Thank you very much, Raj, it's always a great pleasure to see you and to contribute when you approached me with this topic. I wondered what I can do in 20 minutes, right? So that's not so easy. And I thought right now we hear a lot of buzz about these smart contracts and we hear many competitive networks launching and trying to compete with each other. And I thought, I will try to use these 20 minutes to give you some guidance. And I hope that I selected the right height to go through that. Trying to do though, thought of three steps. One is simply to have a look at the development so far. And what are the operational challenges from a supply side point of view? Then when we are clear on that, then I would like to focus a little bit on the different solutions of different chains, how to solve that operational challenges and trying to provide you a framework for evaluating those chains.
Yeah, because there is a lot of dynamics in there and there will be a lot of dynamics and last but not least, I have prepared one slide on the hurdles of the future. So going more and more away from Ellucian to reality. So let's start with the developments of harm. When we go back, basically at the beginning here, we see a chart on the Bitcoin dominance and, and the beginning in 20 13, 20 15 and Bitcoin was so to say the whole blockchain market. And then in 2017 it started Bitcoin dominance decreased. And why did it decrease? Because there was another blockchain called Ethereum, which allowed smart contracts, right? And you might say the first killer application of that chain was ICOs initial coin offerings. So therefore Bitcoin dominance plummeted. And then we saw regulatory issues with ICOs. So Bitcoin dominance increased again. And since 2020, we see decreasing Bitcoin dominance again.
So what are the reasons for that? What are the applications driving that out coins are now gaining an importance? And if we look at that, we basically can distinguish two major drivers. One is so called decentralized finance and decentralized finance. The first idea was basically we do peer to peer lending without a bank, right? And you basically find that it's very difficult to find the same risk profile from one person to another person. So therefore the innovation which came up there is that you created so-called liquidity pools and based on those liquidity pools, then you can have borrow markets and landing markets. And therefore you can think of decentralized findings trying to create an open source software for the whole banking industry, right? I mean, if you look at the banks right now, they all have heritage it systems. They try to optimize those and, and getting more scalability, getting more functions in there.
And what we see in the decentralized finance space right now is basically an open source development of banking software. You might say now, how did that work out here? You can see the total value locked. So the total value locked, increased significantly about to a hundred, 130 billion us dollars, which sounds a great growth path and which is a great growth path, but which is compared to the banking transactions that we do, or the total value locked in the banking system negligent. So there, you would say, we are still at the very beginning of, of the trend when you want. I would like to encourage you to, to go to the different chains and to look at what they offer on their decentralized finance platforms. So then you learn a little bit what the banks usually do with our savings accounts, with the money and how they work with that.
So for example, like if you, you can go to YouTube and their videos, for example, for Korah, you can see basically what they offering. There are now a second driver of this boom of outcomes or boom of smart contracts are so-called non tokens and non tokens. Meaning basically, if we look at the dollar, a dollar is a dollar, a Euro is a Euro. A Bitcoin is a Bitcoin and anther is an ether. Non tokens are basically tokens that are not interchangeable. So you can think of, for example, players, soccer players, right? Ronaldo is not the same as messy. And you can think of characters in the games and stuff like that. So basically there is uniqueness scarcity. And what can you do now with is scarcity? And we can see here. So that is taking off. And one of the triggering events was in March, 2021.
There was the first auctioning of a digital art piece called people and they collected 69 million us dollars. So we one have one driver is decentralized finance. The other driver is non fundable tokens. And whatever you can do with that in terms of altering platforms and acquiring those, those are pieces or singularity pieces. Now what are the implications? So now we have thriving business applications. Now that is not so easy from an operational point of view, and this person metallic BTY coined the issue of the scalability trial. So now we have a lot of traffic you might say on the smart contract highway and the tri is basically in the chains you want to first secure security. Yeah. So the, that it's as safe as in a central solution, maybe even safer in the age of, of, of hacking and cybersecurity. The second thing you want to achieve, you want to have decentralization, right?
