The growth of blockchain technology

With the invention of Bitcoin in 2008, the world was introduced to a new concept, which revolutionized the whole of society. It was something that promised to have an impact upon every industry. This new concept was blockchain; the underlying technology that underpins Bitcoin.

Some describe blockchain as a revolution, whereas another school of thought believes that it is going to be more evolutionary, and it will take many years before any practical benefits of blockchain reach fruition. This thinking is correct to some extent, but, in my opinion, the revolution has already begun. It is a technology that has an impact on current technologies too and possesses the ability to change them at a fundamental level.

Many prominent organizations all around the world have moved on from the proof-of-concept stage and are already writing production systems utilizing blockchain. The disruptive potential of blockchain has now been fully recognized. For example, Decentralized Finance (DeFi) has recently emerged as a new disruptive idea that aims to decentralize the existing financial system. DeFi offers individuals more control over their assets, allowing them to fully own and operate their financial strategy on blockchain without requiring any intermediaries. This is already challenging traditional finance by creating decentralized platforms for trading, investment, insurance, payments, and lending.

However, some organizations are still in the preliminary exploration stage, though they are expected to progress more quickly as the technology matures.

Progress toward maturity

If we look at the last few years, we notice that, in 2013, some ideas started to emerge that suggested that blockchain may have the potential for application in areas other than cryptocurrencies. Around that time, the primary usage of blockchain was in cryptocurrency space such as Bitcoin and Litecoin, and many new coins emerged during that period.

The following graph shows a broad-spectrum outline of the year-wise progression and adoption trends of blockchain technology. The years shown on the x axis indicate the range of time in which a specific phase of blockchain technology falls. Each phase has a name that represents the stage at which the technology was reached, and this is shown on the x axis starting from the period of IDEAS AND THOUGHTS in 2013 to eventually MATURITY AND FURTHER PROGRESS, expected in 2025. The y axis shows the level of activity, involvement, and adoption of blockchain technology. The graph shows that, by roughly 2025, blockchain technology is expected to become mature and have a high number of users:

Figure 1.1: Blockchain technology adoption and maturity

The preceding graph shows that, in 2013, ideas and thoughts emerged regarding other usages of blockchain technology apart from cryptocurrencies. Then, in 2014, some research and experimentation began, which led to proofs of concept, further research, and full-scale trial projects between 2015 and 2017. In 2018, we saw real-world implementations. Already many projects are underway and set to replace existing systems; for example, the Australian Securities Exchange (ASX) is soon to become the first organization to replace its legacy clearing and settlement system with blockchain technology.

Another recent prominent example is that of a production-ready project implemented by Santander, where the first end-to-end blockchain bond has been issued. This is a significant step toward the mainstream adoption of blockchain.

It is expected that, during 2020, more research will be carried out, along with an increasing interest toward the regulation and standardization of blockchain technology. After this, production-ready projects and off-the-shelf projects will be available utilizing blockchain technology from 2020, and by 2021 mainstream production-level usage of blockchain technology is expected.

In the next few years, research in the scalability of blockchains, where blockchains will be able to handle a large number of transactions similar to traditional financial networks, is expected to become more mature. Also, during the first few years of the 2020s, we will see more production-level usage of blockchain addressing issues such as privacy, decentralized identity, and some progress toward the decentralized web (or internet decentralization). Note that such solutions already exist but are not in mainstream use. The mainstream usage of such technologies is expected from the start of 2020.

It is expected that, at the start of the next decade, research in such areas will continue along with the adoption and further maturity of blockchain technology. Finally, in 2025, it is expected that the technology will be mature enough to be used on a day-to-day basis by, less tech-savvy people. For example, blockchain networks can be used as easily and naturally as consumers using the internet now. Further research is expected to continue even beyond this point. Please note that the timelines provided in the chart are not strict and may vary, as it is quite difficult to predict when exactly blockchain technology will become mature. This graph is based on the progress made in recent years and the current climate of research, interest, and enthusiasm regarding this technology, which can be extrapolated to predict that blockchain will progress to become a mature technology by 2025.

Increasing interest

Interest in blockchain technology has risen quite significantly over the last few years. Once dismissed simply as "geek money" from a cryptocurrency point of view, or as something that was just not considered worth pursuing, blockchain is now being researched by the largest companies and organizations around the world. Millions of dollars are being spent to adopt and experiment with this technology. This is evident from recent actions taken by the European Union, where they have announced plans to increase funding for blockchain research to almost 340 million Euros by 2020.

Another report suggests that global spending on blockchain technology research could reach 9.2 billion US Dollars by 2021.

Also, the interest in blockchain within academia is astounding, and many educational establishments—including prestigious universities around the world—are conducting research and development on blockchain technology. There are not only educational courses being offered by many institutions, but academics are also conducting high-quality research and producing a number of insightful research papers on the topic. There are also a number of research groups and conferences around the world that specifically focus on blockchain research. This is extremely useful for the growth of the entire blockchain ecosystem. A simple online search of "blockchain research groups" would reveal hundreds, if not thousands, of these research groups.

There are also various consortiums such as Enterprise Ethereum Alliance (EEA) at https://entethalliance.org and Hyperledger at https://www.hyperledger.org, which have been established for research, development, and the standardization of blockchain technology.

Moreover, a large number of start-ups are providing blockchain-based solutions already. A simple trend search on Google reveals the immense scale of interest in blockchain technology over the last few years.

Especially since early 2017, the increase in the search term "blockchain" is quite significant, as shown in the following graph:

Figure 1.2: A popularity graph for the search term "blockchain," based on data from Google trends

It should be noted that the decrease shown at the end of the graph does not necessarily directly translate into the decreased interest in blockchain technology, but it simply captures the fact that the search term was searched fewer times as compared to late 2017 and early 2018. This could be simply due to the fact that people interested in blockchain technology have already understood enough about blockchain to no longer warrant searching for it on Google. We do see, however, a significant and continued interest in blockchain technology.

Various benefits of this technology have already been envisioned, such as decentralized trust, cost savings, transparency, and efficiency. However, there are multiple challenges too that are actively being researched on blockchain, such as scalability and privacy.

In this book, we are going to see how blockchain technology can help to bring about the benefits mentioned previously. You are going to learn what exactly blockchain technology is and how it can reshape businesses, multiple industries, and indeed everyday life by bringing about a plenitude of benefits such as efficiency, cost savings, transparency, and security. We will also explore what distributed ledger technology (DLT) is, decentralization, and smart contracts, and how technology solutions can be developed and implemented using mainstream blockchain platforms such as Ethereum and Hyperledger. We will also investigate what challenges need to be addressed before blockchain can become a mainstream technology.

We'll also take a critical look at blockchain; Chapter 21, Scalability and Other Challenges, is dedicated to a discussion of the limitations and challenges of blockchain technology.

We shall begin our exploration of blockchain by looking at distributed systems in the following section. This is a foundational paradigm used within blockchain, and we must have a firm grasp on what distributed systems are before we can meaningfully discuss blockchain in detail.