Blockchain Wars?

Blockchain Wars?

By TabbyTabby | The Lonely Places | 5 Oct 2021


When the crypto market saw a dip and the trends for cryptocurrencies were heading downward, there was one bright spot: ATOM.

Why is this? ATOM is the native token of COSMOS, a blockchain of blockchains, a project that allows people to use the token of their choice for the dapp or the service of their choice. Like other interoperability solutions, it seeks to solve the problem of silos which result from people going with one blockchain and then having their funds or even their appeal tied up in that. Interoperability expands marketplaces (you could have an Ethereum dapp that can accept funds from Matic users, for instance), and takes the burden of having to manually exchange and convert funds from the exchange and the user.

The appeal is obvious, especially when we considering how Ethereum's hard fork hasn't turned out like many folks were expecting. The Ethereum blockchain is still congested and the gas fees are higher than they have usually been (but not as high as they were early in September 2021). This has folks looking for other solutions. Some are looking at other blockchains, but some are looking beyond just switching to a different blockchain.

We've seen this drive towards standardization arise from a confused playing field of different players many times before.

This standardization can take several forms. One way is through mutual agreement formed by a cabal (the electric bulb companies in the US, for instance). Another way is through force, like the unification of Germany under Bismark, where he defeated rival princes in battle and created one country from many different fiefdoms. The virtual monopoly of the phone system by AT&T, or the oil system by Standard Oil, are other, less violent but still forceful examples. A third way is wholly peaceful and involves mutual agreement on sizes of bolts (SAE), HTML and CSS standards (W3C), and the sizes of paper.

Were these standards a particular measurement or a particular product? Adhering to a common measurement or way of doing something allows many competitors to do the same thing, but provide value through speed, style, service or follow-on products. If a particular product becomes the standard (by force or customer preference), then the bar is set higher, and rival companies compete in order to provide an alternate service, or take to the law to break up the standard product company.

If you have watched the computer space for any length of time, you've seen this pendular motion, from centralization to decentralization, to and back again. The first computers were room-sized behemoths (here is ENIAC, for instance). Then came smaller systems, but kept behind glass, with only dumb terminals hooked up to them at campuses and research labs. Then came personal computers, completely divorced from the need for a central hub. Centralization returned with the push towards thin clients in the workplace, followed by the concept of the home computer as hub; then the smartphone arrived, cutting the tie from the phone line wired to houses, businesses, and so forth, decentralizing yet again.

The blockchain space is going through a similar pendular shift -- while much has been made at various times over the efforts of COSMOS, Polkadot, Thor, and other ways to interoperate among blockchains, the London hard-fork of Ethereum provides a real-world rationale. It was supposed to make gas fees more predictable (and hopefully lower them), but to date, it has just created a higher basement for gas fees, without affecting congestion. As a result, developers are eyeing the exits from Ethereum.

Interoperability appeals at a very basic psychological level as well. Everyone can use more than one blockchain; however, at some point, interacting with more and more items becomes mentally fatiguing. Studies have suggested that human beings tend to have a limited number of slots available before the internal complexity burden kicks in. The number of disparate things (short term memory items, for example) that most people can handle is around seven. The ways that have been developed to handle the blockchain explosion are makeshift -- exchanges doing it for you, trading bots, are some examples. These approaches are typical of bandaids and duct tape on systems rather than fundamental fixes, and they can only be maintained for so long. So unless a few cryptocurrencies establish a defacto standard soon, interoperability is coming.

Some reasons here are negative reasons -- why hasn't the marketplace coalesced behind one to four blockchains? Many market segments hover on the sideline, such as computer hardware and software manufacturers. Microsoft has not yet partnered with a particular blockchain and Apple has not yet developed its own token/blockchain.

With the continued rise of ATOM, though, it seems that the marketplace is voting for interoperability far more than for any particular blockchain.

(Image created by modification of a found image.)

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TabbyTabby
TabbyTabby

I write. I program. I make music. I am of the tribe of liberty.


The Lonely Places
The Lonely Places

Fixing thoughts and evanescences like butterflies beneath glass

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