That's the whole idea of the blockchain so that we believe in the system and no more are about no more are dependent on a central source of wisdom. And of course the more you decentralize, the better is the transparency and the better is the mutability. But of course the, the less is the scalability. And the scalability is the third topic basically that you want to achieve. So you might say it's a scalability trial, it's an operational dilemma that we face with the diffusion of these applications. In the second part of my talk, I would like to shed some light of how different chains are trying to solve the scalability or the tri. And when I selected the chains, I simply looked at the top 10 and covered the smart contract chains within the top 10 of the cryptocurrency market. So let's start with the first one.
And this is our number two cryptocurrency. This is Ethereum. And here you can see the ecosystem of Ethereum and you see basically that decentralized finance has the most applications, as I said, because they have to reprogram open source, the whole banking system. We see then centralized exchanges that you need to do your all trades in, in these defi space. And we see a growing space of NFTs, non fundable tokens. Here, you see also a little bit, these are other application areas where you would say these are infrastructure services, so ideas to improve, scaling to have wallets or to do data analytics. So now what we see here, Ethereum is the largest layer and they use proof of work and proof of work means that any transactions need to have the approval of more than 50% of the network. So you might say 49% is wasted.
And that creates not only energy consumption, that creates also latency and a lot of work and time to validate the transactions. And you can see that with the rising gas prices. So the transaction fees you have to pay, and basically they realize that also. So basically if the defi applications, if the NFT applications are soaring, we need to have a faster validation system and what they decided, they decided to go from proof of work. So majority has to validate and to say, this is true to proof of stakes. So simply the majority of the, of the stakes have to validate that this is true. And they did that this summer with the introduction of the beacon chain. Now this is a great step forward, right? And you might say this still took some time, right from 2018 to now. So three years question is whether this is fast or slow, we will see, but this is one innovation.
And I'm pretty sure that there will other innovations coming up. And the question is, how fast can we move up and update our chain, our network to cope with this next level of innovation. Now, another chain is the card chain and card was founded by Charles Hoskinson, who was a family member of the theum as well. And he said, basically, we tried to have a validation, consensus mechanism that is much faster. So they invented a Boris. And we, the innovation is that you have a slot leader. So basically not everybody has to validate, but you identify arbitrarily a slot leader, and then the slot leader validates. And then for the next one, again, you have arbitrary algorithm. And then the next one, and that increases the number of transactions validated per second tremendously. So that's one innovation. The other innovation here of the Cuto network is that they basically, they have a cut foundation.
That's most of the change that, and then they have two entities. One is the input output, and this is looking at research and how can we use research insights to improve the scalability dilemma of the chain? So that's a kind of innovative approach. And then secondly, they have another entity which is called IGO and IGO is looking to broaden the ecosystem of the Q change. And that I think is also a great movement because now it's specialized. Once is the technological innovation, and one is the spread or the growth of the ecosystem. Now another chain, which is trying to solve the, the scalability to, and specifically scalability speed is Solana and Solana was founded by a totally VECO. And he, you might say is an outsider of the blockchain system, or while he was working before at Qualcomm. And what the innovation of Solana is, he introduced so-called proof of history.
So basically so far the blocks hadn't have a time stamp on it. Now with this algorithm, they have a time stamp on it. And then of course you can use them to sort the transactions and therefore you can much faster validate the transactions. So here you can see what they claim. They claim 1000 transactions per second, they claim an average cost per transactions of $0. And they have 1000 validator Analyst. You might say, this is decentralized enough. So this is really a huge progress. And nevertheless, they are still in beta. So sometimes, or at least in September, they had some issues with, with the network working of it. But from a scalability perspective, this is really leading edge. Now the last chain I would like to cover is the Poka dot chain. So Poka dot was founded by gaming wood. And his idea was basically, if we look at these are different ecosystems, right?
