Directory Of Alternative Cryptoeconomic Networks And Why They Matter

No blockchains allowed.

The Scaling Problem

There have been concerns about Ethereum’s scalability for a long time and even the most ardent believers must accept the fact that at current levels there is no way Ethereum could handle the throughput necessary for a mainstream consumer application. This has been further highlighted by the moderate success of CryptoKitties, which caused massive congestion in the network.

Too…many….kitties... Image from https://motherboard.vice.com

Believers would of course point to the various proposals that have been put forth as possible avenues to scale Ethereum. Payment channels like Raiden are cool and will be very good for certain use-cases where both transacting parties are known, such as in remittances, but will not help the broader consumer use-case. Sharding, Plasma, Probabilistic Micropayments and others are all still theoretical unknowns and each have limitations of their own.

Now, I want to believe that the incredibly inventive crypto-community will solve this problem, but I fear that the issue isn’t that we haven’t come up with a solution, it’s the blockchain itself. The requirement for global consensus essentially guarantees that the system won’t scale without taking transactions off-chain. Off-chain scalability is of course possible, but seemingly defeats the purpose of decentralising things in the first place.

As the fine folks at Raiden describe it:

“Blockchains don’t scale well because there needs to be global consensus on the order and outcome of all transfers. Every participant needs to learn about all updates to the shared ledger. Hardware and bandwidth constraints set a limit on the number of updates per second that can be shared in a decentralised network.”

Systemic Risk

Regardless of the issues mentioned above, it’s clear that blockchains are great for certain use-cases, which don’t require high throughput, but do require global consensus. For example registries of any kind would not make sense on any other technology. Registries have a number of use-cases, such as land titles, stocks and other assets, etc.

However, people are building all sorts of things on top of Ethereum, many of which require tremendous amounts of throughput if successful as products. Ethereum would already struggle to handle one applications with high throughput requirements, but we are building tens if not hundreds of these applications.

This is a huge problem, because it creates a significant amount of systemic risk around Ethereum. What happens if we don’t figure out scalability for Ethereum and almost all of the projects building on top of it, with large amounts of money, suddenly scramble to get off the platform causing the price to plummet.

Consider for a moment that most new tokens are ERC-20 tokens, most hedge funds primarily hold a portfolio of various ERC-20 tokens and the technology might simply not work. It would be a bloodbath.

Image from https://charlesngo.com

It’s also not just Ethereum, but any blockchain-based implementation attempting to serve a high transaction throughput use-case. If no scalability solution is found, it’s likely our blockchain systems will not be able to deliver on even a simple consumer payments use-case, which further extends the tendrils of systemic risk.

Alternative Cryptoeconomic Networks

Due to the systemic risks surrounding Ethereum and the blockchain as a technology, it is imperative we find alternatives, if only to hedge against the worst case scenario.

Alternative cryptoeconomic networks are weird new technologies that do not have a blockchain and thus are not subject to the limitations of global consensus. DAG-chains fall into this category. In a DAG (Directed Acyclic Graph) there is no single ledger, but instead other mechanisms are used to gain confidence that a transaction is valid. In IOTA, every participant who wants to make a transaction, must verify two previous transactions. In Byteball, each transaction is verified by twelve witnesses. The effect of not having a blockchain is that these networks should be able to scale infinitely. In fact they should become faster, cheaper and more secure as the network grows larger.

Image from http://iota.org/

In addition to DAGs there are even weirder directions being explored by projects like Holochain and Economic Space Agency. I think this kind of experimentation, taken beyond the path Satoshi set us on with Bitcoin, could come to define the next generation of cryptocurrencies.

Regardless of if we figure out scalability or a completely new technology emerges as the successor to blockchain-based systems, it’s important we continue experimenting, because there is now more than half a trillion dollars and a grand vision of decentralisation at stake.

Directory Of Alternative Cryptoeconomic Networks

There are very few resources online where people can go to learn about these alternative approaches to engineering cryptoeconomic networks, so I decided to make one. It will start out as this blogpost, from where it may graduate to an actual website if people find it useful.

If there is a project missing from the list, please leave a comment with the name and a link to the project.

Note: I am in no way recommending these projects, nor am I making any claims as to their legitimacy or technical feasibility.

Live Projects

  1. IOTA
  2. ByteBall
  3. RaiBlocks
  4. IoT Chain
  5. Holochain
  6. Exxor
  7. Hcash
  8. Travelflex
  9. ECSA
  10. Spectre/DAGlabs
  11. Constellation
  12. Hashgraph
  13. Jute
  14. Blink
  15. Yobicash
  16. HashNET
  17. PARSEC

Thanks for reading. Feel free to tweet me with any thoughts or feedback.