No one needs to be convinced that blockchain is a revolutionary technology in the field of asset management. The potential of its application is huge: it can reduce costs, ensure a safe and transparent transit of values, and most importantly, deprive intermediaries and third parties of the right to interfere in your transactions.
However, you probably heard all these words more than once, meanwhile, the path to their real implementation is not easy. An era of competition between so-called BaaS (Blockchain-as-a-Service) platforms is still going on. Such platforms can be anything from a secret ballot platform to a marketplace or a distributed data warehouse.
This field raises a lot of questions, the main one being: how should the perfect blockchain for asset management be organized? Providing scalability, security, and sufficient transaction speed simultaneously is not a simple task, and different teams of developers find different approaches to it. The most notable project in this field was the victorious Ethereum, the first blockchain 2.0, which really turned the development of the entire crypto industry into a new direction. To date, its price is 152,000% of the price during ICO – clear evidence of the demand for this type of platform. Nonetheless, other developers do not stand still – new BaaS solutions continue to appear. In this article we will look into Ethereum’s arising competitor, the Ardor project from the NXT team and why it is becoming projects’ first choice.
Ardor vs. Ethereum
Ardor is a child of NXT – one of the main coins of the “old generation,” which appeared two years earlier than Ethereum. The NXT blockchain with its smart contracts is interesting in itself, but Ardor is some kind of NXT 2.0 – a completely new platform that claims a lot of different functions. Let’s look at the key features of this project as a platform for asset management in comparison with Ethereum.
“Blockchain architecture” comparison
One of the main distinctive features of the Ardor blockchain, which defines its main features, is the division into parent chain and child chains.
When you send transactions in the Ethereum blockchain, they are not sorted, but simply “arranged in groups.” In other words, they get placed into a particular block. Inside the block, there may be calls to smart contracts, transactions of any tokens or the ether itself; in short, anything. Of course, this is inconvenient, especially if your project – say, a marketplace for buying properties through cryptocurrency – involves only one type of transaction. This mix of transactions will slow down your service.
A key trait of Ardor is the existence of sub-blockchains which conduct transactions within themselves and sometimes address to the blockchain. There is a possibility to choose what the blockchain-successor will be, connecting and disabling functional blocks: Asset Exchange, Market place, etc.
The Parent chain in its turn acts as a conductor, coordinating the work of the network as a whole and providing the possibility of cross-chain transactions. In theory, this scheme looks attractive, especially if hundreds and thousands of companies join the Ardor blockchain, each of which will have its own child-chain.
Transaction speed and scalability
This is the second important thing for asset management. Any blockchain that claims to reach a wide audience should solve this painful issue for the decentralized world.
Yes, Ethereum is slow. It is a fact. To verify this, just look at this table, which contains data on some BaaS-platforms:
But this fact is known to the developers of Ethereum and they have already announced the innovative features that will move ETH to a PoS algorithm and increase bandwidth dramatically – Plasma, Casper. Although the upcoming Plasma protocol is sometimes criticized, many believe that in conjunction with the update, Casper will allow the blockchain to gain a second chance. If Buterin’s promise that the speed of transactions will increase by 10,000 times after these innovations is fulfilled at least in part, it will question the future of the other platforms, which wanted to be only “a quick alternative to Ethereum.”
Until then, the Ethereum network is being overloaded regularly and can’t keep up with the ambitions of the platform’s founders. Ardor with its average of 1,000 TPS has not passed this test of scalability yet. Only time will tell how blockchain will behave when the number of child-chains increases.
It should be noted that the Ardor blockchain child-chains inherit the safety and speed of the parent-chain. The reason is that the main chain is used to verify transactions and provide upgrades to other ones.
Speaking about the scalability of both blockchains, it is necessary to mention the unique feature of Ardor, which distinguishes it from Ethereum at the current stage of development. This is the transaction pruning system – the technology that avoids blockchain bloating. The problem is that in order to maintain a full node of the network, you usually need to download a full transaction register, which can be very large. In the future, nodes will not store information about all transactions, but only about those that directly led to the current state of the network. The full history of transactions in the blockchain will be saved with the help of archiving nodes.
Currently the Ardor blockchain is handling only several hundreds of nodes, while Ethereum one has almost 20 thousand. We need to remember that the majority of Ardor’s unique features are still waiting to be tested in real world conditions, while Ethereum went much further on its way to sufficient network scaling (and thus is facing much more serious problems).
Is there a more important question than this when it comes to your funds? Let’s take a look at the details of both platforms’ inner organization.
The power of Ethereum is that its blockchain allows you to create any decentralized applications (Dapps) you wish. Its flexibility as a development environment is unique and justifies its mythological name – ether fuels almost every kind of Dapp you can imagine.
But, giving full freedom of creativity to programmers, Ethereum released the genie from the bottle, and he is a threat to the security of the network. A genie which comes with inevitable errors in the code of smart contracts that developers allow. This was the reason for the Parity wallet exploit, which cost the community $150 million, as well as other numerous violations in the work of contracts.
