All digital innovations required infrastructure, performance, and usability enhancers. Interestingly enough, there is always some kind of law that describes the evolution of the infrastructure of certain industries.
Moore’s Law
In the chip production industry every 2 years the processing capacity doubles. The progress is so consistent that thanks to the founder of Intel, it was called Moore’s Law.
At first, computers (mainframes) weighed tons, cost millions of dollars, and required experts to handle them, but a compounded 60% per year of progress in chips fueled innovations like the personal computer, the smartphone, smartwatches, and someday, possibly, nanochips that can be inserted into our brains.
Wright’s Law
The human being has the ability to learn from experience and find more efficient ways to produce. Wright’s Law is an observation that describes that every time we double the volume of production, the efficiency of producing it increases by 50%.
You can see it in how the cost of producing the Model T decreased over time or in Tesla’s batteries.
Nielsen’s Law
Another law that is used to talk about bandwidth is Nielsen’s Law. In average, bandwidth grows 50% annually. Thanks to this, services such as Netflix, WhatsApp, Instagram, Dropbox, or YouTube can exist.
Blockchain
Unlike previous technologies, all the innovation required to scale blockchains depends solely on software algorithms. This will generate an unprecedented speed of innovation to reach the goal of excellent user experience. For that to be possible it is important to increase speed, bandwidth and lower costs. In any scalability project, there are 2 ways to do it, vertically and horizontally.
Vertically
Vertically implies hierarchy. This is the problem that Layer 2 Blockchains are trying to solve through techniques such as Rollups. If the blockchain were a country, each Layer 2 would be a different estate that deals with issues internally (transactions) and when needed is sent (group of transactions) to the main jurisdiction (Layer 1).
Basically, rollups sacrifice decentralization and security to be able to process and bundle a larger number of transactions, but then use layer 1 to take advantage of maximum security and decentralization.
Horizontally
Scaling horizontally implies greater partitioning and distribution of information, lowering the individual load on the nodes of the network. This makes nodes faster, accessible, and makes the network more decentralized. One of the most popular techniques is Sharding, where each node needs to have only a fraction of the total network information.
Speed
In the case of speed, we are already very close to what is necessary with the Sharding and Rollups techniques. For reference, Visa can process 24,000 transactions per second, while Ethereum or Bitcoin do not yet reach 20. This will change with Eth2 soon reaching in theory 100,000 transactions per second. Solana and Polygon have already reached quite high limits (although for now they are only theoretical).
Bandwidth
Transactions are a very limited and small type of information. We need to be able to store more type of data. There are other blockchains such as Filecoin or Arweave that allow mange other types of information, like files (images, video, websites). This type of blockchains will allow many use cases yet to be seen.
Cost
The cost is general related to the size of the blockchain’s block (amount of transactions) and also relates to supply and demand. That is to say that eventually all blockchains would become expensive if they are in high demand. In this case, they will need to scale in transactions and size to be able to accommodate greater demand. This is why Ethereum is so expensive, it can’t handle the demand.
Conclusion
The interactions between infrastructure and applications creates an economic flywheel that further empower innovation. The more advances there are on the infrastructure side, new ideas and applications emerge that generate greater adoption and utility, the greater the adoption, the greater the incentives to continue improving the infrastructure and so on. Thanks to these virtuous circles, today we have life changing applications such as chats, social networks, streaming and e-commerce.
There is no law that defines the rate at which blockchain infrastructure increases because we haven’t been working on it long enough yet. It’s only been 6 years since Ethereum was founded. We are about to witness an historic scalability event with its transition into Eth2. It will be fascinating to see what new applications emerge.
To learn more about web3 technology, check out my other posts. For more information, feel free to reach out on Twitter, or fguespe@gmail.com
