It’s early 2022, and blockchain has amassed more attention than ever. Initially emerged in the form of a cryptocurrency, followed by the rising of additional ones operating on open-source development platforms, and further catalyzed by a frenzy of NFT, the word “blockchain” has effectively evolved from a geek keyword into a household term.

While a majority of the public is still skeptical about the legitimacy of the blockchain phenomenon, apparently many bystanders are beginning to be bombarded by a mix of curiosity and a feeling of being left out, especially with the recent NFT mania.

It should be noted that by “blockchains”, I’m generally referring to public permissionless blockchains for brevity.

Permissionless vs permissioned

Most of the blockchains commonly heard of, such as Bitcoin, Ethereum, Cardano, are permissionless blockchains which anyone can anonymously participate. Many of these blockchains are open-source. On the other hand, permissioned blockchains from products like Hyperledger Fabric require permissions and proof of identity (e.g. KYC/AML) from their operators for participation.

From a programming enthusiast’s perspective, there is some interesting technological aspect in blockchain that warrants a deep dive. Rather than only authoring smart contracts at the user-application layer, exploring how a blockchain’s participating nodes competing to grow a decentralized immutable ledger via a consensus algorithm will give one a full picture of its technological merit. That’s one of the motivations for me to develop a proof-of-concept crypto-mining blockchain system back in 2020.

Last I surveyed the blockchain landscape, the choice for a development platform was simple. That was about 3 years ago. Excluding permissioned-only blockchains, the only platform ready for “big time” development back then was Ethereum with scripting language Solidity and framework Truffle for smart contracts. By “big time”, I mean ready for the average programming enthusiasts to participate the ecosystem through available tech docs and self-learning. Much has evolved since.

Trending blockchain development platforms

There is now a big list of open-source blockchains besides Bitcoin and Ethereum — Solana, Cardano, Polkadot, Avalanche, Polygon, Algorand, Tezos, Flow, …, to name a few. From a technological perspective, what’s more significant is the abundance of dApp (decentralized application) development platforms provided by many of these blockchains. These dApp platforms built using contemporary programming languages like Go, Rust, Python, are competing among themselves, thus widening choices and expediting improvement that ultimately benefit the rapidly growing dApp development community.

While there are relatively few business cases for building a custom blockchain system, a much greater demand has emerged over the past couple of years for developing smart contract applications particularly in industries such as supply chain, DeFi, collectibles, arts, gaming and metaverse. Many blockchain platforms provide programming SDKs (software development kits) for popular languages like JavaScript, Python, or DSLs (domain specific languages) such as Solidity that many Ethereum dApp developers are already familiar with.

Meanwhile, frameworks for smart contract development that help boost developers’ productivity have also prospered. Within the Ethereum ecosystem, the once predominant Truffle is now competing head to head with other frameworks like Hardhat.

Bitcoin versus Ethereum

Even though Bitcoin remains the blockchain network with the largest market cap, it primarily serves a single purpose as a decentralized cryptocurrency. It wasn’t designed as a platform for development of business/financial applications like many other blockchain platforms were. Hence comparing Bitcoin with, say, Ethereum is like comparing apples to oranges. That said, Bitcoin’s price apparently is still driving the ups and downs of almost every average blockchain network out there.

Despite all the relatively new blockchain development platforms emerged over the past few years, Ethereum remains the distinguished leader with its TVL (total value locked) taking up well over half of the pie comprising all chains. To overcome the known issues of its underlying PoW (Proof of Work) consensus in scalability (and eco-friendliness), resulting in slow transactions and high gas fees, Ethereum is undergoing a major transition to Ethereum 2.0 with a PoS (Proof of Stake) consensus that will supposedly allow it to cope with future growth.

Layer-2 blockchains on top of Ethereum

To circumvent Ethereum’s existing scalability problem, various kinds of off-chain solutions have been put in place. They are oftentimes broadly referred to as layer-2 blockchain solutions, supplementing the underlying layer-1 blockchain (in this case Ethereum). The common goal of the layer-2 solutions is to alleviate loads from the main chain (i.e. Ethereum) by delegating the bulk of compute-intensive tasks to auxiliary chains with more efficient way of handling those tasks.

