Blockchain’s unavoidable link to the highly tumultuous cryptocurrency market (i.e. Bitcoin) has recently made it vulnerable to criticism and dismissal. Despite this climate, blockchain technology, now in its fourth generation, continues to push forward, evolving beyond its cryptocurrency origins and becoming increasingly simple to use.
The evolutionary generations of blockchain
Before we discuss the future business impact of the fourth generation of blockchain, let’s first look at the stages of blockchain’s evolution since it was first conceived in 2008.
Developed by the mysterious Satoshi Nakamoto, the first generation of blockchain saw the emergence of distributed ledgers and enforced digital scarcity, as exemplified by Bitcoin. Blockchain appealed to cryptocurrency creators because of its Proof of Work1 algorithm, which validated transactions and prevented people from “double spending”, or using the same money for more than one transaction.
The second generation of blockchain, led by the automation and the development of trusted code platforms like Ethereum and Hyperledger, introduced the concept of smart contracts and made possible the digital tokenization of physical assets.
It was also around this time that the technology suffered initial scrutiny and concerns with regard to scalability, transaction speed and network efficiency.
Third-generation blockchain platforms like Aion, Cardano, and EOS, introduced technology such as sharding to tackle scaling issues in order to cut down on cost and speed of transactions.
These platforms also matured the distributed application capabilities of blockchain. (eg. La’Zooz, a decentralized, community-owned transportation platform that turns a vehicle’s unused space into a variety of smart transportation solutions.)
Fourth Generation Blockchain
The first three generations have been pivotal in increasing the scope of blockchain’s applicability, but there remained challenges (e.g. complexity, cost) that hindered widespread adoption.
Fourth generation blockchains resolve prior challenges and enable trust in easy-to-consume ways, accelerating the formation, operation, and reconfiguration of business networks. In addition to greater ease of onboarding, these lower cost, and highly scalable platforms make pragmatic trade-offs such as recognizing that not all transactions are created equal. For example, a variable consensus mechanism will allow you to incur different transaction time and cost when buying a cup of coffee when compared to buying a house.
Fourth generation Blockchain platforms like Insolar2 and Aergo, are enabling business networks to be easier to use through business-oriented interfaces that hide the complexity of the underlying blockchain technology. It is this moment in the evolution of blockchain technology–where we stop talking about blockchain and just start using it– that we believe will spark the true disruptive potential of blockchain.
What does it all mean?
Business networks—companies combining their resources in the pursuit of common objectives—are the key drivers of value creation and innovation in our modern economy. Their productivity and potential have traditionally been constrained by transactional frictions, principally informational and trust. The internet has significantly reduced informational friction and blockchain is the mechanism that can radically reduce trust friction. A world with low informational and trust friction will innovate and create value at a dramatically accelerated pace.
By: Douglas Heintzman, Innovation Practice Lead at The Burnie Group
- Proof-of-Work: Proof-of-Work was the first blockchain consensus mechanism and is still arguably the most popular choice in achieving distributed consensus (the ability to trust a stranger without having to go through a third-party). https://medium.com/nakamo-to/what-is-proof-of-stake-pos-479a04581f3a
- Disclosure: Insolar is a client of The Burnie Group