Blockchain : Rise of New Technology 2/3
By : Kie Tsukamoto
These interview posts are broken down into three parts:
- His Back Story
- Blockchain Technologies and their Uniqueness
- Cryptoeconomics Lab and the Future
This is Part 2. To check Part 1, click HERE.
Part 2: Blockchain Technologies and their Uniqueness
How are They All Different？
Kie: There are so many blockchains. Can you tell me the differences of each?
Shogo: Well, you can group them into two categories: centralized and decentralized. I believe that many business people have at least heard of Bitcoin and Ethereum. They are decentralized ones.
On the other hand, blockchains like Hyperledger and AURA are centralized. The node number of Hyperledger is around 3 to 7 while that of Ethereum is around 14,000. The number of the node* is a criterion that you can look into when determining whether it is centralized or decentralized.
* To learn more about nodes, click here
The level of decentralization/centralization varies with each blockchain entity’s vision and also with the number of nodes. For instance, although NEO is considered centralized, I would say that the centralization level is quite diluted since the number of nodes is around 120.
Kie: I see. As you said, Ethereum and Bitcoin are very popular blockchains. Can you tell me about their advantages and disadvantages?
Shogo: The advantages of Ethereum are something like the following:
- You can use any major existing community Library for EVM: Thus, you can implement a new logic right away and deploy it as a contract. However, you need to use an Ethereum specific language called Solidity when writing a smart contract.
- Superior expandability is another advantage: engineers can freely develop anything they want. And then, latter they can make that contract into pre-compiled contract at planned hardfork event. This is going to be performance tuning. This is the virtue of turing complete smart contract.
- An audited code is one of the greatest advantages of Etherium. This means that there is low risk of any bug occurring.
The disadvantages will be its transaction speed and cost:
- Due to the large number of nodes and users, the block and Tx propagation speed is slower and the Gas (processing fee) is quite costly.
Because of this disadvantage, engineers use other blockchains like NEM, NEO, Zilliqa and so on. But, this shift is rather due to project-suitability (of each blockchain’s uniqueness). It is not simply a decision of what is good or bad.
Kie: You need to understand the uniqueness of each blockchain and to see what is the most suitable for your project.
Shogo: Right. You need to pick the technology that is most suitable for your project. For instance, in my previous project (an Uber-like service), NEO or NEM was more suitable than Ethereum.
Kie：Why is that?
Shogo: Because you can use your programming language and the transaction speed is faster. Besides, because you can use Java with it, it is easier to recruit engineers. The Ethereum-specific language is very similar to Java but it is not the same. So, you really need to be familiar with the language to be able to write it more intuitively. There is no such thing that exists with NEO, which is one of the advantages of NEO.
Kie：Well, then can you summarize the uniqueness of NEO for me?
Shogo: I would say something like this:
- You can write it with any existing programing language
- Faster transaction speed
- Lower number of nodes: because it is more centralized and the number of nodes is lower, there is a risk of getting shut down (if you have 14,000 nodes working on a blockchain like Ethereum, if just one or two nodes get kicked out, the damage is virtually non-existent, but it gets more significant as the number of node gets smaller.)
- Insufficient Library: because it is still new, the library is not that significant in comparison to others.
＊To more learn about NEO, you can check their booklet, which came on October 8th, 2018
As for the number of nodes, it is not a simple principle of “the more, the better.” However, here, I mentioned about the risk of being shut down since policy makers have yet to finalize their stance on blockchain. If you are developing something that might get regulated, a smaller number of nodes increases the chance of getting shut down.
This might not be a positive analogy to use, but Ethereum is so free and open that it kind resembles a dark web. There is no single point of failure. That is why it cannot get shut down. It is super decentralized.
Kie: Why is it so different?
Shogo: Such difference emerges because their visions are very different. NEO was invented by a Chinese business person; thus, it is very business-oriented and policy compliant. What that means is “creating something that everyone wants to use.” In contrast, Ethereum is all about freedom. It is unimpeded. No one can control it nor manipulate it.
That is why it can be used anywhere in the world and it can function as public goods. No one entity can regulate it nor control it. That is the most unique aspect of Ethereum. While NEO’s UI is clean and penetrable for many businesses, it is susceptible to regulations. That means, how the management team of NEO communicates/negotiates with a regulator becomes crucial.