Here’s a quick rundown of the most common types of layer-2 blockchain solutions:

Rollup – a kind of the off-chain solutions that executes transactions in rolled-up batches outside of the main chain while keeping transaction data and proof mechanism on the chain. A zero-knowledge (ZK) rollup performs validity proof whereas an optimistic rollup (e.g. Optimism) assumes transactions are valid and runs fraud proof upon challenge calls. e.g. Loopring is a ZK rollup and Optimism is an optimistic rollup.

State Channel – another kind of solutions that allows its participants to bypass node validation process on the main chain by locking certain portion of the state via a multi-signature smart contract, perform transactions off-chain and unlock the state with appended state changes back to the main chain. Examples of state channel operators are Raiden, Connext.

Plasma – a “nested” blockchain with its own separate security from the main chain that performs basic transactions and relies on fraud proof upon validity challenge. e.g. OMG Plasma Project.

Sidechain – a relatively more independent off-chain setup with its own security, consensus mechanism and block structure. e.g. Polygon is a popular layer-2 blockchain of this category.

For more details, visit Ethereum’s developer site re: off-chain scaling.

Other layer-1 blockchains

Meanwhile, a number of layer-1 blockchains such as Avalanche, Solana, Algorand, have been steadily growing their market share (in terms of TVL). Many of these blockchains were built using leading-edge tech stacks like Rust, Go, Haskell, with improved architectures and more efficient, scalable eco-friendly consensus mechanisms. By offering the dApp development community cutting-edge technology and versatile tools/SDKs, these blockchain operators strategically grow their market share in the highly competitive space.

While “Ethereum killers” sounds like a baiting term, it’s indeed possible for one or more of these blockchains to dethrone Ethereum before its v2.0 has a chance to succeed the underperforming v1.0 in mid/late 2022. With things evolving at a cut-throat pace in the blockchain world and Ethereum’s upgrade taking considerable time, wouldn’t it be logical to expect that one of the newer blockchains with improved design would swiftly take over as the leader? Evidently, Ethereum’s huge lead in market share (again, in terms of TVL) and early adopters buy-in has helped secure its leader position. Perhaps more importantly is the inherent limitations imposed on any given blockchain that improvement can’t be made simultaneously in all aspects.

Trilemma vs CAP theorem

Somewhat analogous to the CAP theorem (consistency/availability/partition tolerance) for distributed systems, the blockchain trilemma claims that security, scalability and decentralization cannot be simultaneously maximized without certain trade-off among them. For distributed systems, a decent degree of partition tolerance is a must. Thus they generally trade consistency for availability (e.g. Cassandra) or vice versa (e.g. HBase).

On the other hand, a blockchain by design should be highly decentralized. But it also must be highly secured, or else immutability of the stored transactions can’t be guaranteed. For a given blockchain, there is much less room for trade-off given that security and decentralization are integrally critical, in a way leaving scalability the de facto sacrificial lamb.

This is where the trilemma differs from CAP. Under the well formulated CAP theorem, suitable trade-off among the key requirements can result in a practical distributed system. For instance, Cassandra defers consistency for better availability and remains a widely adopted distributed storage system.

Given the axiomatic importance of security and decentralization in a blockchain, developers essentially have to forgo the trade-off approach and think outside the box on boosting scalability. Sharding helps address the issue to some extent. Some contemporary blockchains (e.g. Avalanche) boost up scalability and operational efficiency by splitting governance, exchange and smart contract development into separate inter-related chains each with optimal consensus algorithm. Then there are always the various intermediary off-chain (layer-2) solutions as described earlier.

What about layer-0?

While a layer-1 blockchain allows developers to create and run platform-specific dApps/smart contracts, a layer-0 blockchain network is one on which blockchain operators build independent blockchains with full sovereignty. To build a custom blockchain, developers may elect to repurpose from an existing open-source layer-1 blockchain which consists of specific features of interest. When high autonomy and custom features (e.g. custom security mechanism) are required, it might make more sense to build it off a layer-0 network which provides an inter-network “backbone” with an underlying consensus algorithm, standard communication protocols among blockchains and SDKs with comprehensive features.

One of the popular layer-0 networks is Cosmos which some high-profile blockchains like Binance Chain were built on top of. Another layer-0 network is Polkadot that offers a “centralized” security model, contrary to Cosmos’ leaving the responsibility of security setup to individual blockchain operators. For core feature comparisons between the two networks, here’s a nice blog post.

