Elrond busy writing the blockchain's next chapter
As blockchain’s history is written, original credit will of course be given to the Satoshis and Buterins who actually created the space. Hopefully not lost in the story will be those who quickly took those early contributions and scaled them so they could handle the complex tasks those minds envisioned when they first saw the technology.
One company helping to scale blockchain for enterprise is Elrond, a company driving increased social scalability through sovereign digital ownership, data privacy, censorship-resistant applications and novel digital economies and governance models.
CEO Beniamin Mincu is one of Elrond’s founding members. He said he stumbled into Bitcoin seven years ago and immediately knew he wanted to join the space as fast as possible and began reading everything he could find on the topic.
But Bitcoin had its limitations so Mr. Mincu soon looked for similar but better performing projects. Finding few, him and his brother started a fund which invested in more than 30 blockchain startups.
“We arrived at a very deep understanding of the space, of what is happening and how things are done,” Mr. Mincu said. “Some of those projects died so we learned what doesn’t work but also how things should be done.”
In 2017 the bull market popularized Ethereum faster than many anticipated, and that revealed how unscalable its infrastructure was. While a few projects were addressing the problem, there was not enough attention being paid to what would soon be a large problem, Mr. Mincu believed.
Those few projects weren’t thinking far enough ahead either, Mr. Mincu added.
“Why not apply state sharding? Why only improve proof of work and not secure distributed proof of stake?” Mr. Mincu asked. “No one was solving the problem in the proper way.”
Most solutions, if realized, would only be short-term fixes, two to five times of an improvement over current versions, Mr. Mincu reasoned. “If you build a solution you should reason from first principle to at least two or three orders of magnitude better than the status quo.”
Armed with that foundation, Mr. Mincu and his brother gathered the most technical minds they knew and discussed their visions of the future. They took a group of 10 and held weeks of intense discussions, culminating with a thee-day marathon where they formalized the infrastructure.
“Our conclusion was we have a really significant breakthrough and we should pursue it,” Mr. Mincu said.
Two key characteristics of Elrond’s architecture are adaptive state sharding and secure proof of stake, Mr. Mincu explained. By splitting the the networking into smaller shards, Elrond creates linear scalability as more nodes join its network through parallelizing transaction processing. As more nodes join the network, new shards are formed and throughput significantly increased.
The process leading to Elrond’s secure proof of stake was challenging, Mr. Mincu said. Needing a consensus mechanism that was efficient, secure and fast, Elrond looked beyond proof of work to proof of stake but wanted to avoid network issues such as cartel wars that could hinder delegated proof of stake systems.
That led Elrond to produce its own pure proof of stake version with some unique characteristics, Mr. Mincu said. The consensus group is randomly sampled every five seconds. If a fraudster was to find out, they would only have five seconds to act before the sample is reshuffled again. After every 12 hours, one third of the nodes in each shard are randomly shuffled into other shards.
Adaptive state sharding offers high throughput and a secure, efficient consensus, Mr. Mincu explained. It grants finality in five seconds, with the goal of 10,000 transactions per second volume.
One of the most promising use cases for Elrond is in driving a globally accessible financial system, one which is borderless, transparent and accessible, Mr. Mincu said. For that to be feasible, you need a globally accessible Internet, which is coming closer every day, and a public blockchain which is scalable with high throughput, fast execution and low transaction cost. Elon Musk’s Starlink initiative helps drive the Internet accessibility while Elrond addresses the blockchain, Mr. Mincu said.
“It allows you to transfer ownership without the need for a trusted third party,” he explained. “If you have this and you have internet you can start having a global financial system that is borderless and censorship resistant.”
Society is headed in exciting new directions, with self-driving cars and the Internet of Things exemplifying the important roles machine-to-machine transactions will play in the near future, Mr. Mincu said. Machine-to-machine transactions will become commonplace, but must be powered by a scalable blockchain featuring high throughput, fast execution and low transaction fees if it is to reach its potential.
“With the current technology that doesn’t work,” Mr. Mincu offered. “But if you scale beyond 10,000 TPS it gets interesting.”
Government and legacy business take time to adapt to change, so it needs to be managed properly, Mr. Mincu said. Take your time showing them the benefits of the new technology. Thankfully, most large players are eager to learn it. Startups tend to be on top of new developments. They proactively learn new technologies and either create new initiatives based on them or adapt existing plans to take advantage of them.
It also helps that you have an actual product to demonstrate rather than a theory, Mr. Mincu added. That takes away some of the hesitancy across the table.
“People react differently if you try to sell them something if you don’t have it,” he said. When you do a demo, you see a light in their eyes, a sparkle.”