Blockchain 1.0 came into existence with the launch of Bitcoin in 2009. It brings with it the potential technology to shift from the prevalent use of centralized fiat currencies to that of decentralized digital currencies, which are more transparent, efficient and secure. The aim is to process transactions while removing middlemen, such as central banks and their charges.
Despite Blockchain 1.0’s novel proof-of-work (PoW) approach, problems with processing transactions also surfaced. With the need to solve highly complex mathematical problems before blocks of transactions can be processed, mining cryptocurrencies like Bitcoin requires a tremendous amount of electricity on high-powered computers. This makes the process not just highly unsustainable, but also unscalable. For example, Bitcoin can process 3 to 7 transactions per second, while Visa’s transaction speed is around 2,000 TPS.
To overcome the limitations of Blockchain 1.0, Blockchain 2.0 was established, with Ethereum taking the lead in launching the proof-of-stake (PoS) protocol. Transaction processing was automated, with smart contracts making it quicker and more efficient, achieving around 15 transactions per second — twice what Bitcoin can churn out. However, this rate falls way behind what existing centralized payment institutions like Visa can do. Therefore, in order for blockchain to become a serious contender to mainstream, centralized payment institutions, Blockchain 3.0 is intended to overcome the biggest issue for existing blockchains: Scalability.
What Can Blockchain 3.0 Do?
As an upgraded version of Blockchain 2.0, Blockchain 3.0 builds on and refines its predecessor’s technological capabilities. It utilizes a directed acyclic graph (DAG) as its data structure to facilitate a unidirectional flow of information that cannot be returned to the sender, thereby eliminating block times. This allows transactions to be processed almost immediately — at an incredible rate of 10,000 transactions per second, surpassing the likes of Visa.
With a faster, more cost-effective and efficient approach that can rival that of existing centralized financial institutions, the launch of Blockchain 3.0 helps to expedite the adoption of blockchain technology. It does so not only in the finance sector, but also in many other industries — from improving the security of information storage and transfer in healthcare, and applying distributed ledger technology in the logistics sector, to improving the tracking of goods, and even implementing transparent ledgers in voting systems to broaden accessibility while tightening security.
Blockchain 3.0 may not have reached its goal of global adoption, but it has moved beyond establishing a decentralized financial protocol — its original motive — to improving the storage and transfer of sensitive data. This has vastly broadened the application of blockchain technology and distributed ledgers to all industries.
Being the most disruptive technology of the century, blockchain will continue to iterate and evolve in order to improve its practicality and adoption. This requires continuous research to resolve pain points and planning for implementation, as well as testing and experimenting for its feasibility. This process will eventually lead to the arrival of Blockchain 4.0, in addition to inching ever so closely toward the decentralized world envisioned with the advent of blockchain technology.