This Singapore-based blockchain platform can compete against Visa

Opinions

Date: 22.02.2018

As crypto has seen massive growth in 2017, the biggest platforms are running into fundamental problems due to scale (neither bitcoin nor Ethereum can support more than three to seven transactions per second). It doesn’t matter what you do to the block size or what other fixes you use, blockchain is no competition against something like Visa that processes 8,000 transactions per second.

To make matters worse, “traditional” blockchains (bitcoin or Ethereum) don’t scale as they grow. As more and more people enter the world of crypto, they will have to bid against each other to get their transactions in a block, while more mining power will compete for the consequently bigger block rewards.

But wouldn’t it be better if blockchains could scale their transactions as the ecosystem scales? Of course it would. But due to the fundamental setup of these blockchains, there’s no real solution. The only option is to move most of the transactions off-chain or into side chains (think the Lightning Network, for instance). But isn’t the whole idea of a blockchain to have all transactions on the blockchain?

Looking for change

A team from the National University of Singapore (NUS) is challenging these assumptions with Zilliqa. Led by its CEO, Dong Xinshu, the Zilliqa proposal has been on the table since 2015 but is only now ready for the market. The team is mostly Singapore-based and draws a lot of raw talent from NUS.

The startup is a blockchain infrastructure quite like Ethereum but structured in a way where high levels of scale and speed are possible without the excessive costs. The fundamental premise is that transactions scale while the networks scale—more miners equals more transaction throughput, making a more useful blockchain.

All this is achieved through a concept called sharding. In a traditional blockchain, all miners work on a very hard mathematical problem. They each compete to solve it first, and once that’s done, the winner gets a reward. It’s a winner-takes-all game. This system works well but has a big downside: everyone who’s not the winner wastes his time (or computer power, in this case). Due to the way the competition is structured, essentially 99 percent of the computer power used goes to waste.

Sharding breaks the winner-takes-all dynamic and the cryptographic task (validating the transactions) down into small segments or “shards.” That means that instead of 8,000 miners competing to solve a problem, for example, these miners are automatically split into 10 shards of 800 each, working on separate problems.

This way, you get computational cooperation rather than competition. More computer power is used fruitfully.

This setup leads to a couple of interesting consequences:

  • As the network grows, the cryptographic difficulty doesn’t scale. Rather, more shards get created, where more miners can work on more problems. As an effect, more transactions come through the blockchain.
  • Because of this, GPUs can do the mining rather than specialized mining hardware.
  • We get way more cryptographic work done for the same electricity output. It’s much greener.
  • Because everything runs much more efficiently, the transaction costs throughout the network can be much lower while still being equally profitable for miners.

Future and challenges

Zilliqa has been in development since 2015. In recent testing on an internal testnet of Amazon Web Services (AWS) instances, the network breached 2,488 transactions per second. That’s more than 100x more than bitcoin and Ethereum combined.

But that was pre-scale. If all Ethereum miners (~22,000) work on Zilliqa, that would allow for about 15,000 transactions per second. That’s more than twice as many as Visa (the world’s largest payment processor).

While Zilliqa would be the first project bringing sharding technology to a big public blockchain, it must be noted that sharding has some challenges too. The technology still needs to be tested and vetted at scale. Sharding could also potentially introduce security challenges, as attackers could try to hone in on one shard rather than the entire network.

But for now, the promise of blockchain linear scalability seems to be driving a lot of excitement.

On January 3, 2018, the team released the much-anticipated “Durian” alpha source code. Now, everyone can inspect the underlying technology, and developers can test and improve it. With a stable proof-of-concept already down, the company is announcing an ICO this month. The team announced they were going to lower their hard cap from US$30 million down to US$20 million, confident that their roadmap could be executed with these resources.

The premise is simple: Whoever can build a stable, reliable blockchain infrastructure that can compete at the levels of Visa and MasterCard can be a very substantial player in the global economy.

https://www.techinasia.com/talk/singapore-based-blockchain-compete-visa

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