Photo credit: NASA Webb Space Telescope
There is no doubt that Ethereum was a fantastic step forward in the evolution of blockchain technology. I talked about the idea of messaging on chain at the first ever Hong Kong blockchain conference back in the days and got 85 bitcoin as a speaking fee (yes, I lost the recovery phrase). I talked about food tracing, personal ID records, smart cities and manufacturing, insurance policies and land deeds using blockchain. Essentially I was talking about smart contracts before Ethereum was even born.
Smart contacts are the greatest invention since sliced bread. They offer endless possibilities for transmitting self-executing instructions over vast distances in record speed. Like the fax machine made it possible to send documents instantly to the other side of a transaction, smart contract on Ethereum are marvelous, for tracing goods, executing land deeds and, it turns out, powering NFTs – from real utility NFTs like trade documents or financial obligations to silly works of “art” – and even music. So far Ethereum is the medium on which they travel (plus the occasional alternative like Solana which has been catching up lately). Today, we have smart contacts & NFTs on Cardano, Algorand, Near, and any other competitor out there.
The problem is they are all the same.
The problem with smart contracts
Smart contacts are a feature of the blockchain they live on (for now let’s focus on Ethereum). They are limited to simple If/Then logic arguments and require what we call oracles – gateways to information not available on-chain. Like Chainlink for example, which basically has a price oracle monopoly. The most damning shortcoming of smart contracts and NFTs is the fact that they depend on the underlying chain’s condition and suffer from the same problem as the chain itself. Like congestion, scalability and transaction costs (called gas fees)
Enter the State Channel
There is an alternative now available that does away with all these problems. They are called State Channels, and they use the Constellation Network. The very same Constellation used by the US Air Force and trusted by FourSquare. The same Constellation that co-authored the standard for autonomous vehicles with GM and Ford, and the very same Constellation working alongside Lockheed Martin and Northrop Grumman to protect America’s space assets.
State Channels are chain-agnostic. They can define their own complex business logic and even include good old-fashioned ERC-20 tokens. Most importantly, they make oracles unnecessary, because they validate data from where it originated in real time. They can involve multiple data types simultaneously because of the horizontal scalability of the network. But above all, they become faster and cheaper the more data you throw at it.
NFTs without gas
The same horizontal scalability and the ability make Constellation the perfect place to run an NFT marketplace. Users can be paid out in any currency and buying and selling as well as transferring NFTs.
While this may not matter for Bored Apes and other abominations, it does matter when trade documents, government licenses, legal documents, ID papers, driving permits, public transport passes or airline tickets are involved. You don’t want to pay 60 bucks in gas fees to get the boarding pass for a $100 fight
The same feature of infinite scalability and fee-less transactions makes project like EnterTheVoid ideal of charitable projects, democratic tools like voting systems, public records, tax receipts etc. My own wildlife conservation NFT project Natoura, which pays photographers for their work while sending proceeds from sales directly to conservation societies and animal refuges is using the EnterTheVoid marketplace.
Many of the taunted advantages of Ethereum alternatives revolve around speed and throughput, essentially two aspects of scalability. Some of them are incredibly fast and cheap. But even as Ethereum is trying to move to Proof-of-Stake it can only scale up to 100.000 tps. A single node in the Constellation Network delivers around 2000 tps, and there are over 5000 nodes already. You do the math. More importantly, the network gets faster and cheaper with every node added. A bit like a human brain growing more neurons.
Let me repeat that: FASTER and CHEAPER the more data you process. If there is anything you take away from reading this article, let it be this:
What I call “classical blockchains” like Ethereum get more and more congested and expensive with increased usage. Constellation State Channels get faster and cheaper. That’s the key.
So while Ethereum changed the world and smart contracts showed us the way to more efficient business processes and much else, I think we’ve reached a bottleneck. No layer or scalability solution will ever solve Ethereum’s trilemma or it’s security problems (it needs cross-chain and multi-chain solutions which are essential band-aids on a patient suffering from bowel cancer.)
Data is everything
Data is eating the world. You’ve had that before. But classical blockchains, while good for many things, are bad at dealing with large amounts of data, especially real data. This is where the Hypergraph shines.
“Hypergraph technology is a dramatic game-changer in the world of data, as well as for out-of-this-world data. State channels enable project- and business-specific data-intensive applications that require the acquisition, processing, securing, and delivering of any volume or any variety of data and data products from any type of sensor to any data-hungry application. That is not simply enabling data to move at the speed of business, but more importantly state channels are enabling businesses to move at the speed of data. I expect to see state channel technologies inspiring a massive wave of innovation and innovative new businesses in the universe of data,” says Dr. Kirk Borne, world renowned data scientist, astrophysicist, and former data archive project scientist for NASA’s Hubble Space Telescope.
Ethereum is not going to disappear overnight. It will have a role to play in the future, undoubtedly so. It may be ideal for a vast number of applications where speed doesn’t really matter, like ID documents, proof of origin declarations, insurance policies and land deeds. But it is not suitable for anything involving massive amounts of data like military operations, smart cities, smart manicuring, voting systems, tamper-proof real time data applications in physics or law enforcement, payments on a massive scale like cross border, retail, CBDCs, or advertising.
The world before us is a world where data rules. Data that needs to be processed in real time. Massive amounts of data, sensor data, algorithm outputs, legacy databases, unstructured, and multi-conventional, DNA data even, and Ethereum and its “killers” are not cut out for that.
So yes, Ethereum changed the world. But it’s time to change the world again.
The author is the Head of Research at Uphold. To sign up for the world’s safest web3 bank with full crypto services click here.