2018 has been a defining year for blockchain, with many new projects releasing their applications, and many more releasing their first prototypes to the public.
With each day that passes, we’re continuing to see an increase in the number of blockchain-focused solutions available.
However, interestingly, not all of these blockchain solutions are actually built on the blockchain. In fact, some of the most popular platforms are still centralized.
Blockchain Meets the Internet of Things (IoT)
Perhaps the second biggest buzzword of the year after ‘blockchain’ is the ‘Internet of Things’ (IoT) – and for good reason.
McKinsey has predicted that the IoT market will be worth a surplus of $580 billion for ICT-based spend alone, growing at a Compound Annual Growth Rate (CAGR) of seven to 15 percent.
As a result, it’s no surprise that more and more companies are looking for innovative ways to make blockchain work smoothly with the IoT.
The IOTA platform is perhaps one of the successful examples. It was developed with the purpose of eliminating fees when carrying out microtransactions in the Internet of Things (IoT).
However, despite its benefits, this solution has some glaring flaws that are causing a large number of potential investors to turn away.
The Big Problem with IOTA
One of the most glaring issues with the IOTA platform is that it is not actually a blockchain solution.
Right now, it uses a centralized server that is referred to as ‘the coordinator’. This means that it currently has all of the drawbacks of a centralized system.
For instance, unlike solutions built on the blockchain, the system is not resilient to attacks. This means that if the coordinator has to be shut off, the entire system will shut down. In fact, this has happened once before in October 2017 when a bug fix led to the entire platform being temporarily inoperable for a couple of days. This led to a substantial amount of public criticism towards the platform.
There are plans for the IOTA platform to eventually become fully decentralized. The team has reported that once the platform has gained a critical mass of users, the Tangle network will be strong enough to withstand attacks and the coordinator will be removed.
However, there is also a risk that this will never happen, and that the platform will remain centralized forever.
As it stands, the platform is currently nowhere near reaching the critical mass it requires to become decentralized, so even if it does happen, it will likely be quite far in the future. This is a huge issue, as decentralization is one of the key aspects of blockchain technology that makes it so revolutionary.
What Are the Advantages of Being a Blockchain Solution?
There are a number of benefits of being a blockchain solution – especially within a blockchain solution.
First and foremost is the benefit of decentralization. Solutions built on the blockchain don’t require a trusted third party or intermediary to validate transactions. Instead, they can simply determine their validity by utilizing a consensus mechanism.
In addition, all blockchains are shared, which means everyone can see what is on it. They are also immutable, which means that once something has been entered into the blockchain, it is incredibly difficult to change it. Both of these features help to establish trust.
However, one of the biggest benefits of being a blockchain solution – and one that will become increasingly important in the future – is that it will enable future connectivity between other blockchains.
For instance, solutions such as FUSION are cooperating with financial institutions, crypto companies, third-party app developers, academics, and the broader crypto community in order to create a broad blockchain-based finance ecosystem.
We’ve also witnessed the creation of technologies such as the Atomic Swap – a smart contract technology that enables the exchange of one cryptocurrency for another without the need for exchanges and other centralized intermediaries.
This method offers many benefits to trading on exchanges.
First of all, it’s far less time-consuming. When using an exchange, the entire process, from registering to the exchange, to actually receiving your coins, can take between 3-5 days. Alternatively, trading cryptocurrencies via Atomic Swaps allow you to skip almost all of the steps required by centralized providers, eliminating delays and allowing you to receive your coins much faster.
It also allows you to keep your identity private because no verification is required, it minimizes delays and reduces trading fees to a minimum.
Alternative Blockchain-Based Solutions for the IoT Industry
IOTW is one solution similar to IOTA that aims to integrate blockchain technology with IoT by putting micro-mining functionality into IoT devices such as televisions, cell phones, cars, computers, and electronic cars – without adding hardware costs.
Ultimately, the platform aims to bring blockchain technology within reach of the average household.
However, there is one big difference between IOTA and IOTW, and that is: IOTW is fully blockchainized.
IOTW has invented a new mining algorithm called ‘Proof of Assignment’ (PoA) – a faster, more decentralized method than both Proof of Work (PoW) and Proof of Stake (PoS) that requires less computational power and power consumption, and is also compatible with IoT devices.
IOTW will also have a marketplace where users can spend their IOTW tokens on various goods and services. This will create a real ecosystem for the blockchain.
What Is the Next Step?
The benefits of blockchain technology are becoming increasingly obvious.
As a result, the blockchain industry has grown so rapidly over the past few years that it’s become clear that it is only a matter of time before it’s crossed over into pretty much every aspect of our lives.
However, despite our progress, it’s becoming obvious that the next step in our long journey towards full blockchain integration will be finding a way to actually enable these blockchains to connect with one another.
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