We all have heard about such revolutionary technology as blockchain (also known as distributed ledger technology) and its most famous implementation - Bitcoin.
Those are the append-only, immutable and distributed features of blockchain technology which make it so attractive to the developers and the businesses around the world.
And there is a huge amount of companies, doing the research and development, trying to apply the blockchain technology to their business domain. Startups around the world are eager to build the solution that is going to disrupt the business environment and change the status quo in one or another area.
As the blockchain implementation, Bitcoin has all the features described above, but for the businesses, though it gives the limited capabilities. To be fair, every business problem that requires the distributed immutable registry can be considered as the problem to be solved with such blockchain implementation as Bitcoin.
But think about that, the applicability of Bitcoin isn’t large. Have you heard much more done on Bitcoin than a cryptocurrency / distributed registry?
Limitation of Bitcoin as the implementation of blockchain is what gave it the classification of Blockchain 1.0. Bitcoin represents the blockchain technology at its early evolutionary stage.
Do you need anything else at all?
Considering the complexity of the solutions being done nowadays, there is definitely the requirement to manage the state & write the business logic.
Bitcoin only stores the transactions of coins on blockchain, therefore the state of the network is just the amount of coins for each account.
Also it has a simple script language, that is stack-based language, thus does not have loops and is not suitable for writing the complex business logic.
You can imagine the impediments for developers in achieving the desired business goals.
So what if we would like to get more out of the blockchain technology?
Is there any alternative to Blockchain 1.0?
Ethereum is a public decentralized blockchain-based distributed computing platform (or distributed virtual machine).
The most crucial notion, proposed by Ethereum developers is a Smart Contract.
That notion can be compared to the Actor Model and you could think about the Smart Contract, as the actor with its own state, that can be managed by that actor only.
On contrary to the Bitcoin’s amount of coins the state here can be anything you could think of.
The contract itself then represent the program / logic built using the Solidity language.
That is a turing-complete language, that gives the capability to write the comprehensive logic of the state management.
As such the Ethereum is considered as the next step in evolution of the blockchain technology and is classified as Blockchain 2.0
Smart Contract applicability
The idea of the distributed immutable ledger and the notion of Smart Contract, as the unchangeable business logic of the state management, has opened the unseen capabilities for us today and the feasible revolution in future.
Multiple companies out there already benefit from the public blockchain by performing the ICO (Initial Coin Offering) and thus getting the investment for improving their products or doing the revolutionary R&D, where the venture capital is quite challenging to involve.
Comparing ICO to IPO, we agree that the ICO is under regulated and that fact is a threat to the technology adoption. But no doubts, that many countries will come up with the clear rules and protect the investors sooner or later.
Talking about the future, the adoption of Ethereum blockchain is quite promising.
Others could think of the legal contracts implemented on a blockchain using the Solidity language. That provides the clear definitions of what the parties agree on with no ambiguity.
There is no doubt that blockchain is a revolutionary technology, that will change our everyday's life drastically.
Companies out there understand the potential and attractiveness of the blockchain-based products to the investors. Thus many of them try to use blockchain in their products.
But not every product can benefit from the blockchain and the DLT technology doesn’t fit everywhere. There has to be a clear understanding and the motivation to use it.
Stay tuned as we talk about the practical applicability of the Smart Contract in future posts.