The Scale of the Blockchain Scalability Constraints

Raul Zambrano Blockchain, Economics Leave a comment

According to latest estimates, global Internet penetration was close to 54 percent by the end of 2017. That is roughly 4 billion people. Figures for the number of unique cell phone users show that 5 billion people have access to the technology.1 BTW, this means that 1 billion people have a cell phone but are not connected to the Internet. But that is another story.

Armed with this numbers, I asked a business acquaintance who is a blockchain enthusiast and practitioner if the most popular blockchain platforms could effectively cater to all those users. Answer: “Not at this moment. But do not worry, we are working on it.”

The reason for this stems from the scalability constraints the most reputed blockchain platforms face. As I see, the scalability issue is related to three factors: 1.

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Endnotes   [ + ]

1. ⇧ BTW, this means that 1 billion people have a cell phone but are not connected to the Internet. But that is another story.

Have You Ever Seen a Blockchain?

Raul Zambrano Blockchain, Human Development, Innovation Leave a comment

A silent but intense competition seems to be taking place when it comes to defining blockchain technology. A Google search for the question “What is blockchain” yields over 120 million possible results. This number includes thousands of guides, videos, FAQs and other “educational” material on the subject. A shining example is a video depicting a blockchain expert trying to explain the technology to a 5-year-old kid. Really?

One common trait of all these resources is the lack of agreement on a single and straightforward definition of a blockchain. So take your pick. But, as mentioned in a previous post, this is probably not that relevant. After all, many people use mobile phones on an hourly basis and have no idea how they work. They do not need to, nor do they seem to care about it. The

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Bitcoin Inequality

Raul Zambrano Blockchain, Economics, Inequality 1 Comment

In the short and medium term, technology and inequality seemed to be positively correlated. In the long term, however, things are not as clear-cut. With the right policies and democratic institutions in place, technology could become a catalyst to reduce income and wealth inequality. Historical evidence from last century clearly supports this claim. Will digital technologies of the 21st Century follow the same path?

The long-term is still quite a few years away for digital technologies such as AI and blockchains. In this post, I will look at the world of Bitcoin and explore its links to income and wealth inequality. I will assume the Bitcoin network is a country on its own with defined financial ties to the rest of the world mostly via crypto exchanges and miners.

Last May, the total

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Blockchain Mining Costs and Revenues

Raul Zambrano Blockchain, Economics, Innovation 1 Comment

In a previous post, I pushed the idea that mining is part of the real sector of the blockchain economy. Unlike financial speculation, mining requires investment in hardware, electricity, space, human resources, etc. This also applies to small miners who undoubtedly will have to defray a lower investment amount but who can join a mining pool to share mining revenues. Also, miners face intense competition which in turn is a reflection of the high level of profitability in the sector.

Mining calculators seem to proliferate in the web. Such sites offer potential mining investors a rough idea of how much they can make on a daily and/or monthly basis given the current price of the crypto being mined and the hashing the investors is willing to purchase. For example, I am told that if I buy Bitcoin

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Checking ICOs, Again

Raul Zambrano Blockchain, Economics, Innovation Leave a comment

It has already been three months since I last checked the ICO scene. At the time, I suggested ICOs were probably slowing down. New data seems to confirm this but all points to other trends not detected before. Figure 1 presents the latest data

ending on 31 May. 159 ICOs were successfully completed between March and May raising over 4 billion dollars. The data includes the Telegram wh.ich collected over 1.7 billion dollars in spite of not holding a public ICO phase. Telegram can indeed be seen as a statistical “outlier” making last April the most successful month ever. Note that the number of successful ICOs did not increase overall. March matched February with 57 ICO but was much more skinny regarding resources. April and May are fatter but do not exceed the number of ICOs of the previous

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The Real Sector of the Blockchain Economy

Raul Zambrano Blockchain, Economics 2 Comments

Most cryptocurrencies are now over 60% down from their December 2017 peak. While prices are still quite volatile, the trend for the last five months is decidedly downwards. While some still expect a recovery to the glorious days of last year, others see overvaluation all around accompanied by a financial bubble about to burst. Comparisons to the good old dot-com boom and subsequent crash of 20 years ago are cited as empirical evidence of what is coming.

Indeed, the current blockchain boom has similarities with the previous one. But there are also some fundamental differences springing from by the very nature of what we can call the blockchain economy. The first one is the marriage between technology and finance. Not that in the past the financial sector refused to use new technologies.

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Blockchain Mining Revisited

Raul Zambrano Blockchain, Economics, Inequality Leave a comment

Blockchain mining cannot catch a break when it comes to environmental sustainability. This is especially true for Bitcoin mining which seemingly has an insatiable appetite for electricity. A recent paper suggests that by 2020 Bitcoin mining will consume as much energy as Australia. While these estimates are not exempt from criticism, mining does not appear to be best friends with sustainable development, at least not for now.  An alternative way to look at this issue is to compare Bitcoin’s mining power use to that of cloud-based providers who have now become well-established tech corporations. Such comparison should be made not only in absolute terms (gigawatts) but also in relative fashion by considering, for example, the total population being served by these platforms and networks.

In

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Democracy and Capitalism: Friends or Foes?

Raul Zambrano Economics, Governance, Human Development Leave a comment

The post-WWII era can be arguably defined as the golden age of democratic capitalism – at least from the perspective of developed or industrialized countries. Rebuilding Europe and pumping capital into Japan triggered a long economic boom that lasted until the 1980s – notwithstanding the infamous 1973 oil crisis. The fall of the Berlin Wall in 1989 opened new markets to capital investment and recruited new members to the democracy club thus providing a much needed second wind to the then declining golden age.  During that same period, democracy, defined narrowly, continuously expanded in developing countries, including those that became independent nations in the 1960/70s. By the end of the last Millennium analysts and observers were openly speaking about the third wave of democratization,

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Algorithmic Inequality

Raul Zambrano ICTD, Inequality, Innovation 1 Comment

Disruptive. One of the attributes that most use to describe in minimalistic terms the potential impact of new and emerging information and communication technologies (ICTs) in society. While its actual meaning can vary from one person to another, disruption is usually linked to dramatic short-term change where old and obsolete technologies, processes and institutions -not to mention people – will be either replaced or purge altogether, all for the best.

Disruption is thus implicitly connected to the concept of progress, especially to its linear version. Here, progress is seen almost like time is in physics: it always goes forward, and it is impossible to go back and say edit the past. Recent research has challenged the linear conception of progress((See for example Amy Allen’s book, The

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Blockchain Technology is not a Monolith

Raul Zambrano Blockchain, Innovation 1 Comment

Many observers seem to assume blockchain technology is an immovable monolith. While such assumption does help when trying to explain how the technology works to the general public, this is indeed not the case when it comes to describing the actual status of the technology.

Rapid and agile innovation is one of the core traits of blockchains, backed by impressive human talent with substantial financial resources, addressing not only some of its well-known limitations but also enhancing its core functionality. Blockchain technology is evolving rapidly and the best way to take stock, for now, it’s via frequent snapshots. In fact, keeping track of blockchain innovations could quickly become a full-time job. In any event, the monolith is not only moving. It is indeed flying at the speed of light.

Blockchains

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