an existing block will trigger a change in all the blocks that precede it, making all information about the blockchain immutable.
With the use of complementary technologies such as smart contracts and cryptocurrencies, blockchain became the basis for a 3 trillion dollars cryptocurrency value and the cornerstone of the wider decentralization motion. According to a report by MarketsandMarkets, the blockchain market is expected to be worth $67.4 billion by 2026. The question for investors, entrepreneurs and onlookers now is: What will blockchain look like in that time?
The potential development of blockchains
Currently, blockchains are divided into three domains and four types.
Public blockchains, which Bitcoin (CRYPTO: BTC), Ethereum (CRYPTO: ETH) and Litecoin (CRYPTO: LTC), belongs to the permissionless domain, a class of blockchains that have no central authority and rely on the cooperation of independent nodes for consensus.
Public blockchains are the main propagators of the decentralized movement, and they are by far the most well-known blockchains. Permissionless blockchains typically sacrifice transaction speed for security, as more nodes mean safer but slower data transfer.
Private and consortium blockchains, which Ripple and Hyperledger respectively belong to the “permissive” domain, a class of blockchains that have one or more central authorities that dictate node availability and functionality within a blockchain network. Private blockchains control who is allowed to be a node, and what functions these nodes have.
Private blockchains represent the individualization of blockchains. These blockchains tend to be specific to the central government’s purposes. For example, private blockchains are popular for supply management functions and insurance claims, two industries where the network’s function is enhanced by the restriction, rather than the popularization, of information.
Hybrid blockchains lie in the middle of these two classes and represent the third domain of blockchains. As more Web3 projects aim to improve security while offering decentralization as an option, hybrid blockchains are quickly becoming one of the most popular forms of blockchain technology and may very well be the next evolution of blockchains.
The Status of Layer-2 Blockchains
Most of the blockchains discussed above are layer-1 blockchains.
Layer-1 blockchains lay the foundation for the way users can expect the network to work. They not only provide the basis for all data transfer, but also define the rules, outline how consensus is achieved, how nodes work and other important requirements.
Achieving a high level of decentralization and security while maintaining efficiency is one of the major challenges of layer-1 networks. In May 2021, for example, the average transaction fee rose to $69 on the Ethereum network as a result of an overload of transaction requests. Bitcoin transaction speed, which reached a low of 4.6 transactions per second compared to Visa 1700 transactions per second is another template for layer-1’s scalability issues.
Layer-2 blockchains help remove the workload from layer-1. If the crypto industry was a kitchen, layer-1 blockchains are the chefs and layer-2 are the sous chefs. The primary function of layer-2 blockchains is to improve transaction speed and reduce the gas fees of layer-1 blockchains while layer-1 maintains the security and integrity of the overall system.
The popular layer-2 project Bitcoin Lighting Network, for example, makes Bitcoin transactions faster and less expensive by executing Bitcoin orders through their network. This helps Bitcoin achieve its promise as a medium of exchange. Similar Layer 2s are available for Ethereum, including Loopring, Optimism, and Ethereum Plasma. While many see the necessity of layer-2 blockchains for scalability as a shortcoming of layer-1 blockchains, others argue that they are a necessary ingredient in the recipe for global decentralization.
A layer-1 blockchain that can fulfill scalability, security and decentralization functions without layer-2 can have a huge competitive advantage; it ranks highly in the “second best” category.
The role of blockchain developers in long-term success
The importance of blockchain software developers like Blaize.Tech cannot be overestimated in the pursuit of the next evolution of blockchain technology.
Behind Ethereum, Avalanche and Cardano is an army of talented blockchain developers working together with a singular purpose. Nothing big in blockchain happens without developers. Blaize has already had a head start on its competitors, deploying over 400+ smart contracts and completing over 70+ successful blockchain projects.
Developers like Blaize help companies create blockchain systems, decentralized applications, smart contracts and enterprise solutions. Specifically, Blaize has all of these features and even offers developer tools like software development kits, allows non-blockchain projects to integrate the technology into their business, and offers blockchain-specific services like security audits and technical due diligence.
If you are interested in any kind of blockchain technology integration, Blaize.Tech is a destination.
