The Future of Cryptocurrency Hinges on Adoption

The Current State of Cryptocurrency

While Bitcoin introduced the blockchain, its functionality was limited to that of a decentralized and trustless form of asset exchange. Developers, however, realizing blockchain technology's potential to be applied to other applications, improved upon it. With the development of hundreds of new cryptocurrency and blockchain implementations, it can be a baffling feat to keep up with where the market is headed. Recently, many analysts, professional or otherwise, have predicted most altcoins are unsustainable and will fail while claiming the cost of Bitcoin is primarily based off of speculation. What many don't understand is that this speculation is based off of not just what the currency itself should be worth, but its use case as well. Bitcoin derives monetary value from its use case just as the value of the many altcoins, which their pricing fluctuates with. Currently the most legitimate use case is the decentralized, tamperless and/or anonymous transfer of funds for benign or dubious purposes, which is what is possible with Bitcoin using anonymizing software or Monero, for example. If cryptocurrency's pricing is to be based off of more than just this use case, the adoption of the technologies being developed intended to bring it beyond that are what it hinges on. If smart contracts do not see use beyond tokenization in ICOs, the value of Ethereum and other similar currencies should be expected to plummet and the most promising aspect of cryptocurrency would go unrealized. That being, the mainstream adoption of smart contracts.

How do Smart Contracts Work?

The first programmable, Turing complete blockchain deployed was the Ethereum blockchain, which provided to applications what Bitcoin did for currency. Users pay Ether for operation codes, or CPU instructions, to run on a blockchain which acts as a decentralized state machine. Prior to this, blockchains and their respective cryptocurrencies that performed the function of a single decentralized application were being deployed, whereas Ethereum allowed multiple decentralized applications to be ran on one. The key innovation introduced by Ethereum that made this possible was the Ethereum Virtual Machine (EVM). The EVM allows anyone to run any program, given enough time and memory, on the Ethereum blockchain. This enables the use of smart contracts, an autonomous agent operating within the blockchain that executes when certain conditions are met. Smart contracts, like transactions on the Bitcoin blockchain, are immutable, tamperless, trustless, and eliminate the need for a third party such as a lawyer for enforcement. This also makes possible the implementation of a Decentralized Autonomous Organization (DAO), which has its financial transactions and program rules maintained and executed on the blockchain. Miners are rewarded in Ether for verifying blocks and running the opcodes within them. 

What Projects Can Lead to Smart Contracts Seeing Mainstream Adoption?

Arguably the largest problem preventing smart contracts from obtaining mainstream adoption right now is the inability to fetch data externally for use with them, limiting them to only on chain uses. Oracles solve this problem by taking information from off chain and making it usable in smart contracts on chain, but relying on a single one makes a smart contract as insecure as a traditional one since the information from it can be corrupted or tampered with due to malicious intentions or human error. Currently, one of the products striving to solve the oracle problem is ChainLink. By using data aggregation, data can be taken from multiple, decentralized oracles and chosen using a mean or majority vote. ChainLink also implements reputation and validation systems to penalize nodes that don't respond to queries or give invalid data. To prevent a Sybil attack, where someone controls the majority of nodes used to provide data to a contract and falsifies it to their own gain, ChainLink uses trusted hardware so that node operators cannot view or modify the data used, or even know their nodes are the ones providing the data. This also allows for the safe transfer of sensitive data over the ChainLink network as well. Currently, ChainLink is developing for Intel SGX as their primary form of trusted hardware,  but emulated SGX and other forms of trusted hardware may be supported as well. Lastly, ChainLink is blockchain agnostic, meaning if another smart contract-supporting blockchain comes out that is better than Ethereum it can be used on that as well. ChainLink will be soon be deployed on the Ethereum mainnet. This is by no means an article meant to say solely ChainLink is what will bridge the gap between smart contracts being used for more than tokenization and mainstream use, but uses it more as an example. If you are aware of other projects that serve the same purpose those would be replaceable with ChainLink in this article as well. However, if cryptocurrency is to be worth investing for more than the use case of Bitcoin as previously established in this article, the mainstream adoption of smart contracts must happen or all the technology being developed for it is vaporware and the price of their associated currencies would either plummet or rise dramatically depending on their adoption. 

I would like to disclose that I own ChainLink.