I am not going to make this post long.
All I want to do is, talk about the absurdity and FOMO economics of the ICO space and why Blockchain tech is not yet ready for the promises it delivers. On that note, if you missed my last post about “why 99% of ICO will Fail” I recommend that you read that first
The reality of today is.
Blockchain promises this.
…But delivers that.
Too many people are feeding the hype and promise of this amazing tech way before it has time to mature.
So I just want you to read this point to understand that we are a long way before we can scale and deliver on the promise.
Big Elephant in the room is scalability
Blockchain consensus protocols like Bitcoin, Ethereum, Tendermint make a tradeoff between low transaction output and being an open source decentralized system vs a Centralized system. As the size of the blockchain grows, the requirements for storage, bandwidth, and compute power, goes up and up and up.
Why does this cause a problem?
Because every fully participating node in the network must process every transaction. Meaning each node, for the most part, needs to download and update the whole blockchain. Remember that blockchains have one inherent critically important characteristic — “decentralization” — which means that every single node on the network processes every transaction and maintains a copy of the entire state.
In order to scale, blockchain protocols must figure out a mechanism to limit the number of participating nodes needed to validate each transaction, without losing the network’s trust
I will give you an example with Ethereum
This is via Fred Ershan
“At the moment, Ethereum can handle about 13 transactions per second, which cuts in half to about 7 transactions per second for tokens (4.7m gas limit, 21k avg gas price for standard txn = ~220 standard txns every block, current avg block time 17s = 13 txns/sec, gas requirement roughly doubles for token transactions). And this doesn’t include more expensive smart contract execution.
By this estimate we’re roughly 250x off being able to run a 10m user app and 25,000x off being able to run Facebook on chain. And since these systems are open rather than proprietary, we’ll see applications bigger than Facebook. This estimate isn’t perfect because the dApp stack functions differently in places than the current Web 2.0 stack. But I believe it’s in the right ballpark. This is why I believe scalability will be the primary bottleneck for the industry for the foreseeable future.”
Where do we go from here?
We need to be working more on protocol layers for scaling for both scaling transactions and also scaling security protocols.
Some that come to mind are.
- Lighting network
- Ethereum Casper — POS
All of these are still under development and it will take years before we see the speed and security that we need in order to sustain the hype that blockchain promises.
And this why I stress the education part on ICO’s.
It’s scary when you see all of these ICO’s raise millions that are building on top of protocols that won’t be ready for years.
We have a long way to go!