While cryptocurrency prices have seen their fair share of volatility, the underlying technologies supporting the industry continues to grow immensely, demonstrate innovation, and solve problems. Specifically, technological advancements in the areas of privacy, off-chain solutions, and exchanges are signs of a cryptocurrency industry with a bright future ahead.
The initial iteration of blockchain privacy has left many people scratching their heads as to why anyone would ever want their financial transactions published for the world to see. But the advent of zero-knowledge proofs are beginning to change this narrative, as they allow transactions to be validated without any information of the transaction itself being made public. This method of privacy, which is currently being used by ZCash and is being developed by Ethereum, has been thoroughly researched in order to prove its validity as a method for increased privacy.
There are other technological advancements arriving on the scene that are dedicated to making user privacy a priority. Coinjoin technology gives the option to join multiple transactions together making it impossible to tell the transaction origination and destination wallets. Homomorphic encryption, or a method of performing calculations on encrypted information without decrypting it first, has been proposed as a way to prevent privacy problems that occur when dealing with sensitive, unencrypted data. Although still in the theoretical phase, this technology is projected to be utilized for practical, mainstream usage in the not-too-distant future.
Two large challenges for blockchain technology are speed and scalability, and developers are actively working on addressing both. Payment processors such as Visa can conduct thousands of transactions per second at high speeds, while the legacy Bitcoin blockchain can only conduct 4-7 transactions per second. Because of this, Bitcoin has had trouble scaling at the enterprise level, but an array of off-chain solutions are being implemented to help create blockchains that can transact without capacity or speed limitations.
The Bitcoin Lightning Network has been widely regarded as a game-changing innovation that could take the cryptocurrency to the next level. Powered by smart contracts, the Lightning Network allows payments to be settled off-chain by way of payment channels where users transact. The blockchain isn’t used in every transaction and is instead only called upon to settle disputes and when payment channels are closed.
Ethereum is working with a similar off-chain solution, the Raiden Network, which promises instant, low-fee transactions to work in conjunction with the Ethereum blockchain. Compatible with the ERC20 token, the Raiden Network takes away the need for global consensus and allows Ethereum smart contracts to be processed off-chain and settled on the blockchain when needed.
Bright Horizons Ahead
Although the cryptocurrency industry has dealt with its fair share of volatility in recent months, the technology powering the space has grown immensely and will only continue to grow steadily with the help of dedicated teams working to accommodate the over 20 million digital wallets being used by consumers and businesses around the world. This puts blockchain technology and cryptocurrencies on track to do great things in 2018 and beyond.
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