Let’s not get too excited about blockchain

June 18, 2019 14:57
Max Kantelia, co-founder of Singapore-based blockchain startup Zilliqa, said the scalability issue remains a bottleneck in the application of blockchain technology. Photo: Zilliqa

Blockchain, which underpins cryptocurrencies such as Bitcoin, has drawn massive interest around the world, with a growing number of enterprises investing heavily in the technology for deployment in their businesses.

But amid the excitement, some blockchain startups and entrepreneurs are taking a more prudent view of the technology.

Among them is Zilliqa, a blockchain platform headquartered in Singapore. In an interview with EJ Insight, its co-founder Max Kantelia said enterprise application of blockchain technology is still in the “pioneering” stage and its true value remains to be seen.

Zilliqa’s goal is to achieve a high-throughput public blockchain platform. Despite the technology's massive growth around the globe since 2017, Kantelia said the scalability issue remains a bottleneck in its the application.

“The existing public blockchains, for example, Ethereum and Bitcoin, can only process seven to ten transactions per second,” he said.

Ethereum, the second largest blockchain cryptocurrency, can only process a limited number of transactions. “End users have to pay a lot, in terms of “gas fee” to miners, to actually make transactions on the platform," Kantelia said. "As the cost became very high, people stopped using the application.”

Designed to scale to thousands of transactions per second, the hyper-efficient Zilliqa blockchain platform is based on “sharding”, a technology concept developed by researchers at The National University of Singapore.

“In principle, sharding is a sort of a ‘divide and conquer’ approach,” Kantelia explained. “For example, if you have to process a hundred transactions, what you do is you split or 'shard' those transactions, maybe into ten by ten, and then process those transactions in parallel.”

With the sharding approach, the more network size is added, the higher the throughput rate.

The technology enhances the scalability of the platform and reduces the amount of computing needed for those processes to work.

As a result, Zilliqa has succeeded in achieving “thousands of transactions per second of throughput”, Kantelia said.

Zilliqa emerged from the university world, instead of the common startup community. Its board includes several Singapore-based scholars and professionals in computer science.

Himself a blockchain enthusiast and an entrepreneur, Kantelia said the market has seen a boom in blockchain applications deployed in various industries. But while some adopters see the power of the blockchain as omnipotent, Kantelia prefers to take a more conservative approach.

“We are still at what I would call the pioneering phase of blockchain technology, where people have been trying to find the right use cases for this technology,” he said.

“Look at the enterprise world: you see that nine out of ten projects or proof-of-concept projects in blockchain actually don't go any further than a proof-of-concept. In some cases, people are just trying to be trendy. They're saying, 'We've used a blockchain to do X because our competitors are using one too.'”

“If you look at a lot of other public blockchains, you’ll see that it’s a hodgepodge of things with little focus, but we’ve taken a different approach.” Kantelia said.

Zilliqa is targeting has three "verticals". One is digital media and entertainment, including its partnership with media company Mindshare on an end-to-end reconciliation platform for the digital advertising industry. PepsiCo as one of Mindshare’s clients.

Another one is gaming. Zilliqa is working with a number of gaming platforms, such as EMONT Alliance and Krypton, to allow in-app payment for games using blockchain technology.

And the third is financial services, which includes Zilliqa’s participation in establishing Hg Exchange in Southeast Asia to support the issuance and trading of private company shares, including security tokens.

After plunging from historical highs last year, cryptocurrencies have regained momentum in the second quarter. Bitcoin, the largest cryptocurrency by market cap, has surged to a one-year high of over US$8,900 in late May, bringing the digital money back to investor attention.

Commenting on the crypto bulls’ return, Kantelia said the community is now saying that the "crypto winter" is over and "crypto spring" is here.

Nonetheless, he believes "winter" is good for the industry. “Just like the internet in the late '90s, when things appear too good to be true, and they usually are, and there were just far too many scam projects and really nonsense projects that raised capital, I think that there's been quite a lot of cleansing going on during this winter,” he said.

Asked about his cryptocurrency price predictions, Kantelia said it is very difficult to predict. “There are no fundamentals in this market, no matter what people try to convince you of.”

However, he hopes the market will see a slower but less volatile climb. After the market crash last year, “we’re going to see fewer newbie speculators coming in because people have had their fingers burnt already in [the cryptocurrency rally] last time,” he said.

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EJ Insight writer