Blockchain – Generations 2 and 3
In a recent post titled ‘Innovation through cryptocurrencies‘ we provided you with an introductory explanation of blockchain, along with a quick brief on the original, 1st Generation blockchain and our most well known cryptocurrency – Bitcoin.
Over the years however, blockchain has evolved. It is no longer simply a transaction platform for transferring electronic tokens. Generation 2 and 3 blockchains are doing much, much more.
Second generation blockchain Ethereum (launched 30 July 2015), was the first smart contract blockchain, which not only allowed the transfer of tokens, but allowed conditions to be attached to the transfer. Meaning a transfer would only be executed when the conditions of the contract had been satisfied. Smart contracts have opened up blockchain to an unlimited array of commercial opportunities. Unfortunately, Ethereum like Bitcoin is limited by speed to approximately 15 transactions per second.
Both Bitcoin and Ethereum transactions incur transaction fees which are paid to the miners. These fees are are difficult to gauge as they change depending on how business the network is. They have also been known to get very expensive in busy times, causing both delays in transaction times and high transaction costs.
In the end, the fees make it next to impossible to use Bitcoin or Ethereum for small purchases – your morning coffee for example. So again this comes as a drawback to mainstream adoption for Generation 1 and 2 blockchains.
Third generation blockchains, such as the EOSIO blockchains (first launched in 2018) can now process thousands of transactions per second, near instantaneously, with no transaction fees.
These EOSIO blockchains are run efficiently by 21 specialised and elected block producers, with paid backup block producers on call should any top 21 servers be taken offline.
They come with smart contract capability, multiple account permissions, human readable account names and multiple token functionality. They are opening up a huge range of trade and commercial opportunities for individuals, businesses and other organisations.
Third generation blockchains could theoretically connect people in every country throughout the world – allowing them to freely and securely communicate; trade and transact instantaneously and, all completely outside of current banking and finance systems.
As a part of your financial awakening you should strive to understand blockchain technology. Consider the evolution it will take over the next decade; and, the role it could play as a future monetary supply and global transaction platform.
So does cryptocurrency really cover all the criteria to be considered ‘good’ money?
Be sure to subscribe to Goldsmith Money, so as not to miss our next blog, which will answer this very question.