The three reasons why a technology will limit blockchain implementation
Blockchains usually mandate that every block and transaction is stored on every node. Currently the bitcoin blockchain is rocking at 250 GB. The Ethereum blockchain passed a terabyte a month ago now.
This amount of data does not seem like a terrible amount — and it isn’t; a decent 1 terabyte hard drive costs about $40 on Amazon. By this metric, you may think that it would take about $50 and some time to run an Ethereum node. However blockchains require a stupid amount of upkeep to maintain, not even mentioning the stress on the node validating everything.
A node almost needs constant connection to other nodes to stay updated; on top of that, there isn’t much benefit to running a node — unless the person also runs a mining operation, or a wallet service.
There are cryptocurrencies that reduce the stress on the nodes, and speed up the transaction by using complicated mathematics that would put even the most avid reader into a coma. If governments did create a cryptocurrency, the majority of the effort would be just making the code for the nodes, and not figuring out how the hell to actually upkeep it, this leads us to the first issue:
Issue One: Innovation
There are hundreds of cryptocurrencies available for you to buy. All of them provide some different benefit that the others do not have. There’s even one that has the very important feature of being a meme.
There is also this other really cool blockchain-theory that implements anonomous voting and decentralized government, as well as many other facets of crypocurrencies. It is made in part by Daniel Jeffries, who (brag) follows me on Twitter.
Blockchains are really difficult to update. The Bitcoin Segwit2x fork took months to organize and complete — and that was, more or less, just a simple block format update. There will be immense pressure from all the typical parties — the private citizens, the banks, the corporations, the government— will all want to get the software right the first time. They will all want to bias the network in their favored technology, but the immense pressure from all sides will favor a chain toward an unbiased one
Though a lot of nodes with the same interests can put heavy pressure on the network. In a world with a heavily interlaced economy, a country could pressure the rest of the world to make changes to the network that benefits them. If the rest of the world does not comply, the chain could separate, slowing the global economy — and none of the typical parties want that.
Running a blockchain the size of the world will be expensive, so some governments might want to favor a system where the private citizens use banks, who then use bulk transactions, therefore lowering the amount of data stored on the network. This brings issue two:
Issue Two: Data Rate
Right now, the Bitcoin blockchain takes in 1 megabyte every 10 minutes, or just under 3 kilobytes a second. I’ll assume that 5,000,000,000 people are to use my imaginary blockhain, ignoring a few billion people whose government would use its own digital or physical currency. I’ll estimate about 15 transactions per day, and 500 bytes per transaction. Contracts, data storage, and massive transactions will skew the average size.
5,000,000,000 times 15 times 500 bytes makes out to be 37,500,000,000,000 bytes to be stored indefinitely daily. With a few calculations, I am left with about 400 megabytes per second, or 3 gigabits per second.
This is over 133,000 times the data of the Bitcoin network. A blockchain used by 5 billion people would need to be over one hundred thirty-three thousand times the capacity of the bitcoin. It’s for a good cause, I guess. The current financial system probably would use millions of times than resources as bitcoin.
On top of the required bandwidth to simply store data, a node has to communicate with other nodes and clients, and receive the final blocks. I’ll assume this will multiply the required bandwidth by one hundred.
Now think about how a private citizen is supposed to run and maintain a node in their house. Consumers’ internet speeds increase at 50% each year. Assuming a starting point of 1 gigabit per second at 2018 (year zero) we could calculate how many years internet speeds would take to reach 300 gigabits per second:
300 = 3 * e^(.50 * x)
100 = e^(.50 * x)
100 = e^(x/2)
x/2 = ln(100)
x = 2ln(100)
x = 9.21034037198 years
This means that in 2027, consumer internet will reach 300 gigabits per second, assuming that innovation is steady.
But even then, nobody is willing to use their entire internet speed to run a blockchain node, especially if the information could be easily found from a miner pool. A crowdfunded and or a subsidized situation might be better, but crowdfunding something that is inherently meant to be non-consolidated creates the third problem:
Issue Three: Consolidation
Due to the large amount of data required to run a [popular] cryptocurrency node, many miners have joined into a pool to even out the fixed cost of running a cryptocurrency node. One person would run the node, the others and maybe even the person that runs the node would all mine for solutions, and they would share the profit. Simple economies to scale — bigger production is cheaper per product; but only up to a certain amount — eventually the person who runs the cryptocurrency node would be overloaded with the amount of mining it would need to verify, and would run out of bandwidth it would need to transfer the necessary data.
If there was a world-scale blockchain, nobody except the rich and the fanatics would be very eager to run their own node. Today nobody is eager to run a node, unless they can run a large-scale mining operation or mining pool. In order for the interests of the network to be aligned with those of the people, the people need a way to control a node, in such a way that counters the monetary power of the other typical parties to run nodes.
While everyone is running around, writing second-grade stories on why their irrelevant shitcoin should be the one to rule over the world, the actual battle between control of the inevitable blockchain movement is between the people and the powerful.
Since mining power rules all as concerned to blockchains. Since money can buy more mining power, money will be the deciding factor of control.
Some people will still insist that people will be able to set up their own blockchains and they will all easily exist in harmony. This is only true for very basic cryptocurrencies that do not have any of the fancy shit, like tokens or smart contracts — you cannot transfer one-of-a-kind tokens across networks; and forking will be just as pointless.
My point is: there will have to be one network that will rule all. Control over that network will will be the most important thing in the world. Money is power; control the money, control the world.