Expense and Scalability
Despite today’s rapid Internet connection, the early days of the Internet faced difficulties in terms of scalability and expense. On August 7, 1996, AOL’s Internet service struggled to help a high number of Internet users and went down for nineteen hours. At that stage, Americans were increasingly living their online lives every day and AOL was the largest internet service provider in the world, among other competitors such as Prodigy, CompuServe and MSN. The internet itself did not disappear, but the ability to access it briefly stopped, and it was a big deal for those who started getting used to browsing the web in their daily lives. This is analogous to what happened in the blockchain environment in December 2017 in which CryptoKitties spiked the on-chain transaction volume on ethereum and clogged the network. Most users could not get their transactions through on the blockchain unless they were willing to offer a high amount of gas charges, which created a great deal of uncertainty and distress in the community. While the ethereum network jam made many of us realize the current absence of scalability of blockchain technology in servicing more complicated use cases, both of these scalability failures demonstrated a confirmation of the value of these technologies for early adopters in a few years during the early days of the Internet and Blockchain and the need for better scalability solutions to help them.
There are also similar high network fees and costs during the early days of the Internet and the current state of the Blockchain industry for starting a start-up. Back then a modem and a phone line were involved in the method of getting online, in which all online services were operated by a network of local modems for people to dial in. At the time, AOL, the most popular online service, charged $9.95/month for 5 hours of unrestricted access, costing $2.95 for each extra hour, which was very limited by the new standard. However, over time, DSL broadband connections finally arrived, Internet speed was scaled up, and Internet speed was 200 times faster by 2014 and 90 percent cheaper compared to 1999. Similarly, the speed of wireless mobile telecommunications has improved over the years, from less than 1 Mbps with 2 G technology to 25 Mbps with 4 G technology, allowing new services such as music and video streaming via mobile phones to be feasible and realistic. Scalability and cost constraints have been progressively eliminated over time, making it possible for more complex and bandwidth-intensive applications to be feasible and viable.
In the blockchain environment, we are still early in the technology growth cycle, in which the issues of scalability and cost hamper the practicality of more advanced use cases and a broad user base. Low scalability means that developers or users will have to pay higher fees to outsource the other transactions in the queue in order to minimize wait time. As of February 2019, the average transaction fees for ethereum are approximately $0.13, in which more complex dapps, such as on-chain games, will easily run up elevated transaction fees. In order to accommodate the increasing number of dapps and all daily transactions (Visa processes 24,000 transactions per second) living on the same ledger, there is still an urgent demand for blockchain to be scalable, even if not every activity needs to live on-chain. Many projects are working on different ways to increase the speed of blockchain transactions, with variable trade-offs between scalability, stability, and decentralization. With the recent mainnet releases of EOS and TRON (4,000 and 750 TPS respectively), we have seen a spike in more complicated dapps being released in the past few months, and we expect this trend to continue as more scalable blockchains are deployed in space. Overall, the different scaling solutions being explored, such as new data structures (Sharding, Tangle, DAG, Coda, etc.), layer 2 solutions (Sidechains, off-chains, hashed-time locks, etc.), and more powerful consensus algorithms (POS, DPOS, Casper, Avalanche, Hashgraph, etc will gradually increase bandwidth and reduce blockchain transaction costs, allowing new use cases and new use cases.
Furthermore, we expect to reduce the cost of launching blockchain startups over time. During the Internet boom, the average cost of starting a start-up dropped significantly over the years, from $5 million in 1999 to $500k in 2005 and $50k in 2010. The first wave of cost reduction was due to the appearance of open source and horizontal computing (which meant no UNIX, web server and O license) (which meant no need to buy expensive Sun servers & EMC storage). The second wave of cost reduction was then attributed to cloud computing maturation, popularized by AWS, web storage provision (S3), processing power (EC2) and the ability to scale up or down depending on the traffic of the cloud (auto-scaling). It has a starting price of $275,000 for enterprise blockchain proof-of-concepts to implement, according to Gartner, and can go up to several million dollars. Depending on the blockchain (ethereum, NEO, EOS, etc the implementation and transaction fees of simple dapps on public blockchains will cost you $30–85k (interesting breakdown here and existing blockchain talents are in short supply and costly ($150k on average). As the speed of blockchain transactions becomes more scalable and cheaper, we also foresee a cost reduction in the launch of blockchain ventures, as more business-side full-stack solutions (BaaS hosting-Kaleido, AWS, Azure, Oracle, etc.), NoOps-Esprezzo (development platform), middlewares (Omnitude) and developer tools (Mist, Geth, Truffle, Remix, etc are similar to the evolution of the Internet.
At one point, 50 percent of the CDs produced worldwide had an AOL logo on them.
Education is a vital driver of the adoption of new technology, reducing the entry barrier and helping to “cross the chasm” (a term created by Geoffrey Moore). Technology is usually seen before the chasm as a foreign entity, and it is seen as healthy to consume after it has really passed. During the early days of the Internet, Jan Brandt from AOL was hired as VP of marketing to expand its user base. During market research, she discovered that when someone took a computer mouse and began pointing it like a remote control at the computer, people did not know how to use the machine, so it was important to go back to the basics. Selling customers on the basis of one online service over another was not as necessary as informing customers about what an online service was The marketing strategy implies
With broad conferences, such as Consensus, Deloitte or IBM corporate education, developer education, such as ConsenSys Academy, and university education, such as Blockchain Education Network, we have seen many initiatives to educate the next generation of crypto and blockchain adopters to draw a parallel with the cryptocurrency environment (ben). Many companies are also seeking to give away tokens or cold wallets for free through events and marketing campaigns. A crypto platform for learning and receiving has recently been introduced by Coinbase, providing cryptocurrency incentives to complete their educational courses. Actually, there are still a lot of blockchain frictions, and compared to conventional payment solutions such as Venmo or Paypal, you need to have some basic information (private/public keys, gas/transaction costs, etc.), not to mention the permanent risks associated with key management and transactions. We are still early in the industry with less than 1 percent of global adoption, and educating the general public about cryptocurrencies, blockchain and key management will be very necessary for the industry to develop. Large companies such as AOL and Coinbase are well placed to provide additional rewards by givingaway CD trials and cryptocurrencies to effectively help lower the entry barrier and further fuel acceptance.
Overall, it is undeniable that the blockchain industry has made tremendous strides in solving the scalability, expense, and education challenges over the past few years. While we are still early in this technological cycle, we are optimistic that Blockchain will evolve gradually to become scalable, affordable and realistic for mass adoption in a manner similar to the Internet.