Tuesday 21 July 2020 9:00 am

Blockchain technology will only reach its full potential through industry cooperation

Blockchain has come a long way since I first entered the space in 2011. Back then, altcoins were all just forks of Bitcoin, the same code with some cosmetic differences here and there. These days, we have multiple generations of blockchain with entirely different systems, each with varying and exciting capabilities. There has been a huge amount of evolution in the space, from first generation blockchains like Bitcoin, to second generations which can support smart contracts such as Ethereum and Tezos, to the third generations which are characterised by high degrees of protocol-level, participatory governance that is extended to dapps and DAOs like Cardano and Telos. But along the way some seem to have forgotten that we work best as an industry when we work together. 

Current discussions often focus on which blockchain is likely to triumph over the others. This is understandable, given the way in which this still very young industry has seen Bitcoin and subsequently ethereum come to dominate the adoption race for first and second generation blockchains, respectively. However, taken too far in the opposite direction, we could be shooting ourselves in the foot. If we do not prioritise and research how we can ensure blockchains can operate in the same space and talk to each other – allowing end users to not have to lock themselves into a single, native blockchain system,we are hindering the growth of our industry.

Blockchain partnership vs blockchain competition

Partnerships are not a new idea. In fact they have become a common thread over the years in many major technological innovations; from Apple and Microsoft teaming up to design a mobile operating system, to Samsung and Sony agreeing to share research and development costs to design flat screen LED televisions. It is naive to assume that one individual company holds all of the answers. We have over 5000 cryptocurrencies currently in operation, running on a number of distinct blockchains. We tend to have a maximalist view that only one is necessary, but this does not take into account the fact that the variety of these capabilities and functions could be complimentary, if we can find a way for them to work together. 

This is something that we have been researching extensively at IOHK over the last four years.  We have examined the solutions which already exist, such as the Color Coin standard, ERC20, as well as researching and building our own Proof- of-Stake sidechains, and cross-chain communications. Indeed, we are now at a point where we can take Cardano from a single- to a multi-asset ledger. In practice, this means we are able to build the functionality required for cardano to act as the framework for an ‘internet of blockchains’, where disparate systems are able to transact with each other, and transfer value and information. With this in place we can finally see the blockchain industry maturing to a point where end users are no longer locked into a proprietary, single blockchain standard.

An internet of blockchains 

The initial vision of there being a ‘one size fits all’ blockchain solution, where all transactions, smart contracts,and other functions are performed on a single chain has passed its sell-by date. It is now clear that this is not a practical way to look at things – different blockchain platforms will inevitably have different strengths and use cases, meaning that they should be able to work together, rather than operating completely separately. This is why interoperability is increasingly becoming not just a nice-to-have, but an essential component in the growth of our industry. 

Innovation is already underway. For example, we have been talking to Litecoin about NiPowPows, one of our ideas. NiPowPows can give us a succinct proof that coins both exist, and have not been double spent. If other chains adopt this, then when you see transactions coming from chains which are NiPowPow compliant, you can immediately issue a transaction from any given network into the Cardano network. Once it enters the network, it becomes “wrapped”, creating both ada and a separate asset in the system, which can be used as fuel for computation within Cardano itself. This means that a coin like Litecoin can suddenly add capabilities from the Cardano blockchain, like smart contracting or governance, onto its own asset, allowing for innovative changes without having to hard fork. As a result, rather than needing to knock the house down entirely, you can simply extend it by using blockchains like Cardano as a service layer rather than making fundamental changes. And those involved in the Cardano network will be compensated for the use of that token on their network. 

Take this principle, apply it to the industry, and suddenly we have an Internet of Blockchains where systems can not only successfully coexist, but share knowledge and grow together. 

Cooperation and competition

As Gilbert Verdian of Quant Network eloquently pointed out in his piece a couple of weeks ago, while we are well on the way to solving interoperability on a technical level, there is still more to be done. He was referring to the necessity of adopting regulatory frameworks and international standards across all jurisdictions, but we can take it further. Developing an Internet of Blockchains, where differing platforms are able to connect to not only share data, but also ideas, means that we can create an industry where platforms can both successfully coexist and develop mutually beneficial technological arrangements, allowing stakeholders of both platforms to reap the rewards.

The most extraordinary achievements in human history have happened as a result of sharing knowledge and working together. IOHK’s strongly held view is that the success of blockchain technology will be no different. If we can collaborate as an industry, then we can build a global framework which truly has the power to replace and improve global systems, and change lives.

Charles Hoskinson is a technology entrepreneur and mathematician, involved in blockchain technology for almost 10 years. 

He is the co-founder and CEO of leading blockchain engineering company, Input Output Hong Kong (IOHK) which is committed to harnessing blockchain technology to provide 21st century financial services to the 3bn who don’t have them.

IOHK leads the research, design and development of Cardano, the ‘third-generation’ blockchain that launched in September 2017.

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