Blockchain technology: its trends and prospects

In the framework of Devoxx Ukraine 2022: Secure Our Future, Pavel Kravchenko, Co-Founder and CEO at Distributed Lab, delivered an online presentation for IT-specialists on Blockchain technology and its future prospects. Blockchain is an emerging innovative technology that is being adopted in various fields, like retail, finance, energy, media and entertainment sectors, etc. The topic of Blockchain is quite controversial, that is why it does not enter the market at a fast speed. A lot of companies create research groups, hire experts, and test the market in order to apply Blockchain technology, however, the tempo of its integration still remains low. Currently, only a few companies professionally utilize Blockchain, as their income depends on the market situation, which can be very fluctuating.  

Blockchain was mainly invented for the following reasons: 

  • the race for ideal Internet money 
  • the need for secure decentralized information processing 
  • expectations of enterprises. 

In fact, the quest for ideal Internet money started long before Bitcoin was introduced in 2009 with several attempts to build similar technologies. A lot of technical solutions and inventions were required to fulfil the task of ensuring trustless Internet money with no companies or institutions behind its issuance and transactions. This money is programmable, scarce and anonymous, and can be utilized for various reasons, including for the provision of financial services. Bitcoin, as an early application of Blockchain technology, has been one of the greatest scientific inventions and a revolution in computer science. Bitcoin is a secure system with no administrators, firewalls, permission management and physical security. However, Blockchain has many other applications outside of Bitcoin.  

For years, there has been a need to design decentralized autonomous organizations to prevent corruption and reduce the role of governments in decision-making processes. The latter should be public and transparent, and the development of Blockchain technology is a great instrument to ensure this. The transfer of control and decision-making process from a centralized entity to a distributed (mesh) network design is one of the key elements of decentralization, and it is highly needed and widely used these days. Blockchain fulfils the need for the establishment of a single source of truth that is usually required by consortiums or organizations, which do not trust each other, but need to have real-time access to the same information. The use of distributed (mesh) networks prevents the parties from exercising control over one another and degrading the network functionality. In the framework of decentralization, cryptocurrency is challenging the government’s right to have monopoly for the money and is considered to be beneficial in this regard. Additionally, businesses and individuals can benefit from cryptographically verifiable information of any kind that is provided by Blockchain technology. 

With time of their operation, enterprises acting within certain business networks have largely realized that they need to reduce the level of entrusting everything to insiders and mitigating the consequences of possible security breaches. In this regard, Blockchain provides a platform to have auditable data and processes and automates business logic through smart contracts to meet the needs of the business network. The technology ensures secure reconciliation and decision making, as well as seamless identity management subject to the customer’s pre-approval by an authorized individual.  

It should be noted that Blockchain is based on the innovative Fintech and infrastructure-related technologies that define its efficiency. The Fintech-related ones are mainly as follows: 

  • censorship resistant anonymous money 
  • programmable money  
  • smart contracts 
  • DeFi, and 
  • Play-To-Earn Games. 

The introduction of anonymous Internet money has brought the current cryptocurrency market cap to around 1 trillion with the users having a lot of assets on the market. The smart contracts that are stored on Blockchain serve as a good tool to build some good interactions. In 2020, decentralized finance (DeFi) has become a popular digital ecosystem, allowing people to build a full financial infrastructure on decentralized rails with no relation to traditional banks and brokers. Additionally, with Play-To-Earn Games, one can earn money that can live longer than the game and be tradeable. It is expected that in 10 years or so, we will have more advanced games, and Blockchain and virtual reality will lead us to the future with more technologies in place.  

The infrastructure-related technologies that Blockchain relies on are: 

  • zero-knowledge proofs without revealing the data 
  • verifiable anonymized data, credentials and business logic to verify the correctness of applied processes and results
  • multi/group/ring signatures, and  
  • uncensored data storage. 

Blockchain is entering the market pretty slow due to its controversies, but it periodically experiences ups and downs on its bumpy road to adoption. Currently, the market is experiencing a so-called crypto winter with a significant decrease in the prices of cryptocurrencies and a reduction in market capitalization. During the crypto winter, people are usually pessimistic about the future of Blockchain technology. However, during crypto summers, people are very enthusiastic and invest a lot. The speaker expects Blockchain to continue experiencing it will ups and downs and come to the plateau of productivity in 10-15 years. 

The positive trends in Blockchain are caused by the huge growth of projects that avoided regulation. Blockchain technologies could operate for years. However, fraud has turned out to be the major problem in most cases, as a lot of people smeared free money, or launched projects that tried to replicate successful projects, but failed. Another cause of Blockchain controversy was those certain flawed economic models, like utility token model, were applied and they were unsuccessful. Also, with limited regulation came inflated promises mainly in new industries, and the value of projects plunged.  

One of the major issues of Blockchain’s practical application is that its projects cannot be applied in a “vacuum” without their integration in real processes. The only successful projects were the ones that did not depend on any existing infrastructure and were built from scratch, like the games that did not require integration with financial systems, or certain use cases that did not require integration with traditional processes. Additionally, Blockchain experts are still far from reaching a general consensus, hence, there is pending disagreement about basic terms, goals and assumptions for Blockchain use.  

Overall, the security paradigm has changed. For many decades, there existed a concept of security perimeter that is now fading away. Currently, all the information goes through public networks, and many companies do not have their local networks. The Blockchain industry provides a fully open-source infrastructure, and now everything depends on the security of the <user’s> key. If the user loses the key, in most cases, the administrator cannot reissue the new one, and all the assets can be lost.  

Within the next five years or so, there will be global changes with regards to wider Blockchain integration. Cryptocurrency will gradually fill its niches, and more and more regulated and unregulated stablecoins will be used. Central bank digital currencies (CBDC) are expected to be adopted wider, and they are already used in China. The speaker also anticipates that some initial standard for self-sovereign digital identity will be established. Niche developments are expected to include the development of digital property (NFTs, licenses etc)., as well as the growth of popularity of decentralized autonomous organizations (DAOs) in private and public sectors. All kinds of gamification and incentivisation models, as well as P2E games are currently under development and will gain advanced features in the future. Additionally, many companies are building metaverses, and will continue to do so.  

The speaker believes that digital economy will grow bigger than the physical economy in 10-20 years. It implies that there will be a lot of work for developers, as APIs would need to be developed, in particular, for accounting systems, registries and virtually everything. Cryptography is expected to be integrated in many life spheres; hence, developers would need to learn about it and its trends to be successful in the next decades. As all traditional databases are expected to be converted into Blockchain-style ones to ensure secure data storage, IT specialists would need to fulfil a lot of technical tasks. Additionally, the wallet-oriented infrastructure and privacy-centric technologies will become very needed and would need to be developed as well. 

As companies implement new applications, Blockchain technology continues to improve, and its potential opportunities seem to be impressive. Overall, Blockchain can now be integrated as a timestamp mechanism, without the change of one’s infrastructure. It is expected to get more standardized, and will move to the next level of its application in building decentralized consortium projects in the future. Blockchain technology brings a lot of benefits to ensuring data security, decentralization and asset transaction management. Transparency and smart contracts, in particular, expedite business processes and help increase their efficiency. Its future prospects look promising, as it is expected to be integrated in multiple spheres and transactions. 

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