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Blockchain-Based On-Chain Solutions: An Overview

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Blockchain-Based On-Chain Solutions: An Overview


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@ks.shilovKirill

Blockchain enthusiast developer and writer. My telegram: ksshilov

With more than a decade having past since the creation of Bitcoin, blockchains have come a long way. There is no doubt that the Bitcoin blockchain has its specific uses, and as developers figured out what else blockchains could be used for new types of chains had to be created.

These new chains offered increased speed, larger block sizes, and overall improvements to security on a decentralized network. As new chains were developed, some blockchain experts thought it would be better to start taking some of the stress off of chains by creating hybrid blockchain environments: databases that used blockchains and off-chain resources in a quasi-decentralized manner.

This led to the argument between on-chain and off-chain solutions. In the current market, there are plenty of companies on both sides of the aisle, and no clear market data exists to clearly dictate how many are companies are on each side.

Both, on-chain and off-chain solutions are trying to reduce costs and increase privacy. Anyway, storing data inside a block leads to centralization, while keeping it off-chain is less secure. There might be cases where off-chain solutions may excel at the moment, but isn’t it in the best interest of everyone to keep everything on-chain and immutable?

4 popular on-chain solutions

Sure, it is easier to use outside sources to store data or process payments — but doesn’t that take us back to square one of having to trust one another? Blockchains exist to keep sensitive data and control out of the hands of the few, by placing the trust in the hands of the majority.

It may be cheaper to incorporate off-chain workarounds to reduce the load on a blockchain, but that isn’t solving any of our problems. Instead, we should be focusing on how to improve blockchains so they can handle anything we need to throw at them.

If a purely on-chain solution is practically impossible as we can not increase the limit of a block, what functional solutions do we have?

Cardano is an open-source, decentralized public blockchain that is home to the Ada cryptocurrency. Like ILCoin and Ethereum, Cardano is more than just a vessel to carry a cryptocurrency and is capable of implementing financial applications like those already being used around the world by organizations and governments.

Because Cardano is constructed in layers, all of which are on-chain, the system has increased flexibility to handle diverse tasks, smart contracts, and dapps. Cardano is built and developed based on scientific philosophy, its creators being a global team of academics and engineers.

Cardano aims to balance the privacy needs of users with the restrictions placed on companies by regulators, finding harmony between the needs of its many diverse users and the governments under which it operates.

EOS, an open-source blockchain introduced in 2017, is aiming to grow into a decentralized operating system able to support massive dapps through dPoS. Although it already exists in this capacity, as a decentralized operating system where users stake tokens to gain processing power, it may be introducing a new storage feature soon.

DISK, a new network resource, is theorized to be on-chain storage databases that operate within EOS’s existing network — along the same principles of CPU and RAM. There are other EOSIO copycat blockchains already running storage protocols, however, using EOS DISK will be easier for people already integrated into that ecosystem.

Icon.foundation, also known as the ICON Network, is a blockchain designed to connect other blockchains to one another. Think of it as a way to keep on-chains blockchains on a greater chain, in order to prevent isolated blockchains from having to rely on off-chain solutions to serve their users.

ICON’s blockchain is designed to connect real-world entities to one another, on the scale of banks, universities, insurance companies, hospitals, etc. By combining public blockchains with permissioned/private blockchains, ICON aims to be the web that connects blockchains around the world.

It uses a transparent governance system that allows validators to gain trust in the network and become C-Reps, which authenticate transactions and have voting rights to make decisions with a majority consensus. ICON Network’s real strength comes with its ability to connect existing blockchains, giving them a path to stay on-chain instead of forcing them to rely on off-chain solutions when resources are strained.

Bancor, similar to ICON, is building a bridge between existing cryptocurrencies to help them stay on-chain. Bancor is a decentralized liquidity network that allows any token connected to it to be seamlessly exchanged for any other token it is connected to — relying on Bancor’s internal embedded converter to sort out prices.

Thousands of token pairs already exist on the network, and Bancor runs on the EOS MainNet with plans to expand to more blockchains in the future. For developers seeking a way to avoid settling payments off-chain, Bancor is a solid solution to encourage cross-crypto payments while keeping everything immutable and on-chain.

So why aren’t all companies staying on-chain?

On-chain roadblocks, and how to overcome them

If keeping everything on-chain was the cheapest and easiest solution, every blockchain company would be doing it. All blockchains face similar issues in this regard, figuring out how to scale, how to handle larger capacity transactions, and how to do it without spending more money. Take Bitcoin, for example, a blockchain that keeps everything on-chain and has had plenty of years to develop into what it is today.

Bitcoin has, on average, a transaction limit of 7 transactions per second at most. The actual transactions per second are somewhere closer to 4. To improve Bitcoin you have to loosen one of the throttlers: block size and mining speed. Bitcoin’s block size limit is 1 megabyte, while blocks are restricted to being mines once every 10 minutes or so.

So how do we scale? One solution is increasing block size, which is what the ILCoin network is attempting to do. By utilizing mini-blocks, ILCoin pushes their block size limitations to around 5 gigabytes — this alone would increase the total number of transactions processable per second. EOS, on the other hand, opted to increase the transactions by second by reducing the time between blocks. They do this by requiring less consensus; instead of requiring the majority of the chain, they instead require 21 chosen nodes to validate the entire chain.

No matter how companies strive to overcome these restrictions, it is important that they do so while keeping everything on-chain. Centralized, off-chain solutions are definitely cheaper, but data leak after data leak has shown us that centralized systems cannot be trusted. When the opportunity to misuse and abuse data is available, it is almost certain that someone is going to prey on it. Keep it on-chain, because if you’re going to be using blockchain for more than a buzzword you may as well commit to actually using the technology for what it is best at.

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Blockchain enthusiast developer and writer. My telegram: ksshilov

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