Can These Blockchain Protocols Survive a Consumer Facing App? (Part A)
Comparative analysis of notable protocols under requirements of microtransactions and scale
ClanPlay is the highest rated app for gamers with 4.8 stars and 1.5m users. We are introducing a new marketplace for in-game actions, where anyone can pay players for services inside games.
Using Blockchain allows us to service the entire gamer population, including hundreds of millions of unbanked awesome players. It also enables creating smart-contracts that ensure payment and actions are both conducted in a transparent and trust-less manner.
The Good Game (GG) Token
To fulfill our plan, we needed to create a utility cryptographic token that will serve as the basis for all marketplace transactions. We called this token “GG”, a term all gamers have probably used, today.
The GG marketplace will be relying on authorizers, entities with access to either public or private game data. Based on their data, interested parties will write contracts, stating the actions they would like to pay for and these contracts will be picked up by players, looking to fulfill these actions and get paid.
Given the early exposure, this marketplace will get among ClanPlay’s existing audience, we anticipate an immediate need for scalability in support of thousands of transactions per second. The GG contracts will require a blockchain protocol that supports a stateful smart contract mechanism, allowing the authorizers to inject a new state (game data) in order to conclude a GG transaction.
You can read more about the Good Game (GG) token and its contract system in our whitepaper.
Why not Ethereum?
When designing our blockchain system, we naturally explored Ethereum’s ERC20 protocol, the industry standard for issuing digital assets and smart contracts.
Ethereum’s reputation is well-established. It is THE go-to platform for tokens and decentralized applications, it also offers the stateful smart contract mechanism which our project demands. It can support transactions occurring directly between our users, outside of the marketplace.
However, the low scalability and high fees make it inefficient for large-scale microtransaction systems such as the GG marketplace. The Ethereum foundation recognized these problems and is working on a solution. However, until such a solution is presented and field-tested, we decided to explore alternatives. The results of our literary research are presented in this multi-part article.
IOTA, The Fee-less
IOTA is an open source distributed ledger, which was designed from the ground up for the world of IOT with feeless microtransactions and data integrity for machines.
IOTA, by contrast to other blockchain protocols, does not consist of transactions grouped into blocks and stored in sequential chains. Instead, it is a stream of individual transactions entangled together. They call it the ‘Tangle’.
A consensus is achieved by the transactions alone, with no miners. All that is needed is a tiny amount of Proof-of-Work, makes it scalable and fee-less, and therefore, a suitable solution for microtransactions. In other words, every new transaction is required to approve the previous pair of transactions and thus save the requirement for costly consensus.
Yet, IOTA has a major disadvantage. At the time of this writing, it does not natively support smart contracts. So, if your token requires those, as our GG does, you need to look for another solution.
Lightning, The Sophisticated
The Lightning Network is a Bitcoin-based decentralized system for instant, high-volume micropayments, that removes the risk of delegating custody of funds to trusted third parties.
It solves the bitcoin blockchain weaknesses of scalability, irreversibility, and inviability of micropayments, by introducing off chain payment channels.
Inside a payment channel, the nodes that established the channel can freely exchange bitcoin as their starting balance permits. These transactions are referred to as off-chain transactions because, unlike regular transactions, they are not immediately recorded onto the blockchain. Only when such a channel is closed, it will lead to an actual final transaction, aggregating all transactions made. Off-chain transactions are secured by the nodes’ shared knowledge of a random number, known as key-agreement protocol.
Payment channels may introduce Lightning, as a tailor-made solution for contract based blockchain systems such as GG, as all microtransactions within a certain contract entity (e.g. gaming tournament) are instant, with minimal fee payment, and conducted off the blockchain.Once the contract is fulfilled and agreed upon by all participants, the bitcoin transaction is performed on the blockchain.
However, since the final transaction is on the bitcoin chain, it will still be susceptible to bitcoin’s scale problem, resulting in relatively high transaction costs — for microtransactions.
Zilliqa, The Sharded
Zilliqa is a new blockchain platform that is designed to securely scale in an open, permissionless distributed network. The core feature that makes Zilliqa scalable is sharding — the division of the network into several “shards”, smaller component networks, capable of processing transactions in parallel. Each of these shards will process its given micro-block, and then all micro-blocks merge to create the final one.
It uses proof-of-work to establish identities and perform sharding, but not to achieve consensus. This allows a reduction in node-operating costs by an order of 10, and increases processes scalability to several hundred TPS
Zilliqa will support a smart contract platform with a formally verifiable language that is sharding-friendly. It will allow users to compute programs in parallel, harnessing the full computational capacity of the mining network.
Note that Zilliqa, as of this writing, is on a very early stage and didn’t release the testnet and smart contract alpha version yet. According to the company roadmap, Mainnet and Anchor app release are planned to the end of 2018.
But if it delivers on its promises, the estimated scale with a network size of 10,000 nodes, Zilliqa will enable a throughput of approximately 8,000 transactions/sec
We find that under such performance, Zilliqa may become a viable protocol for scalable consumer facing dApps like ours.
It seems that with the development of the blockchain ecosystem, many new protocols have been recently introduced. All of them try to address blockchain vulnerabilities with different and creative solutions.
When searching for a suitable solution, it’s important to not only consider scalability and transaction cost, but also implementation and other viability factors, such as network adoption, integration complexity, smart-contract capabilities and product deployment schedule.
In Part B, next week, I’ll go through our notes for 3 more protocols: Waves, Stellar and Neo to look into further enlightenment.