Blockchains need to get faster, talk to each other and protect data. Here is how new technologies tackle the three biggest challenges.
Early blockchains can only process a limited number of transactions. When many people want to use the network at once, fees and waiting times rise.
The solution is often an extra layer on top of the main chain, called layer 2. On Bitcoin, the Lightning Network enables fast, cheap payments. On Ethereum, so-called rollups bundle many transactions and send a summary to the main chain.
Most blockchains were built as closed systems that do not talk to each other. Value and data therefore end up locked inside each network.
Bridges and cross-chain protocols let tokens and information move between chains. That improves liquidity, but bridges have also been a favorite target for hackers, so security is crucial.
On public blockchains, every transaction is visible. That builds trust, but suits companies and banks poorly, since they cannot show all their payments.
Zero-knowledge proofs are the most important solution. The technology makes it possible to prove that something is true, for example that you have enough money, without revealing the information itself. Newer networks build in privacy that regulators can still see through when needed.
Scaling, interoperability and privacy are preconditions for blockchains to carry large parts of the financial system. These are the areas where much of the development is happening now.