We’re computing on the equivalent of 1960s hardware.
Developers take virtually free storage and computation for granted, but blockchains don’t work that way. Typical modern applications contain millions of lines of code. Typical smart contracts contain only dozens of lines of code.
Right now, the cost of committing transactions permanently to the Ethereum blockchain is astronomical. This past summer, the Ethereum blockchain size exceeded 1 terabyte. (Note: that’s for its full history. Etherscan is only tracking FAST sync now.) That storage capacity is shared by every user of all Ethereum decentralized applications (DApps) combined.
Thirty-two bytes of immutable Ethereum blockchain storage costs 20,000 gas. One gigabyte costs 20,000 * (1,073,741,824 (bytes per gigabyte)/32) = 671,088,640,000 gas. This summer’s ETH cost for that gas was 6710.8864, close to $4.7 million.
In 1966, 1 GB of storage would have set you back $1 million. By 2017, it was $.02.
Note: Gas prices are very volatile and can double or halve in days. Regardless of whether the price is $2 million or $8 million when you read this, it’s expensive.
The Apple II (1977) could compute over 1 million operations per second. On Ethereum’s busiest day, the entire decentralized supercomputer that is the Ethereum VM processed just 1.3 million transactions in 24 hours. An Apple II could handle 86 billion operation cycles in a day. Of course, this is a simplistic comparison, but I hope you can see the point.
A music-playing greeting card has thousands of times more computing power than the Ethereum VM makes available to all application developers combined.
So, what are all those expensive GPUs and custom ASIC processors doing? Securing the blockchain. Nearly every ounce of computing power in the Ethereum blockchain is spent solving consensus and the double spend problem. Application developers get microscopic scraps of leftover computing power.
New consensus algorithms are being developed and deployed to solve some of our resource problems (notably, lightning and proof-of-stake), but in terms of computing power, we’re currently in the 1960s again.
Lots of other systems promise to solve all these problems, but they’re unproven and they do not have robust developer ecosystems.
Investment-wise, we’re in the mid-1990s and investors are throwing money at the new internet that’s beginning to take shape. Most of the investors — and even the developers in the ecosystem — are not fully aware of the resource constraints we’re facing today, or the fact that we’re talking about a 7-10 year journey to realize the grand visions that are laid out in all the smart-contract-heavy white papers floating around.
We’re Early, and That’s OK
I’m glad you made it through that part! I know it was rough. Here’s the good news:
Some early innovators in the 1950s to 1970s (where we’re at, tech platform-wise) are still around today, and worth a fortune. Intel was founded in 1968. As of this writing, it has a $258B market capitalization. IBM’s market capitalization is $130 billion. HP created the first personal computer; today it’s worth $36B. It’s quite possible that Bitcoin, Ethereum or Lisk could be the next Intel. (Bitcoin’s market capitalization as I write this is $122B, and it peaked at $327B — what’s open to speculation is how long Bitcoin can hold its dominance, and how much it could grow).
Investment-wise, we’re in the mid-1990s. The pre-dot-com bubble-burst era included Amazon, Google, Priceline, Netflix, Salesforce and Alibaba. Their early starts gave them all unfair competitive advantages compared with latecomers.
You may see a big mismatch between technology innovation and investment. However, ENIAC (the first Turing-complete digital computer) was completed in 1945. Ethereum (the first Turing-complete blockchain platform) was proposed in 2013 and launched in 2015. Solutions to the scaling problems are already being tested. It will take time to incorporate those fixes, but we’re talking a few years, not a couple of decades.
Crypto won’t solve every problem, but it will solve a great many problems across every industry, tear down walls, disintermediate many inefficient processes, forge entirely new industries and open up many opportunities that did not exist before. It has the potential to substantially grow the global economy and unlock tremendous hidden value in every industry. In short, it’s a technological development on par with the web and the mobile computing explosion — the foundation upon which 7 out of 10 of today’s most valuable companies are built, and one upon which all 10 rely for key operations.
Now is the time to invest long term and build the internet of value.
Focus on Infrastructure and Tools
Amazon (with a $791B market capitalization) is a particularly interesting example, and I think companies in the crypto economy are going to emulate the pattern: Amazon figured out common infrastructure and logistics problems and addressed them internally as if it were building services for other companies to use. And then it turned that strategy into businesses currently worth tens of billions of dollars annually.
At Po.et, we’re taking the hybrid approach. By batching transactions and anchoring to the Bitcoin blockchain, we can potentially handle billions of transactions per day.
Our protocols will take advantage of the immutability of the blockchain without being constrained by transaction frequency limitations. Batching is the key to that.
This approach will enable us to take on major partners with hundreds of millions of users in the near future, instead of waiting years for technology to catch up with us.
People trying to build consumer DApps for near-term mass market adoption are in for a rude awakening: The world is not ready to handle the full glory of your ultimate vision and probably won’t be for another three to seven years.
You may have better luck with a centralized/decentralized hybrid. If you’re hoping to build a DApp and attract 10 million users by this time next year, good luck. You’re gonna need it.
The DApps are Coming
Currently, there are more investors and speculators in the industry than there are qualified developers — by a large margin. There are about 5,000 DAU on the most popular decentralized exchange, and fewer than 20 DApps with more than 100 DAU. In other words, close to 100 percent of DApp users are using DApps primarily to invest in crypto, and a very small number of developers are currently focused on building and marketing DApps.
Where the money goes, jobs follow. For a large majority of developers entering this space, it will be their first crypto job and, in most cases, their first experience with crypto in any capacity.
Step one: Learn the limits so you can plan ways around them.
Welcome to the Blockchain.