We have been writing about the importance of decentralized protocols going back to 2013. Since then a lot has happened, including a run up in the price of Bitcoin (and eventually other crypto currencies), the launch of Ethereum, the rise of ICOs and with them the funding of many new projects. And yet it feels to us that we are still in what Carlota Perez calls the “Installation Phase” of a new technology. That’s the period when a market attracts a lot of capital to help build out the necessary infrastructure.
One clear indication that we still require infrastructure investment was when the CryptoKitties project wound up nearly swamping Ethereum late last year. There is not yet a blockchain that can handle the throughput requirements of most real world applications. Now there are important efforts underway both to build on existing chains, such as the Lightning Network for Bitcoin and Plasma for Ethereum, as well as to extend the capabilities of existing base chains such as Ethereum through protocol upgrades (such as shifting to proof of stake and introducing sharding).
Beyond those efforts though is the quest for a new foundational blockchain. There are many projects at varying stages developing new consensus algorithms that allow for scalability while also remaining secure and decentralized. It turns out to be relatively easy to achieve scalability, if you are willing to comprise on one or both of the other properties. The hard trick is to achieve all three.
We are excited to be backing one of these projects, Algorand, which builds on the work of Silvio Micali and others at MIT. You can learn more about the project on the just unveiled and still somewhat under construction Algorand website. If you are more technically inclined you can read a research paper about Algorand.