Internet vs blockchain revolution: early challenges
I. Internet vs blockchain revolution: early successful products
Second, the Internet vs blockchain revolution: the origin of the giant company
Third, the Internet vs blockchain revolution: early challenges
Fourth, the Internet vs blockchain revolution: new concepts, valuation methods and timing
V. Internet vs Blockchain Revolution: Are we in 1994? Where will the future go?
This article is the third part – the Internet vs blockchain revolution: early challenges.
The early stages of emerging technologies often have problems with scalability, cost, and education, which limits the development and adoption of breakthrough applications. However, these challenges are generally resolved over time. Therefore, as with the evolution of the Internet, we should believe that the same technological advances will occur in the blockchain.
01 scalability and cost
Although the Internet is fast now, the early Internet faced challenges of scalability and cost. On August 7, 1996, AOL (America Online), a company that provides online value-added network services in the United States, discontinued service for up to 19 hours because it could not support a large number of Internet users. At that time, the number of people surfing the Internet every day was increasing. AOL was the largest Internet server provider in the United States at the time, and its competitors were Prodigy, CouServe and MSN. The Internet itself has not collapsed, but users have no access to the Internet, which is a big deal for many people who like to surf the web in their daily lives.
There is no such thing in the blockchain industry. In December 2017, the trading volume of CryptoKitties soared, causing the Ethereum network to be congested. Most users are unable to complete transactions on the blockchain unless they are willing to pay a high gas fee, which causes a lot of confusion in the community. Although the Ethereum network congestion has made many people realize that blockchain technology currently lacks scalability when serving more complex use cases. But in the early stages of the Internet and blockchain, many examples demonstrate the importance of scalability in these two revolutions, and at the same time demonstrate the importance of finding better scalability solutions to meet growing demand. User base and needs.
The high network costs and costs of starting an early startup on the Internet are similar to those of the blockchain industry. At the time, the Internet required modems and telephone lines, all of which maintained this local modem network for people to dial in. At that time, the most popular online service, AOL, cost $9.95 a month, and users could use unlimited services for five hours, for an additional $2.95 per hour. According to today's standards, this is a very limited service. However, over time, the speed of the Internet has been greatly improved because of the access to DSLeventually. In 2014, the speed of the Internet was nearly 200 times faster than in 1999, but the fee was reduced by 90%.
Similarly, we have seen the speed of wireless mobile communications over the years, from less than 1 Mbps (megabits per second) for 2G technology to 25 Mbps for 4G technology. This allows new services to be implemented on the mobile side, such as music and video. Over time, scalability and cost constraints are gradually eliminated, making more complex, bandwidth-intensive applications practical.
As of February 2019, the average transaction cost of Ethereum is about $0.13, and the transaction costs of more complex dApps, such as chain games, will soon increase. While not every operation needs to be done on the chain, there is an urgent need to increase scalability to support more and more dApps and other day-to-day transactions (Visa processes 24,000 transactions per second). Many projects are adopting different methods to increase the transaction speed of the blockchain, finding a variable trade-off between scalability, security and decentralization.
After EOS and TRON were recently launched on the main network (TPS were 4000 and 750 respectively), we saw an increase in the number of more complex dApps released in the past few months. This trend is expected to continue as more scalable blockchains are deployed. Overall, we are exploring different scalability solutions, such as new data structures (Sharding, Tangle, DAG, Coda, etc.), Layer 2 solutions (sidechain, chain, hash time lock, etc.), and More efficient consensus algorithms (PoS, DPoS, Casper, Avalanche, Hashgraph, etc.), which will gradually increase bandwidth and lower blockchain transaction costs, gradually implementing new use cases and services.
In addition, we expect the cost of launching blockchain startups to decline over time. During the Internet revolution, the average cost of starting a startup fell sharply, from $5 million in 1999 to $500,000 in 2005 to $50,000 in 2010. The first wave of cost reductions was due to the emergence of open source (meaning no licenses for UNIX, Web servers, and Oracle databases) and horizontal computing (meaning no need to purchase expensive Sun servers and EMC storage).
