People often associate blockchain technology with cryptocurrency, and understandably so, as the market cap for Bitcoin (BTC) alone currently sits at approximately $1.3T. Industry data from CoinMarketCap shows that Bitcoin continues to dominate the digital asset market by capitalisation, underscoring the scale and maturity of blockchain-based financial systems.
This kind of valuation marks crypto as a notably strong store of wealth, but even the best traders and investors should keep in mind that blockchain is more than the crypto that uses it. While people are finding more uses for crypto, developers are expanding the utility of blockchain itself, a shift toward real-world applications driving demand for certain blockchain ecosystems like the Solana price USD .
Since blockchains see considerable use in and outside of crypto, it’s worth understanding how developers are upgrading the technology and what those upgrades might mean for future users.
The Current State of Blockchain
It doesn’t mean much to discuss where blockchain’s going if you don’t know where it is, so it would be pertinent to briefly review the current state of blockchain, including what it does and how it works.
Recall that blockchains are digital ledgers distributed across a network of computers, more commonly referred to as “nodes.” These networks are decentralized, meaning no one entity or node has authority over another.
Importantly, blockchains use this principle to ensure all members of a network have to agree to make a change to a certain node. If they don’t agree, that change can’t be made. As such, in addition to the fact that data on a blockchain is irreversible, blockchains are known for being particularly secure.
Decentralization also makes blockchains notably transparent. Since all nodes on a blockchain have the same level of access, any user can download and inspect transactions, a feature that proves useful for audits and tracking where data like cryptocurrencies go. Keep in mind that this transparency only extends to data, as maintaining anonymity is one of the central appeals of using blockchain networks in the first place.
How transactions actually work on a blockchain is another matter entirely. Since blockchains are distributed ledgers, they record and store information that users create when they perform a transaction across their network. Blockchains store this information in files—blocks—that, once filled, are labeled before the blockchain moves onto the next block, thus creating a chain of blocks.
Transactions are often considered complete after a block closes, but that isn’t true for all blockchain networks. This is because different networks use different consensus mechanisms to prove the validity of a given transaction. These mechanisms vary significantly and remain an active topic of interest for blockchain developers since consensus as a process requires time and computational energy.
Growing Pains: Scalability, Security, and Speed
While blockchain technology as a whole is more advanced than it was when it was first put into place over 15 years ago, its capabilities remain limited by three key aspects: scalability, security, and speed. These limitations matter because they often hinder a blockchain’s ability to handle large numbers of transactions efficiently and sustainably, something that this technology will need to improve if it is to see widespread use beyond the crypto industry.
Some experts note that one of the most pressing obstacles to scalability is the consensus mechanism blockchains use to validate transactions. These mechanisms are an essential part of ensuring each transaction’s veracity, but traditional protocols like Proof-of-Work (PoW) require every node in a network to validate every transaction, often creating a computational bottleneck in the process. This bottleneck then leads to reduced transaction speeds and greater transaction fees, both of which would be unacceptable at an enterprise-level scale.
What’s more, blockchains also have to consider security and decentralization when addressing scalability. It’s commonly thought that making positive changes to one area will negatively affect the other two, necessitating a careful approach that can balance all three.
Solutions in Layer 2 and New Consensus Mechanisms
Although the scalability issue hasn’t yet been completely solved, there have been some important advancements in how blockchains process and validate transactions.
For example, many blockchains are adopting a strategy known as Layer-2 scaling. This strategy moves transaction processing from the main chain onto dedicated secondary networks, i.e., Layer-2 solutions. Using Layer-2 solutions like sidechains has, for some networks, enabled fast and cost-effective transactions. These sidechains also inherit the security of the main chain, so blockchains don’t have to decide whether to sacrifice security for scalability or vice versa.
To address the matter of consensus mechanisms directly, some blockchains have developed alternatives to the original PoW method.
Today, a growing number of networks are adopting the Proof-of-Stake (PoS) mechanism, a validation method where validators stake their tokens to secure the network. Other networks are exploring more experimental mechanisms like Byzantine Fault Tolerance (BFT). Such experimentation has proven valuable in the effort to develop consensus mechanisms that allow for scalability without impacting security.
Why Developments in Blockchain Matter
As niche or esoteric as some of the latest developments in blockchain technology may sound, they serve an important function. Industries like retail, healthcare, and supply line management have begun to use simplified blockchain networks to store information in a way that makes it secure yet accessible for later examination. Their use in these and other industries will remain limited, however, unless blockchain developers can find ways to improve their effectiveness at scale.
By implementing new consensus mechanisms or splitting blockchains into layers, blockchain developers could not only make it more convenient to trade crypto, but they could also make it easier for hospitals to store and retrieve sensitive information. Retailers could use improved blockchains to scale up their product provenance tracking capabilities. Supply chain managers could use better blockchains to create smart contracts that can automatically execute payments.
Blockchains are still very much in a period of growth, but current developments make the future of blockchain technology appear promising. In finding ways to improve blockchain technology’s scalability without sacrificing its security, blockchain developers are playing an active role in exposing blockchain-based tech like crypto to broader audiences, something that will likely prove invaluable in the years to come.