But for Ethereum, because it is so decentralized, it takes the position of questioning and challenging the regulator side to generate more 21st century appropriate changes.
For the decentralized ones like Bitcoin and Ethereum, the crypto coins that are issued by those blockchains are handled as commodities, meaning there is lower agent risk. This is also an important point. On the contrary, if the coins are issued by a highly centralized blockchain, the agency risk is significantly higher. That is equal to one entity having control over that currency— which is a securities characteristic.
What I look for the most is the direction and vision of each blockchain community—are they going to be public goods or biz friendly? For instance, EOS blockchain is very similar to NEO; yet, the number of nodes they have is just 21—keeping themselves quite centralized.
Public Chain vs Private Chain
Kie: So, can you describe what public chain/private chain is? What is the difference?
Shogo: A private chain is a blockchain that employs a permission structure. With this structure, not anybody can be a node; you need to be authorized by the blockchain organization(s). The most “permissioned” blockchain has only one organization that is in full control. However, even among private chains (“permissioned” ones), the level of authority differs. On the other hand, Ethereum is open for anybody. Anybody can be a node. There is no entity controlling it.
To me, every blockchain is a public chain but with a different level of “proof of authority.”
Kie: That is easier to understand. What or how does that difference become apparent?
Shogo: well, I think one way to demonstrate this is how crypto startups raise funds. Usually, this is a very typical public chain case. They create a business concept and write a white paper—telling people that “this is a good project and you can make money.” By doing so, they collect a lot of people and grow a community. Once a solid community is formed, the control level of one entity is diluted, meaning the securities characteristic disappears while founders receive the capital gains. This is only possible because they use a public chain.
A crypto startup develops a community rather than a company—the initial users keep the tokens and keep the door open for anybody to join the community. As the community grows, the value of the token goes up. This is how a public blockchain team usually is.
If it is a private one, you can still raise the value of the token; however, you will have hard time diluting the securities characteristic. Ripple’s class action case is a good example of this. How you can create your crypto with a non-securities characteristic could become a key.
So, when you are looking at a blockchain, you really need to look at their position rather than their programming languages.
Kie: Can you explain to me about “their position” from a more business perspective?
Shogo: From a business stand point, it is nice to have a blockchain that is already audited—in other words, bug-free. You can use this already audited code, this is very cost-effective since you do not have to run your own quality control team to test it out.
I think that this is the reason so many people use Ethereum.
But, I would say that NEM is more suitable for creating crypto coins that are web service friendly. A simple C2C service (e.g., a simple “pay money and you get something in return” model) is best suited for NEM. Their API is very limited (not so expandable to various unique services) but because it is so clear what the engineers can do with it; a product can be developed very easily and quickly. Such can never be achieved by Ethereum, I bet.
Kie: Why is that?
Shogo: Because Ethereum is very free—you can do anything with it. Engineers can play with it so much that they will never go to the direction where they just create one simple product and that is it. That is, it is like a candy shop for the blockchain engineers. So many distractions!
So, if it is as free as Ethereum, they go “everywhere” with their development—taking them away from developing a product but getting more into “research.” This might not become a short cut to generating a marketable product and selling it. (In terms of expandability, the same can be said about NEO.)
However, that is how a technology develops. The more engineers play with that technology, the more advanced the technology becomes. This is how technology has always developed.
Learn More about Blockchain?
- Technical Booklet for NEO was published on Oct 8th, 2018! For more details, you can click here.
- There is a blockchain boot camp coming up in Tokyo (Oct 19th~Nov 2nd, 2018), where you can learn about all these major blockchains: Bitcoin, Ethereum, NEM and NEO. Shogo Ochiai will also be there to teach engineers about Ethereum. You can book your seat here .
- NEO Keymakers Japan is selecting their logo. Please vote for the one you think is the best to present NEO Keymakers Japan! Vote here
Profile of Shogo Ochiai
Co-founder/CTO at Cryptoeconomics Lab
A blockchain engineer, specialized in Ethereum, Plasma and zk-SNARKs.
He is mainly devoted to OSS activities in relation to Staking, Formal Verification and so on that are essential to cryptoeconomics, which is the basis of Ethereum development; and taking numerous cryptocurrency development projects across Asia.
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