Bitcoin remains the primary and first use case for blockchain technology, though there remain doubts as to its efficacy as not just a currency, but also as a payment rail that can reliably facilitate global transfers.
This has led to three alternative proposals, none without their issues but all envisioning a better solution which is scalable—a key concern to be addressed if widespread adoption is ever going to be plausible.
The First Alternative: A Faster and Cheaper New Cryptocurrency
A more efficient new currency which also bases itself on blockchain technology is a popular suggestion. The most prominent examples are Litecoin (LTC) and Bitcoin Cash (BCH), which on paper offer much more room to scale though they are yet to be comprehensively tested. One of these alternative currencies could be set to replace Bitcoin although they still might run into the problems inherent with blockchain technology.
The Second Alternative: A Multi-Layered System for Bitcoin
Technologies such as the Lightning Network and Segwit introduce new layers to Bitcoin, through which transactions can become faster while retaining the security that makes BTC so strong. Many of these proposals are still in testing but they could usher in a trend of developers creating layers on Bitcoin in order to provide fixes for the currency’s challenges.
The Third Alternative: An Entirely Different Technology
With the idea that verification on blockchain is simply too expensive to be plausible for thousands of constant micro-transactions – and too slow to be as effective as existing systems – fundamentally different technologies are being considered by some. IOTA have the Tangle on DAG, while Hashgraph and CyberVein are others exploring the possibilities of Directed Acyclic Graph (DAG).
Multi-layers and DAG architecture are still so new that it is hard to say whether they hold a solution. There is a greater risk for those developing here, but if the technology is solid then there could be substantial rewards for these startups.
A DAG Network Also Creates an Immutable Distributed Ledger
The move towards Directed Acyclic Graph architecture is a reaction to a current reality of blockchain verification; it is too slow and expensive to compete with credit cards and ineffectual when it comes to micropayments.
A DAG, like blockchain, directs nodes from earlier to later in a linear sequence which finalizes transactions when they are successfully verified. Links between the nodes are made which creates a network that can be used for payments, smart contracts, among other things.
The CyberVein DAG – Redistributing Data
CyberVein believe that a DAG architecture can be used to create a decentralized database which takes storage from the devices of users. This design does not have miners as the transaction is verified at the node.
In theory, they could eliminate data centers and replace them with a p2p network that relies on users donating disk space in return for crypto tokens. This reward is assigned according to proof of contribution, which measures the storage capacity that a node gives to the network.
IOTA and the Data Marketplace
IOTA follows a similar concept, though they aim to design a marketplace for data streaming from Internet of Things devices. A key tenet of the platform is to allow data producers to sell their data to interested parties.
Hashgraph: Solutions for Enterprise
Though using the same technology as IOTA and CyberVein, Hashgraph has taken a fundamentally different approach. They have patented their technology – while IOTA remains open source – as they try to establish predominance in the space for designing enterprise permission networks.
The advantage for Hashgraph is that there is no need for an incentive system based on crypto tokens. Instead, the node is owned by the company as the desire here is for a reliable, secure, and ultimately centralized network for businesses.
Other Startups Are Also Now Designing DAG Architectures
Perhaps most prominent 0f these are DAGCoin and Byteball who are also racing to claim a spot as the premier DAG platform. That is, if the technology takes off, as it is impossible to predict where advancement will take us. Who knows—the next big thing might be just around the corner.
Featured Image: DepositPhotos/ migfoto
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