The financial institution OK Blockchain Capital, in collaboration with the OKEx exchange, has recently published a report on the technical limitations of current blockchain-based implementations, indicating possible alternative developments based on sidechains and cross-chains, called Blockchain 3.0.
According to this research, sidechain and cross-chain technologies will play a key role in future blockchain-based developments, overcoming the limits of blockchain 1.0 (Bitcoin’s original one) and blockchain 2.0 (Ethereum and the like), particularly with regard to performance and decentralisation.
The report reads: “Assuming an average of one new block generated every 10 minutes, the Bitcoin network can handle seven transactions per second at peak, far from the hundreds of thousands of TPS required by centralized systems. There are two essential factors limiting Bitcoin trading performance. The first is the size limit of each Bitcoin block at 1 [megabyte]. Secondly, it takes up to 10 minutes on average to calculate a qualified random number to establish a new block“.
In addition to these limits, blockchain 1.0 would also have a very limited capacity for innovation at the main level, i.e. without recourse to higher layers: for example, there is no possibility of creating “for” cycles, effectively limiting BTC to a reserve of value token.
With blockchain 2.0, like Ethereum’s, some of these problems are solved, but the ecosystem as a whole continues to suffer from performance issues.
The solutions adopted so far have been effective in improving the flow of transactions, but at the expense of decentralization. An example is the decentralized exchanges, still not very utilized because of the fact that the centralized ones allow for much higher performance.
According to the authors of the report, the so-called blockchain 3.0 could solve these problems.
For example, higher layers such as Lightning Network and solutions based on the creation of more subchannels for distributed consensus allow to significantly improve the performance of the system while maintaining decentralisation.
Another good example is Ethereum’s sharding, which generates several independent subchannels that remain perfectly integrated within the ecosystem.
Therefore, a decentralized exchange based on sidechains or cross chains could drastically reduce commission costs, improve the speed of execution of the orders and increase liquidity.
In fact, several trials are already underway and some of these technologies, such as the Lighting Network, are already operational.
The era of blockchain 3.0 has already begun, although these tools are often still in the experimental phase and require a lot of development and implementation work.
However, just the same example of Lighting Network shows that these developments can exponentially increase the speed of transactions while maintaining decentralisation, a typical feature of blockchain-based solutions.