The problem is not so much that errors in the code are inevitable, but that the blockchain will perpetuate your code regardless of whether it contains critical vulnerabilities or not. The developer has a heavy responsibility on their shoulders, because any miscalculation will be knocked on “stone tablets” and the attackers will be able to use it to attack the network at any time.
Thus, Ethereum actually took a polar position in the inevitable conflict between the universality and reliability: the developers have complete freedom of action, but they are responsible for their mistakes. It is worth noting that there are methods of editing smart contracts in the Ethereum blockchain, but they involve either delegation of these powers to privileged network nodes (and in this case, what about decentralization?), or a vote on each change in the code of the smart contract, which is fraught with a number of additional problems.
The platform is infallible and does what it should. The only problem is the inaccuracies that allow the developers of smart contracts to make mistakes.
How does Ardor solve this issue?
The answer is simple – the platform sacrifices the freedom of developers’ creativity. As stated before, child-chains may have one or more predefined functions. They are implemented through proven smart contracts, in which the code has been verified by Ardor developers, and, according to them, does not contain errors.
This is what financial advisor Mohammed Aajaji is saying about this principle:
“The Ardor approach is to build a set of common features as described above in the Core protocol then enable developers to build upon these features. By choosing this approach, the Ardor team provide tested and secure building blocks for mainly every use case.”
Following the analogy of one of the Ardor’s evangelists, instead of a set of parts glued together (Ethereum), this blockchain offers us a Lego type design environment with details of a fixed size and shape. The idea is clear, but is it good? In many ways it is a question of your trust in the developers of the platform. However, this approach is a viable alternative to the Ethereum model, at least as long as developers continue to make mistakes in the code.
In order to asses its utility, let’s talk about one project, which is an early adopter of the Ardor blockchain. We are speaking about Max Crowdfund – a platform that is aiming to create a global property software system. What does blockchain technology have to do with it? Max Property Group is going to register all information related to property, such as maintenance-, sales- and rental records and allow for regulated property funds to be tokenized.
Max Crowdfund will provide the standardised legal documentation for the funds and the fund (assets) creators will be covered by the umbrella license of Max Property Group. If they manage to do this, they would create one global property register (rather than individual country land registries) and have all historical data on the property in one place, thus creating full transparency for the buyers, tenants, investors alike, but also for the governments and regulators. An interesting and daring project indeed.
According to the words of a famous platform enthusiast Segfault Steve, “the blockchain will automatically handle the logistics of tracking who owns shares of a fund and what dividend payments they are owed. It will also provide a liquid marketplace for investors to trade shares of funds peer-to-peer without fund managers having to incur the costs of listing on centralized exchanges.”
So, the distributed ledger technology is exactly what they need, but why did the developers choose Ardor and not, say, Ethereum?
Obtaining information from an interview with Esther Dekker, Property Director at Max Property Group and Joost de Kruiff, Blockchain Advisor at Max Property Group, one may conclude that these are the main reasons for their team to choose the Ardor blockchain:
First of all, Max Crowdfund needs a convenient and scalable platform with the functionality of a “Marketplace” (remember that this is one of the built-in functions of Ardor child-chains). Economic efficiency is extremely important for Max Crowdfund, as one of the project’s key features is easiness of investing in real estate sectors. The project needed a blockchain platform which would not slow down transactions and would have small commissions when compared to other blockchains. As we have previously stated while discussing the scalability perspectives of Ardor, the parent-child chain systems solve both of these problems.
Max Crowdfund wants to revolutionize the technology behind one of the largest markets in the world. If their scaling plans succeed, the project will face a serious load on its blockchain. The developers of Max Crowdfund are very concerned with this problem, and one of the reasons for choosing Ardor as the basis was their impressive solution to the problem of blockchain overloading. Max Property Group’s Managing Director, Mark Lloyd, supports this idea:
“For a property project with potential millions of users and assets worldwide, blockchain bloating and functionality are of a primary concern to us.”
Permission based child-chain technology that will be provided by Ardor in Q3 2018 will allow Max Crowdfund to implement different security levels. A user’s status will depend on the amount of information he provides to the system. First-level users will provide basic identification information and will be able to trade MPG tokens as well as real estate. Second-level users who have fully passed the KYC-procedure, will be able to work with shares of regulated real estate funds. The third level is designed for professional investors.
As Max Crowdfund presents itself as the first blockchain-based platform aiming to “simplify the asset listing and investment processes”, they will have to work with regulators in different jurisdictions closely. Thus the project developers hope that Ardor technological features will be helpful to create their AML/KYC system required by local authorities.
To sum everything up, there are serious reasons to believe that Ethereum could lose its dominance in the asset management niche in face of Ardor. The heir to NXT looks much more confident for many reasons, such as scalability. Parent-child chain system looks great when it comes to developing a blockchain platform with a limited set of functions, for example, a platform for asset management. However, the Ethereum system has already passed the test of time, and has serious potential to solve its problems. This creates a challenge for Ardor, which must implement its technological features at the level needed to stay one step ahead.