The future of Bitcoin is uncertain. Now, many experts are discussing what will happen with the Blockchain in the future and what technology will be used. In the area of Bitcoin there were many startups, but most of them did not find application. What will be the future of Bitcoin and the Blockchain in 5 years?
Vitalik Buterin co-founder of Ethereum, the decentralized web 3.0 publishing platform. He is currently working on implementing Ethereum 2.0. Vitalik answered a few questions specifically for CoinTelegraph.
CoinTelegraph: The most interesting question today is that of the next generation for cryptocurrency. What will be the next step in evolution after Ethereum, Litecoin and Bitcoin?
Vitalik Buterin: So, there are a few research directions that I think are important. Perhaps the most important one is scalability; right now, blockchains are capable of processing only about 4-20 transactions per second, and the primary reason why that is the case is that they have this fundamental limitation that every node in the network must process every transaction. Hence, unlike other decentralized systems (eg. BitTorrent) that get _more_ powerful the more nodes join the network, blockchains actually get weaker, at least in terms of transaction throughput, the more participants they have (because the network grows and so the latency increases logarithmically, whereas the power of each node does not increase at all). There are two main routes to solving this problem:
- “State channels
- Sharding, ie. having different nodes process different transactions, so each transaction is only processed by a small subset of nodes”
The second one is integrating stronger cryptography. There are a lot of projects already that are getting interested in linkable ring signatures, which provide moderately strong privacy properties, and the next step will likely be the community getting its hands on zero-knowledge proofs (specifically zk-SNARKs), which are a much more powerful beast and capable of providing strongly privacy-preserving guarantees of almost any kind of mathematical claim. This could be useful for the simple purpose of creating in-protocol (or in Ethereum's case, super-protocol) currency mixers, but there are also more complex applications that have privacy needs, eg. financial contracts, identity and reputation data, multisig escrows.
CT: What should new features be in cryptocurrency in order for it to succeed?
VB: Regarding cryptocurrency specifically, I think that right now in order for a new cryptocurrency to really succeed in the payments space specifically, it needs to offer some kind of monetary policy advantage over bitcoin proper. One route here is the "stablecoin" approach: come up with an asset which is designed to have lower (or possibly zero) volatility against something like the dollar or SDR by having another high-volatility asset "absorb" its volatility. Otherwise, the best thing to do to help small-scale coins get adopted is better development of "universal gateways": services that make it easy for customers and merchants to pay each other in different currencies and convert as needed.
“My vision for the crypto consumer-merchant-payments infrastructure architecture of the future is one where the customer declares the set of currencies S that they are willing to pay in, the merchant declares the set of currencies T they are willing to accept, then if S and T have an intersection you pay in whatever both are happy with and otherwise you use pathfinding algorithms over decentralized markets to find the cheapest way to exchange between something the customer is happy to give and something the merchant is willing to accept.”
CT: Scalability is Bitcoin’s main issue - What are your thoughts on this?
VB: Particularly, note that scalability isn't just a problem that we will have some far day in the future, it's a problem now. The reason is that if we can solve scalability today, then we can reduce the cost of a blockcain transaction by 100x, say from $0.04 to $0.0004. At those levels, using blockchains for many things will become dirt cheap, and people will start using blockchains as high-reliability application deployment infrastructure just because they are lazy. Imagine blockchain-based encrypted email. Very simple to write, with scalable blockchains it could be done in only 100 extra lines of code.
Scalability and also price volatility. Normal people do not want to be paid in volatile crazy tokens that can go up or down 2x in value before they have a chance to spend them.
CT: In what application will the next generation Blockchain be used for?
VB: In the longer term, I actually see blockchains and other decentralized technologies like distributed hash tables merging together into a kind of decentralized super-operating-system. Essentially, this dOS (not the same as microsoft's DOS) will be used not just for high-value stuff like payments but also as an infrastructure for very many kinds of web applications for perfectly mundane aspects of daily life. You could be conducting zero-knowledge privacy-preserving job searches on a blockchain of the future with a decentralized reputation system. E-commerce, IoT, everything.
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