Blockchain technology was initially introduced as the underlying platform for Bitcoin, way back in 2009. However, times have changed, and the innovative tech is now used in several industries, which even Satoshi Nakamoto wouldn’t have imagined.
Over the last decade, research and development on blockchain technology have yielded overwhelming results. A huge number of businesses and social sectors have adopted blockchain technology. Decentralization, cyber-security, and transparency, the essential USPs of DLT, have become the most sought after and demanded features in modern-day organizations and communities.
The scope of blockchain in future can be ascertained by the fact that several giant business corporations have jumped in the game, investing hundreds of millions of dollars in the blockchain space. Especially, after the crypto market collapse of 2018, focus of crypto investors shifted from digital currencies to blockchain start-ups. Venture capitals invested over $5 billion in blockchain space, a significant bump from the previous year’s $1.5 billion.
These investments, and entry of players like IBM, Microsoft, JPMorgan, Bank of America, TCS, Intel, and Facebook, have created blockchain based solutions for various industries including banking, forex, global remittances, healthcare & pharma, e-commerce, supply chain management, entertainment, and many more. Large companies across the world incorporated blockchain technology in their operations either to accept and pay via digital tokens or simply reap the core benefits of the revolutionary tech.
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However, these developments created a bit of a problem, which not many would have expected. Most of the dapps built for various purposes in different industries use general blockchains or smart contracts as their underlying platforms. The problem is that these traditional smart contracts did not build for a specific type of industry. This doesn’t allow users to optimize scalability, and reduce costs to the lowest achievable. The “One hat fits them all” philosophy hasn’t really worked anywhere, is also negatively affecting blockchain growth.
Citing this problem, Komodo Blockchain Platform, interoperability focused blockchain platform tweeted last Saturday that blockchains built for specific purposes will challenge traditional smart contracts.
Komodo shared a link to a blog post on its official website, which argues that smart contracts have become unviable due to the increasing congestion on the major existing platforms like Ethereum, on which 25% of the total crypto platforms are based. Ethereum also houses over 2000 dapps. The blog post stated,
“As Ethereum exploded in popularity, several new smart contract platforms emerged. While these new projects sought to improve upon Ethereum in minor ways, they all followed the same general model— a single blockchain with a virtual machine environment that could run smart contracts submitted by developers and entrepreneurs.”
The blog post also reflected on certain limitations of smart contracts which make them unsustainable in the future. These limitations include the inability to scale due to shared networks, lack of security, and a threat to decentralization due to Oracle nodes, among many others.
The post argues that smart contracts are against the general rule of economies of scale, which say that as production increases, costs decrease. However, as more and more projects build on a smart contract, it becomes even more expensive and time-consuming.
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What Komodo’s argument states are that having a single blockchain in an ecosystem put a huge burden on it, which would affect its efficiency. It advocates that having multiple purpose-built blockchains in an ecosystem is the solution.
