5 Things you need to know if you want to enter the Blockchain and Crypto Sector
You may be thinking these days about moving into the blockchain sector and asking your self “What do I need to learn ?”, “Which are the most promising areas ?” and “How can I personally benefit from it ?”
I have been following this sector as a developer and consultant since 2017. In this article I summarized some of the major aspects you need to know if you want to work, use or offer services in this sector.
This article will cover the following 5 questions:
- Why public blockchains are the future ?
2. Which blockchains have big potential, and when to use them ?
3. What are the most interesting areas ?
4. What are the biggest risks and open issues?
5. How can I personally benefit from blockchain ?
1. Why public blockchains are the future ?
Private blockchains are today as exciting as corporate intranets were few years ago. No one really is passioned about it.
In 2017 private blockchains had a big share in the blockchain eco-system. Today in 2021, their share and impact is diminishing rapidly.
The reason is that public blockchains like ethereum are getting better and beginning to solve their open issues around privacy and scalability which were the main reason for private blockchains.
Public blockchains provide today a couple advantages over the private ones, for example:
- Higher network security because of the larger number of network nodes
- Lower costs for companies because of the lower maintenance costs of the network
- Neutrality since there is no central unity who owns it
- A vibrant developer and a passioned user community around almost every major public blockchain
2. Which blockchains have big potential and when to use them ?
Below are 3 of the top blockchains, which will still hold a big share of the market in the next years:
Ethereum
Strengths
- Real-world use cases with smart contracts and a strong eco-system
- Ethereum has the potential to be a base layer for a new decentralized internet
When to use it:
Ethereum as it is today with its high fees is best suited for decentralized finance applications rather than gaming or other use cases involving a lot of low value transactions
Cardano
Strengths
- fast, energy friendly and lower fees than ethereum
- big developer and fan community
When to use it
Once smart contracts are fully functional, cardano can be a real alternative to ethereum, because it has less fees and is a real decentralized blockchain using Proof of Stake.
Bitcoin
Strengths
- The consensus protocol Proof of Work is simple and robust
- The UTXO concept is powerful against all kind of errors, because there is no state to manage like when you use accounts as in other chains
When to use it
Bitcoin is best suited as a store of value. it is very simple and it is the most secure chain existing today. The energy issue will mostly be solved with green energy in the next years.
All the critics regarding Bitcoin performance, scalability, its limits to serve as payment network and the lack of smart contracts makes it even a better store of value ( less attack surface, less hacks , less bugs)
3. What are the most interesting areas ?
In 2017 ICO’s and ERC20 Tokens were the biggest use cases.
Today and in the future the following 5 areas have the biggest potential:
- Finance / Decentralized Finance (DeFi): Lending/Borrowing, Deposit, Payment, Settlement, Tokenization, DEX’s, Crypto trading
- Energy: Energy Trading, P2P Vehicle Charging
- Internet/Web: Identity Management, Web3 (IPFS)
- Trading , Supply Chain & OwnerChip: Provenance tracking, IOT, NFT’s
- Ads & Social-media: Advertising using crypto tokens, Meme Coins
4. What are the biggest risks and open issues ?
Below are 5 of the biggest risks and challenges, I am seeing today in the Blockchain eco-system:
Performance & Scalability: Performance & Scalability are still the biggest issue, centralized platforms are today faster ( Binance Chain as a centralized solution for example is taking big market shares from ethereum).
Layer 2 Solutions: The multiple solutions for scalability like layer 2 solutions on ethereum ( Polygon, OMG..) will help short term, but will damage the future of the blockchain base layers long term. The reasons are: first they are already splitting the eco-system, second they can not communicate between each others and lastly they will be interested long term in growing their own garden, even when the base layer has its problem solved.
Interoperability: There are dozens of running blockchains and protocols today. Syncing transactions in a secure and decentralized way between them will be a big issue in the future. The up coming solutions like Polkadot, cosmos and cardano will bring some help, but they are also competing between each others and are based on different concepts. So you will need adaptors even between the adaptors them selves. It will get complicated. More Standards for the Inter-blockchain communication are needed and need to be implemented ( like HTTP protocol on the Web).
Software bugs and hacks: Blockchain is a new technology and lot of concepts are still on the Making, so bugs and hacks are very likely on every layer of the technology ( Core, Smart contracts, Communication)
New Intermediaries and big players on the rise: In many blockchains you still have intermediaries and big players, for example miners who are collecting mining fees. In many cases miners pushed their own interests, which have led to hard forks of existing blockchains like bitcoin and ethereum. Other types of intermediaries in the decentralized space will for sure popup in the next years and can become as big as google today. We are seeing for example today already central exchanges like Binance and CoinBase influencing where the blockchain eco system will go in the next years. Governance is already and will get more complicated in the future.
5. How can I personally benefit from blockchain ?
There are many ways to benefit from the blockchain technology. You can start:
- As an expert who consult people how to implement blockchain solutions or as a software developer who builds stuff for the blockchain.
- As a miner or a stake holder who write blocks to the blockchain and earns rewards (for example in bitcoin as a miner, or a stake pool holder in cardano)
- As a participant who maintains an entire blockchain and validate and propagate new entries ( receive some kind of crypto rewards )
- As an investor in blockchain platforms, tokens or blockchain projects
- As a business owner who uses blockchain solutions for added value or cost optimization
Expect also that the big corporations will try their best to profit the most from this technology. Exactly like what happened on the internet which is not only a bad thing for adoption, but can lead to monopole like huge corporations ( see facebook in social media area or amazon in e-commerce).
So Don’t be late to the party and try to get your own share also as an individual developer, an investor or a startup owner.
If you want to learn more in depth about the blockchain concepts, I have written a compact guide which covers the whole picture including use cases, risks, chances, technical aspects and a comparison between the major platforms.
It covers the main questions which everyone asks when starting with blockchain, how to use it and how to benefit from it.
In 2 Hours time investment, you will get the whole picture of the Blockchain eco-system. Here is the Link on the Book Store: https://tinyurl.com/tux3f23h