So we have now Ethereum, we have card, we have Solana, but basically he argued the future of blockchain will be that the blockchains have to be interoperable. So they have to be connected to each other so that you can do a little bit one-stop shopping. Yeah. And you don't have to switch from chain to chain to chain. So then the first thing he said, then we need to have some solution that the chains can trust each other. Yeah. Because each chain has different validation, nodes, different rules. So the question is when can I trust the other chain and in order to do so he said, now we have a relay chain. So this is a layer zero, you might say. And there we have the same validation algorithm. And therefore all the change that rely on that relay chain to do the validation can trust each other.
The second thing is then on top of that, we might have a hundred different chains, like layer one chains, like ifthere here in Solana and so on. And they might set up their validation algorithm, whatever they wish. Yeah. So you have complete freedom to design your, your consensus mechanism. And then we will see the market will decide whether we will have a focused defi chain, a focused NFT chain, a focused infrastructure chain whatsoever. Yeah. And these slots. So he's basically talking about hundred slots are auction. Yeah. And then you can auction for that. And then you have the right to use the relay chain for, for two years. So that's one part of innovation he's trying to do with pocket. Or the other part is they have a, a language, a software language called substrate. And within the substrate, you create a modular system. And basically whenever you want to use some existing models, you can rely on those substrate. So you don't have to reprogram the whole thing.
Now, when we look at the scalability and this is a chart from Solana, so you would say, then the winner should be clear, right? So Solana claims, they have 65,000 transactions per second, Ethereum, the old way had 50. Now they moved to proof of stake. You see Pogo dot with a thousand cut with 270. And they are all working on that, basically that it's getting faster and faster. But I would like to sensitize you that this is only one part of the story. Yeah. So one part of the story is a little bit what I try to sensitize in the beginning, the operational three of security, decentralization, and scalability. But when you look in the future, you have to have three more issues to solve and we can call it the strategic tri. First of all, you need to be able to inter to be interoperable between the chains.
And the question is, how do you do that? And not only bridges, but also there's the concurrency problem in other chains. So basically whenever you pay more gas, your transactions will be sooner validated than if you pay less gas, which is great, which is the market, but there might be other applications where you really want to ensure that this is validated in the time that you propose. The second question from a strategic point of view is innovation. As I said, there will be many more innovations. Yeah. Like the rural BOS, but also like the proof of history, many more innovations to come. So the question is what is the, the speed of which that chain can innovate and last but not leave? The third strategic issue is governance. So who will decide on when to innovate? Is that off chain governance? Is that on chain governance?
How much centralized is it? How much decentralized is it? So that is one thing I would like to give you as a guidance, to, to get some insight or to get some overview of all the different blockchains that pop up these days. Now I would like to have as a last agenda, what are the hurdles of the future? What is the long term be? What kind of movements can we expect? And here you can see a shake out ahead. And I would actually, yes, there will be definitely a shake out ahead. And what are the triggers for that? From the supply side, you could argue that these days now web 3.0 services are being developed as plug and place suit for developers in different chains. Yeah. And if you have interoperability, you might say they have to compete across the chains. And the question would be, which would be the leading WANs in a race for innovation.
Yeah. Which can update most Fastly. Secondly, from the demand side, you might say, if you look at, I mean, so I said it was a little bit out of the ecosystem. Yeah. So from EXCOM, but you might say there will be many other incumbents, big incumbents from the it industry also entering the market. And they, you might say, how will they change the supply site? And they can bring in much more network effects. And last part, not least adaptation. We see decentralized finance NFTs are, you might say natural applications that take off in the beginning because they are all completely in a virtual world. So the question might be from new new applications. When will we see real world assets, for example, to be integrated, we talked about NFT, non fundable tokens. The real estate is all non fundable tokens where we'll see non fundable tokens also entering that, that ecosystem. And with that, I would like to conclude and would say, thank you very much and would give the floor to questions.
