
What is Blockchain 3.0?
Blockchain 3.0 is an umbrella term for technological innovations solving significant problems with Blockchain 1.0 and Blockchain 2.0. To refresh your memories, Blockchain 1.0 arrived in 2009 when Satoshi Nakamoto released Bitcoin to the world utilizing distributed ledger technology (DLT) and a proof-of-work (POW) consensus mechanism. Five years later, Ethereum brought blockchain to the next level with smart contracts and decentralized applications (DAPPs). Blockchain 3.0 is the next generation of blockchain and includes some non-blockchain technologies (more on this later), centered on facilitating greater adoption across enterprises, institutions, and the globe. It aims to address security, scalability, sustainability, interoperability, and cost issues associated with predecessor iterations.
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Main issues with Blockchain 1.0 and Blockchain 2.0

To better understand Blockchain 3.0, we must first understand the main issues with less evolved blockchain iterations. Blockchain 1.0, synonymous with Bitcoin, revolutionized the world with a digital currency that did not require government backing like fiat currency. Utilizing POW as a consensus mechanism, bitcoin miners compete against other network participants to solve computational problems. The result was a mechanism that circumvented the need for a “middle-person” like the government to validate a transaction; however, it is not without high costs. POW-powered blockchains like Bitcoin require massive amounts of energy to validate blocks on the chain. Moreover, this technology faces scalability issues with lethargic throughput, equating to three-to-seven transactions per second (TPS). To put this into perspective, credit card processor VISA processes 1,700 TPS, with the ability to support as high as 20,000 transactions per second.
With TPS top of mind, Ethereum launched in 2014, boasting of more than doubling Bitcoin’s throughput and reaching a TPS of 15. Additionally, Ethereum innovated smart contracts, which provide the network autonomously executable code defining terms and conditions for tangible and intangible asset transactions, increasing the adoption of blockchain considerably. However, even though Ethereum’s TPS is double that of Bitcoin, it still pales compared to credit card processors.
Blockchains 1.0 and 2.0 suffer from low throughput or scalability, and they both require inordinate amounts of energy which have negative environmental implications. Ethereum forged a path towards greater adoption. Smart contracts and DAPPs provide Ethereum blockchain participants with many additional use cases aside from cryptocurrency. However, many issues abound. Beyond scalability and sustainability issues are problems regarding interoperability and security.
Many people are under the misconception that blockchain technology is tamper-proof and invulnerable to security threats. Though this is the case concerning DLT itself, at least nine significant vulnerabilities exist. These vulnerabilities include 51% attacks, Sybil attacks, double spending attacks, routing attacks, phishing attacks, private security key attacks, selfish mining attacks, smart contract vulnerabilities, and transaction-based privacy leakage.
What happens when you want to exchange your Bitcoin information across the Ethereum blockchain network directly? In other words, what if you desire to exchange some amount of Bitcoin for its equivalent in Ethereum directly or some altcoin? Currently, this is impossible without a third-party centralized intermediary. Due to interoperability issues, it is not possible as blockchain networks are isolated from one another and cannot communicate directly. Thus, it is not possible to exchange or make use of data between two or more blockchains or move a digital asset in a way where the state and uniqueness of the asset are maintained consistently throughout the exchange process. This issue of interoperability, or an inability to work across chains, severely minimizes the true potential of blockchain and its adoption.
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Blockchain 3.0 to the rescue!
Through innovation, blockchain is evolving. Implementing multiple technological advancements addresses scalability issues and increases the ability to support more transactional throughput. Sharding utilizes the power of distributed databases by splitting a network of databases into separate database blocks called shards. The result frees up processing power and increases throughput. Layer two technology implements networks on existing layer one (Bitcoin and Ethereum) blockchain protocols to fork a portion of the transactional burden to adjacent peer-to-peer (P2P) networks. Shifting a part of the transactional burden to be processed on an external P2P network mitigates bottlenecking and increases throughput. Layer two advancements also comprise nested networks, state channels, and side chains.
Alternatives to POW consensus mechanisms include Proof of Stake (POS), delegated Proof of Stake (dPOS), and Byzantine Fault Tolerance (BFT). All of which aim to solve intense energy requirements compared to the POW mechanism and increase throughput, making blockchain more scalable. POS on its own has security vulnerabilities associated with it, and as such hybrid models are under development to mitigate them.
Directed Acyclic Graphs (DAGs) is an innovative digital ledger technology that is not actually blockchain. DAG technology is considered a blockchain competitor, comprising a “block-less” DLT that is said to be more scalable and lighter weight in comparison. DAGs require network participants to confirm several other transactions while completing their own transactions differing considerably from blockchain-based consensus mechanisms. DAG transactions are directly linked together and do not require processing into blocks. One defining feature of DAGs is that, as more users transact on the network, the network speed increases without increasing the cost to its users. DAGs reap the benefits of economies of scale.
There are now hundreds, soon to be thousands, of blockchain networks that desperately need to communicate with one another. Multiple organizations are developing protocols to enable the transference of data and assets between blockchains without the requirement of a centralized third party to solve interoperability issues. Beyond direct blockchain to blockchain (across chain) communication, some companies are working to enable traditional infrastructure to blockchain communication.

Multiple organizations are working to implement privacy to their existing protocols to protect network participants, as blockchain networks are inherently public. These privacy protocols replace confidential information with inputs, outputs, and transaction data and remove all traces of address information and personal identifiers. Other privacy protocols enable users to decide what information they share.
As more security vulnerabilities are understood, new fixes are under development to address these issues. Through vigorous audits, penetration testing, and shoring up base code, security is continuously improved while bad actors continuously find new ways to exploit it. Once quantum computing is commercialized, more security issues will likely arise.
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Now-and-into-the-Future
Blockchain innovations and some non-blockchain tech like DAGs are advancing at breakneck speeds and changing the industry to facilitate greater adoption and use-case application. Along with the web’s next iteration, Web3.0, of which blockchain plays an integral part, digital technology is gaining wider acceptance and becoming ever more decentralized. Adoption is growing, even amidst a global pandemic, the brutal invasion of Ukraine, and staggering inflation, among others. No one truly knows what Blockchain 3.0 or beyond will be in the end, exactly, but the future is exciting.
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References:
- What is Blockchain 3.0? | CryptoWallet
- What Is Blockchain 3.0? | A Guide to the Next Phase of DLT – ELEV8 Blockchain Industry Content (elev8con.com)
- Dag vs Blockchain – Fundraising & community for crypto projects (icoda.io)
- Blockchain 3.0 Technology Explained | What About Bitcoin? (cryptomaniaks.com)
- Blockchain 3.0: Top Blockchain 3.0 Projects That You Should Know | Cryptoverze
- Layer 1 vs Layer 2 : What you need to know about different Blockchain Layer solutions | CoinScribble
- What are Layer-1 and Layer-2 Blockchains and why are they so important? (benjamindada.com)
- Blockchain Layer 1 vs. Layer 2: Things You Must Know – Bybit Learn
- How many transaction per second (TPS) can Bitcoin process? – Phemex Blog
- Blockchain Security Issues – A Complete Guide (getastra.com)
- Everything You Need to Know about Blockchain 3.0 (bbntimes.com)
- Top 5 Blockchain Security Issues in 2021 – 101 Blockchains
- Blockchain Interoperability – The Importance of Cross Chain Technology (101blockchains.com)
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