Article By Darryn Pollock
Conflux, a blockchain protocol based on Proof of Work, that has been aimed at China’s tech giants as a decentralised, scalable, dApp blockchain solution has garnered much attention from some well-regarded investors.
The likes of Sequoia China, Metastable, IMO Ventures, as well as a significant Chinese tech company, have funded The Conflux Foundation, developers of Conflux, to the sum of $35 million.
What makes Conflux a different solution for dApp development is the decision to not go with the industry flow which is seeing most blockchain solutions offering Proof of Stake options. Conflux, by weaving a Directed Acylic Graph (DAG) data structure into its Proof of Work consensus algorithm, believes it can solve scaling issues by offering higher Transactions Per Second (TPS) than Visa.
Conflux is trying to tackle the long-standing scaling issue which has precluded many blockchains from mass adoption, and by enticing significant funding from these notable investors, there seems to be considerable interest from China’s tech industry for its potential.
Differentiating with DAG
The DAG data structure that Conflux is utilising to scale the blockchain solution and make transactions quicker and easier on its dApp protocol is the defining point. DAG has been touted as the next evolution of blockchain as it solves the scaling issue, although there have been criticisms about its decentalisation.
Blockchains like Bitcoin only allow a single block at one time onto a single chain. Traditionally, accepting two concurrent blocks on a chain would be considered a fork, with just one block ultimately emerging as the longest chain, while the fork recording discarded transactions on a completely unrelated chain. Computing power and electricity is consequently squandered for the separate chain that doesn’t contribute to the blockchain performance.
However, Conflux accepts multiple concurrent blocks at the same time from any node through its DAG web. Unlike traditional blockchains, the Conflux protocol records information about two kinds of relationships between blocks, parent-child relationships and generate-before relationships, which create a DAG-like structure of the blockchain protocol.
“Imagine developing dApps on a fully decentralised protocol like Bitcoin, with the scalability of centralised platforms. Conflux solves the traditional consensus bottleneck that Proof of Work blockchains, like Bitcoin, have been stymied by,” said Fan Long, co-founder at the Conflux Foundation.
Long goes on to expand on just why it is crucial for blockchains to scale:
“The scalability bottleneck of traditional blockchains is severely limiting their further adoptions. Because of only being able to process 7-20 transactions per second, we are experiencing congested networks, skyrocketing fees, and annoying experience. Many perceived great dApps like decentralised oracles and exchanges are not possible with this limited transaction throughput. So yes, blockchains need to be upgraded. Otherwise, the applications of blockchains will stay with just storage of values, ICO, and gambling games.”
Conflux maintains that it is fully decentralised, yet scalable, and for this reason, it is managing to tick many boxes that have kept significant companies out of blockchain technology. Their claim, however, is holding much water as the investment round that garnered them $35 million is backed up by savvy investors.
Haseeb Qureshi, General Partner at MetaStable Capital, explains the attraction to Conflux and the work they have done with a Proof of Work-based DAG protocol.
“Conflux has the strongest approach we’ve seen to a proof of work-based DAG protocol. DAG protocols comprise a very promising approach to improving the throughput of blockchains. If we want to reach world-scale throughput for these systems, DAGs are undoubtedly part of the way to get there,” Qureshi explained.
Thomas Yao, Partner at IMO Ventures, echoes Qureshi thoughts, explaining how there has been a bit of a search for such a solution.
“We’ve been searching for a company to solve the fundamental Blockchain infrastructure problem. When we came across Conflux, we were impressed by their consensus protocol that designed with DAG structure. Moreover, they have an excellent team led by the first and only Chinese Turing Award recipient Andrew Yao and few of his smartest students, which make me believe they can deliver the idea into a well-functioned blockchain,” Yao said.
Funding for the future
In the current cryptocurrency climate, it could be argued that the excitement and revolutionary blockchain talk of late 2017 is all in the past now. However, instances like these, where huge funding is being put into projects aimed at the future, seems to suggest that the future is still bright for emerging blockchain technology.
Qureshi goes on to explain that the loss of interest in the cryptocurrency market and the resulting poor performance is merely a loss of speculators, which is not the worst thing.
“It may look like cryptocurrency markets have given up the ghost, but most of that is just speculative money leaving. For the last year, cryptocurrencies have resembled the world’s biggest casino. However, all speculative fervours eventually die away, and what’s left is the real stuff of innovation—people building real things and solving real problems.”
“We need a world-scale cryptocurrency. Bitcoin and Ethereum currently don’t scale, and can’t yet fulfil that role. Conflux’s DAG protocol is very promising, and I’m hopeful it will prove itself a worthy claimant.”
Yao goes on to explain that the cryptocurrency market is its own beast, and entirely different to what is happening in blockchain advancement.
“There is a big difference between the cryptocurrency market investment and blockchain technology investment. Most of the people in the cryptocurrency market are irrational when comes to blockchain technology innovation. The crypto investment market is like a big casino. It’s gambling, not investments. We are investing in blockchain technologies,” he added.
Blockchain investment is still active and healthy, according to the likes of Yao and Qureshi, who seem to be showing relief that the frenzy around the technology has died down.
There’s still plenty of capital and appetite for blockchain investing. Valuations have come down to earth, and there’s less frenzy around ICOs, which is good and healthy. It encourages a return to fundamentals and a refocusing on addressing the real problems as they exist today,” said Qureshi with Yao adding:
“I can’t comment on other VC companies, but for IMO Ventures, we don’t chase the market. Our partners have invested in blockchain technologies as early as the Ether ICO in 2014. The ‘killer app’ of blockchain investments is the protocol. In my mind, Conflux has the potential to become the next protocol with “killer app”s running on top of it.”