Blockchain oracles

Then there are blockchain projects whose main role is to connect a blockchain with data sources from the outside world. A blockchain can be viewed as an autonomous ecosystem operating in an isolated environment with its own governance model. Such isolation is by-design, disallowing on-chain smart contracts to arbitrarily reference external data like currency rates, IoT sensor data, that can be prone to fraud.

An oracle provide a “gateway” for the smart contracts on a blockchain to connect to off-chain data sources in the real world. To ensure trustlessness, decentralized oracles emerge to follow the very principle embraced by general-purpose blockchains. Examples of such oracles are Chainlink and Band Protocol.

NFT – provenance of authenticity

NFT, short for non-fungible token, has taken the world by storm. It’s riding on the trend of blockchain in its early stage when a majority of the general public are still wondering what to make of the phenomenon. At present, the most popular use case of NFT is probably in provenance of authenticity. By programmatically binding a given asset (e.g. a painting) to a unique digital token consisting of pointers to unchangeable associated transactions (e.g. transfers of ownership) on a blockchain, the NFT essentially represents the digital receipt of the asset.

A majority of the NFTs seen today are associated with digital assets such as digital arts. A similar provenance mechanism can also be extended to cover physical assets like collectible arts by having the corresponding NFTs referencing immutable “digital specs” of the physical items. The “digital specs” of a given physical item could be a combination of the unique ID of the engraved tag, detailed imagery, etc.

Given the prominence of Ethereum, most NFTs follow its standards such as ERC-721 standard which requires a “smart contract” that programmatically describes the key attributes of the token and implements how the token can be transferred among accounts. Once a smart contract is deployed on a blockchain, it cannot be changed. Nor can any results from executing the contract that are stored in validated blocks.

Outside of the Ethereum arena, some blockchain projects come up with their own native NFT standards. For example, Algorand’s NFT is treated as one of it’s own built-in asset types and can be created by parametrically specifying certain attributes in the metadata of the digital asset without the need of an explicit smart contract. There are also blockchains like Avalanche providing both their native NFTs as well as Ethereum-compatible ones.

Final Thoughts

Over the years, the various emerged blockchains have interwoven into an inter-network that is increasingly more structured and functionally rich. The blockchain-powered inter-network is being touted by many early players as the next generation of the internet and is sometimes referred to as Web3. Layer-0 blockchain projects aim exactly to be an inter-network of independent blockchains. Among other blockchain projects, some aim to create a blockchain-powered internet extension (e.g. Internet Computer).

From a technological point of view, there are definitely merits of using blockchain’s underlying technology. In particular, the trustless decentralized ledger on a blockchain that keeps an immutable log of transactions can be used in many business use cases in various industry sectors like asset management. Some real-world applications using permissioned blockchains have demonstrated success in, for instance, improving traceability and transparency in the supply chain industry. The permission and proof of identity requirement does make fraud attempts significantly harder. Nonetheless, that inevitably breaks trustlessness, although such requirement is generally acceptable in operating a private alliance network.

Viewing from a different angle, cryptocurrencies except for stablecoins like Tether are volatile and will likely be so in the foreseeable future. Given that most prominent public blockchains are operated in conjunction with a corresponding cryptocurrency, when evaluating for a blockchain platform to land on, it warrants a good look at its cryptocurrency counterpart. Even though volatility may not be as critical for the purpose of development as for investment, it does make assessment of a given blockchain’s long-term prospect non-trivial.

Another obstacle to mainstream adoption of public blockchains is that many blockchain projects have emerged with superficial or even downright fraudulent plans for opportunistic reward in the prospering space. And the NFT frenzy permeated with scams also hasn’t helped gaining public trust either. In addition, people are overwhelmed by the numerous blockchain projects out there. As of this post, there are thousands of public blockchain projects, over 80 of which each with its corresponding cryptocurrency market cap above $1 billion. It’s likely only a small percentage of them will prevail when the dust settles.

All those issues are in some way hindering blockchain technology from becoming a lasting mainstream computing class. On the other hand, for those who are adventurous and determined to make the most out of the yet-to-be-mature but improving computing technology, it may be the right time now to dive in.