Why connecting all the Blockchains is the final step for mass adoption of Cryptocurrencies
Since the start of Bitcoin in January 2009, we have seen the introduction of a multitude of blockchains across all kinds of areas and financial markets. Today we can count hundreds of public blockchains that amount to a total market cap of almost 100 Billion dollars, excluding many more private blockchain installations.
Last year we saw the emergence of precious metal backed tokens, derivatives, entirely new asset classes representing entire ecosystems, and even ETF tokens to invest into other blockchain assets. One such example is Initial Coin Offerings (ICOs) or token sales that are gaining in popularity as I described in the last post (https://medium.com/@TenX/raising-money-from-vcs-vs-doing-a-token-sale-a-quick-guide-to-best-practices-e38e7645727b ). The World Economic Forum is even going as far as predicting that 10% of the global GDP will be stored on the blockchain in less than 10 years2. In terms of today’s global GDP that would be $7.8 trillion. (http://www3.weforum.org/docs/WEF_GAC15_Technological_Tipping_Points_report_2015.pdf ).
Here a challenge arises: If we as a community do not find a way to connect blockchains, these 7.8 trillion dollars will be dispersed in such a way, that its true value is a lot lower, just like discussed in this article: https://medium.com/@TenX/how-do-blockchain-assets-trulyderive-their-value-f42573e75d59 So what is the solution? The solution is one, that we have seen in a similar way being executed around 30 years ago already:
Before the invention of the TCP/IP protocol the Internet was also dispersed in many local networks, so-called Intranets. These provided local efficiency over the more traditional point-to-point communication (such as letter, fax, telephone calls). The real breakthrough only came in 1973, when different Intranet networks realized that they could use a unifying Internetwork protocol to communicate among each other, thereby extending reach by compatibility even more.
With the requirements for an Intranet to join the so called Internet dropping to the bare minimum, it became possible to add almost any Intranet, no matter how basic or sophisticated their characteristics were.
The initial adoption by users was relatively slow, as the services offered at the beginning were limited. There was one major factor however, that eventually sped it up significantly. The same providers that were already offering mail, FAX and phone services, could now add Internet services to their portfolio giving them extra revenue streams. User adoption came easily, as a trust basis between the customers and these services providers was already established for years or even decades. Early adopters started, the late adopters followed.
Today the Internet spans across the entire world and information that used to be accessible only locally is now accessible from anywhere, even from the moon. Information is stored by servers all over the world while routers create the backbone. Internet service providers (ISP) give the average end-user easy and quick access to this vast database of information by opening a communication channel to their customers and to other ISPs, servers and routers.
Once the average user accesses the Internet through his or her communication channel with the ISP in order to gain information from the Internet, the user does not have to worry about how the information is retrieved exactly. All she has to do, is to type in the destination from where she wants to retrieve the information (URL). The ISP, to which she has the communication channel to, does not know the exact path to the destination either. However, through the TCP/IP protocol, the request is routed through from one communication channel to another using routers, servers or ISPs, who then either know the location or continue the process. The important point is, neither one of them has to know the entire way. All they have to do, is to trust the TCP/IP protocol, which has the task of delivering packets from the source host to the destination host, solely based on the IP addresses in the packet headers. Its routing function enables internetworking, and essentially establishes the Internet8.
How does this translate into connecting blockchains? What if there was a way to connect literally any blockchain, without creating a new larger blockchain, like some companies have suggested. Creating a new blockchain would be like a large intranet, that all the other intranet would have to trust. It would be way more difficult to convince everyone. It is easier to leave everyone on their blockchain/intranet and just connect them.
With that in mind, I therefore suggested a Cryptographically-secure Off-chain Multi-asset Instant Transaction network (COMIT) at the end of 2016 and wrote a white paper on that: www.comit.network .
What does such a network look like? Just like in the Internet, we need a stable and trustworthy backbone. In our opinion any large blockchain provides exactly that. It can be any blockchain, because just like on the Internet, different modalities will be interconnected (For example: the initial Internet never foresaw mobile app messaging services, but these have been implemented without any problems). The same will be true for COMIT, where any new blockchain can be connected to an existing one through the use of the COMIT Routing Protocol (CRP).
A user today, who is using crypto-currencies, currently has to wait minutes if not hours before a transaction is accepted by the counterparty. With the adoption of payment channels, such as the Lightning Network, Raiden or many others, such users can transfer assets instantly from person A to person B. If person B then opens another payment channel to person C, person A can also transfer assets to person C via B instantaneously, as long as person B provides enough liquidity. In theory there can be an infinite chain of participants in between person A and C, as long as they all provide enough liquidity. Again, such transactions are immediate without person A needing to know which route the assets took to end up at person C. She can trust this system as the routing protocol ensures its correctness, plus the cryptographically secured payment channels, which will be described in the next chapter, ensures flawless functionality.
What we end up with, are cryptographically-secured instant payments off-blockchain that can even be transferred from one asset to another via hashed time-lock contracts (those will also be described in the next chapter). In order for this network to have enough liquidity (in the example above person B needs to provide enough liquidity to enable a transaction between person A and person C), we introduce the concept of Liquidity Providers (LP). LPs can be seen or understood as hubs or nodes in the COMIT network, that create payment channels to users, other LPs and businesses. They are a core part in COMIT. Just like servers, routers and ISPs are to the internet.
Adoption of this system will be seamless, fast and will bring great benefits to all of its participants, just like the Internet did. Some of the benefits of COMIT include:, but are not limited to:
- Open source infrastructure
- True instant, frictionless and cheap payments for users all over the world
- True global access without limitations to any asset or business process connected to a blockchain
- Cryptographically secure trustless global transactions network
- Amazing new business opportunities for companies
- New recurring revenue streams for banks and other liquidity providers
- Rapid adoption based on existing networks build with new cheap and secure infrastructure
We have already checked and over 95% of all the blockchains (especially the large important ones can) can be connected. In the next article I will discuss in great detail what the 3 requirements are for such a system to work and how it looks from a technical perspective.
With COMIT our vision for the world seems to become reality: Sending money as cheap and seamless as sending a WhatsApp message. Will you join the revolution?
The author Dr. Julian Hosp is the co-founder and CVO of TenX.
TenX (www.tenx.tech) is a Singapore based FintechCompany that makes any Blockchain asset spendable instantly by offering a debit card payment system to its users on the frontend and by connecting any Blockchain at the backend.