The second wave of cost reduction is due to the maturity of cloud computing. Cloud computing is becoming more popular as AWS provides network storage (S3), processing power (EC2), and the ability to automatically increase or decrease scalability based on traffic. According to Gartner's data, the actual cost of deploying an enterprise blockchain proof of concept is $27,500, up to millions of dollars. On different blockchains (Ethereum, NEO, EOS, etc.), simple dApp deployment and transaction costs can cost between 30,000 and 85,000, and current blockchain talent shortages and high prices (average $150,000) ).
Similar to the development of the Internet, we also expect that as the blockchain transaction speed increases and the cost decreases, the enterprise has more full-stack platforms (BaaS hosting – Kaleido, AWS, Azure, Oracle, etc.), development platform (NoOps – Eprezzo), middleware (Omnitude) and developer tools (Mist, Geth, Truffle, Remix, etc.), as well as more development talents moving to the blockchain field, will also reduce the cost of launching blockchain projects.
02 Education popularization
Education adoption is the key to adopting new technologies, reducing barriers to entry, and helping the “crossing the chasm” (the term coined by Geoffrey Moore). Technology is often seen as a foreign object before the divide is crossed. Once this gap is crossed, people will think that this technology is safe and reliable.
In the early days of the Internet, Jan Brandt was hired by AOL as vice president of marketing, hoping to expand its user base. When doing market research, she realized that people didn't know how to use the computer. "Someone picked up the mouse and started to press the computer as if it were a remote control," so the most basic things are often very important. We must not only let consumers consume an online service, but also give them a generalization of what the online service is.
The strategy implemented by AOL is to give people a trial disk and CD. The result is very good. Everyone will go to the website to register and provide a credit card number. AOL has invested heavily in this strategy, and eventually CDs are everywhere: in mailboxes, on new computers, in magazines, when you rent movies, and so on. So for a while, 50% of the world's CDs have AOL logos on them. This move helped AOL surpass its competitors and grow its user base from 200,000 to 25 million. Overall, AOL's activities are a very successful example – helping to drive adoption by early adopters who “have no technical background” by lowering the barriers to entry.
In the cryptocurrency industry, we've seen a lot of actions about educating the next generation of cryptocurrency and blockchain adopters, including corporate education (such as Deloitte or IBM's Consensus), developer education (such as ConsenSys Academy), and university education (such as Blockchain Education Network (BEN). Many companies also offer free tokens and cold wallets through events.
Recently, Coinbase has launched a number of programs to learn to earn cryptocurrencies, providing cryptocurrency rewards to those who complete their education programs. At present, there is still a lot of friction with the blockchain interaction. Compared with traditional payment solutions such as Venmo or Paypal, cryptocurrency transactions require users to have some basic knowledge (public key, private key, gas fee, transaction fee, etc.). Not to mention the irreversible risks of key management and trading.
We are still in the early stages of the industry with a global adoption rate of less than 1%. Training the cryptocurrency, blockchain and key management for the general public is very important for the development of the industry. Large companies like AOL and Coinbase can provide incentives by giving away CDs and cryptocurrencies, lowering barriers to entry and furthering adoption.
Overall, it is undeniable that in the past few years, the blockchain industry has made significant progress in addressing the challenges of scalability, cost and education. Although we are still in the early stages of this technology cycle, we believe that the blockchain will mature in a similar way to the Internet, gradually becoming more scalable, affordable and practical, suitable for large-scale adoption.
The history of the Internet revolution is based on the book "The Internet Tide" by Brian McCullough. We are trying to find similarities between the Internet and the blockchain revolution to help you better understand the technology lifecycle and the future of the blockchain industry. I hope this series of articles can provide you with some valuable views on the blockchain industry. If you have any ideas, please leave a comment at the end of the article.
- Internet Trends, Brian McCullough
Author | Remi Gai
Translation | Huang Feihong
Source | Medium