DeFi & The Fall Of NFTs
In many ways, decentralized finance (DeFi) is the reason for blockchain’s popularization.
Blockchain’s first public triumph was Bitcoin, a DeFi solution that allowed ordinary people to send and receive currency without the need for central authorities. The current examples of DeFi projects all reflect the financial decentralization concept, but express it in different ways.
Aave (CRYPTO: AAVE), for example, is a DeFi project that allows the lending and borrowing of currency without the need for a central authority. Aave achieves this by using smart contracts, which are programs that automatically run on the blockchain when certain conditions are met. Automatic execution of smart contracts is what enables all DeFi services, including trading, investing, lending and borrowing.
Smart contracts have been central to the creation of decentralized exchanges such as Uniswap (CRYPTO: UNI), decentralized oracle services that Chain link (CRYPTO: LINK) and inter-blockchain communication platforms such as Polka dot (CRYPTO: PRKK). As a result of smart contracts and blockchains, the DeFi industry is expected to be worth $231 billion by 2030 according to a report by Grand View Research, but issues of hacking, security and trust must be resolved before the industry can move forward.
Similarly, NFTs are currently awaiting a “renaissance” of their own after their fall from grace in 2022. Last year it became clear that the majority of the value perceived by NFT traders was the result of one of the biggest bull markets of all time . As soon as the curtains pulled back, NFT values reverted to “sensible” valuations, leading many to believe that they had no value to begin with.
The conversation around NFTs is now changing. A growing number of NFT advocates argue that NFT’s value can extend beyond speculation, and advocates have begun testing this idea with the launch of NFTs. Utility NFTs give their buyers something more than just a stamp of ownership; they give owners access to benefits and rewards. Utility NFTs have been embraced by some of the biggest brands – from Nike and Dolce and Gabanna to Adidas and the Premier League. Many argue that NFTs will play a major role in broader thematic movements such as Web3 and the metaverse.
Safe, secure and user-optimized DeFi services and utility-based NFTs have a strong case for a place in the “future of blockchain.”
Using chain analysis to make educated investment decisions
An exciting domain for exploring the future of blockchain is on-chain analytics.
In traditional markets, investors have access to very limited information and must make predictive assumptions with many missing variables. In an environment as complex as the financial markets, trading on limited information only makes the investment process more difficult.
The breadth and availability of information that crypto investors can glean from on-chain analytics is changing the investment landscape. Essentially, chain analysis is the process of monitoring the flow of money into and out of crypto assets. Due to the large amount of information available, many crypto investors are able to make decisions with a much larger set of facts and information than their traditional counterparts.
On-chain analysis can involve a number of different ratios, calculations and observations. Some of these include monitoring key exchange flows, which can depict large-scale entry or exit of certain assets by examining exchange-based information. Others may include whale watching (ie monitoring large orders), while others may take a more detailed approach and record active addresses, supply distribution, mining revenue and realized profits or losses.
The use of on-chain analytics is considered by many to be the emergence of blockchain’s own “fundamental analysis.” Despite all of blockchain’s potentially life-changing properties, investing and trading are still two of the biggest areas of interest in this industry. On-chain analytics represent the first clues to the rise of educated speculation, and it may also play a major role in the future.
Where will Blockchain go next?
As discussed, there are many potential paths blockchain technology could take, and none are mutually exclusive.
On a private scale, blockchains have already been implemented in governments and companies, but this path has the lowest potential to impact the world. Public blockchains, although the most problematic of the bunch, create a whole new ecosystem of products that are independent of central governments.
There are suspicions that blockchain, as a peer-to-peer network, may have too many flaws, and that these decentralized approaches can be better achieved through alternative systems such as Urbit or Hedera. Nevertheless, thousands of entrepreneurs are pushing to improve blockchain’s trust and automation issues to take it to the next level, and there are many promising exploration opportunities.
This article was originally published on Benzinga here.
Blaize is a software company that offers blockchain development outsourcing solutions for various types of businesses. Creating blockchain ecosystems and decentralized application development are our core specializations. We have great expertise in building DeFi applications, decentralized exchanges, DAO, smart contract development and distribution, blockchain node development and creation of staking platforms.
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