When Satoshi Nakamoto launched Bitcoin in 2009, he knew that he was introducing a disruptive force that would, to some degree, impact the future of finance. In fact, that was his original intention.
Disillusioned by the financial industry’s misdeeds that helped cultivate the 2008 financial crisis, Nakamoto set out to create a currency that was entirely digital, indelibly secure, and uncompromisingly private. It would operate outside of the purview of any government or central bank, and it wouldn’t require an intermediary to clear transactions.
To make all of this happen, Nakamoto introduced a decentralized ledger known as the blockchain. This technology empowers Bitcoin’s ethos to become a tangible reality. Now, nearly a decade later, Bitcoin is more valuable than most people ever thought possible, but, incredibly the blockchain is advancing even further.
As Steven Johnson wrote in The New York Times Magazine in January: “The Bitcoin Bubble may ultimately turn out to be a distraction from the true significance of the blockchain.”
In writing this, Johnson is less bombastic than it might seem. Sure, Bitcoin is extremely valuable, but the ecosystem developing on the blockchain is more prominent and profound than any digital currency. While the future of digital currencies is still undecided, it’s evident that blockchain technology will play an integral role in the future of technology and the platforms that we frequent.
The Blockchain Ecosystem
Today, the blockchain ecosystem is vast and comprehensive. Ethereum, the most popular open-source blockchain platform for launching a decentralized organization, has more than 80,000 token contracts on its network. It’s joined by dozens of other public and private blockchains that offer unique solutions to a complex web of problems.
In many ways, the technology places new startups and established juggernauts on an equal footing while creating a dynamic and competitive marketplace. These projects are frequently well-funded as they embody the enthusiasm and potential of a new technological landscape.
In 2017, Initial Coin Offerings (ICOs), the most prominent financing mechanism for new blockchain initiatives, brought in $3.8 billion, a record at the time. This year, those numbers have only increased. Data compiled by CoinSchedule shows that ICOs are poised to break $7 billion, and two-thirds of the year remain. In March alone, ICOs raised almost $3 billion for new blockchain startups.
Not since the burgeoning days of the internet has a new technology so stirred the creative juices of developers, entrepreneurs, opportunists.
Unfortunately, the decentralized ethos and autonomous nature of the blockchain means that these disparate platforms are not connected and cannot communicate. Unlike the internet, these platforms can’t broadly connect to other platforms or even other services, and that’s one of their most pressing developmental needs.
Research and consulting firm, Deloitte, identifies this problem as an increasingly important component of blockchain adoption. In their2018 Tech Trends report, Deloitte encourages companies to “Push for standardization in technology, business processes, and talent skill sets.” In addition, they recommend that companies “Work to integrate and coordinate blockchains within a value chain.”
These connections will facilitate the continued expansion and integration of blockchain technology. In doing so, this decentralized ecosystem will flourish as different platforms can contribute to and benefit from the dynamic developments happening in the space.
Connecting the Blocks
To solve this problem, developers, engineers, and thought leaders need better and more available tools to connect the blockchain.
In general, application programming interfaces (APIs) are the most effective way to establish blockchain connectivity. These tools allow developers to establish connections between blockchains and between other off-chain services. By enabling these platforms to “talk,” APIs equip the blockchain to embody many or the internet’s most compelling features while also maintaining its distinctive technological advances.
This technology has applications for virtually every industry. For example, companies can connect the blockchain to transaction records or databases to create verified, transmittable records. What’s more, private blockchain’s can connect to public chains to enhance their ability to receive digital payments or other value transfers.
The use cases for APIs are as broad and diverse as a developer’s imagination can make them.
In a separate report, Deloitte supports API expansion as the primary methodology for blockchain connectivity. According to a 2018 report “API Imperative: From IT Concern to Business Mandate, APIs “are one of the key building blocks supporting interoperability and design modularity.”
In comments to Medium, CA Technologies’ director of product marketing, Bill Oakes, notes, “APIs are crucial to [the] whole blockchain transactions process. Without them, nobody would be able to utilize it.” There is broad agreement that API development and integration is the fundamental next stop for the technology’s transformation.
Of course, on a practical level, an additional level of support is required to make the blockchain usable at an enterprise level. For instance, one of its most lauded features, smart contracts, require a significant amount of data to be effective, but this data stream can quickly overwhelm the blockchain’s capacity.
Therefore, developers need access to Oracles, an off-chain tool that processes the smart contract data feed and forwards necessary information to the smart contracts. This process protects the blockchain while maintaining the contract’s security and usability. Moreover, since Oracles are frequently provided by third-party developers, they can be tailored to fit the needs of specific projects, which makes them a dynamic solution for blockchain implementation. As J Slobodnik recently wrote, “The utilization of real world data in Smart Contracts requires reliable Oracles.” Since the blockchain is only as exceptional as it is usable, Oracles are a powerful tool for developers.
The blockchain’s future adoption and success are contingent upon its connection to a broader ecosystem. APIs provide a specific solution, and it’s likely that other innovative ideas will join the movement and create additional solutions. Meanwhile Oracles make the blockchain more functional and dynamic for real-world implementation. Ultimately, the promise of the blockchain is in the ideas that are expressed through its technology, and those ideas are most functional and compelling when they are represented in conjunction with other platforms.