What is a Third Generation Blockchain?

What is a Third Generation Blockchain?

You may have come across the terms “Third Generation Cryptocurrency” or “Third Generation Blockchain” and been curious as to what they mean. In essence, the goal of the third generation of cryptocurrencies and blockchain technology is to solve the problems that plagued the first two generations. The first generation is Bitcoin, which was the first cryptocurrency ever created, and Ethereum, which was the first cryptocurrency to offer smart contracts and decentralized apps.

What advantages do the 1st Generation and 2nd Generation of Blockchain have over one another?


The purpose of first-generation blockchains is to make the existing financial institutions better by delivering a decentralized platform for money that restores power to the general populace. Second-generation blockchains add a layer of “conditions” to transactions, allowing parties to negotiate the parameters of smart contracts without the need for a third party to mediate the negotiations.


On the contrary, a 3rd blockchain generation aims to tackle the problems that Bitcoin and Ethereum are now experiencing, but what exactly are those problems? And what are some examples of cryptocurrencies that belong to the third generation that are now available?

Concerns Raised by the First Two Generations

This is one of the biggest issues the first two generations of crypto have faced, and it’s proving difficult for their applications. Even for little quantities, Bitcoin transaction fees may average $20 US. The network is slow since it handles just seven transactions per second. Adding new layers to Bitcoin’s blockchain is one way to solve this problem.

Ethereum wants to be the “world’s computer.” Ethereum can only process 15 transactions per second, preventing it from reaching this target. Even if it’s double Bitcoin’s throughput, it’s not enough. Ethereum gas prices for minor transactions are roughly $15 USD, and even paying that amount does not ensure the transaction will be executed owing to Ethereum’s fluctuating factors.


Third generation blockchains can handle hundreds of transactions per second, which is a major leap in blockchain technology.

Consensus Algorithms Based on Proof of Work

Bitcoin and Ethereum’s next issue is proof-of-work consensus systems. Proof of work has no inherent flaws; the difficulty is its long-term cost-effectiveness.

Crypto requires more yearly electricity than Argentina. This is unsustainable for several reasons, mostly environmental, but the expenditure of mining Bitcoin must be financially burdensome, and this likely leads to many individuals selling off their Bitcoin as its value rises. Several Bitcoin solutions are either being built or are already in use.

In preparation for Ethereum 2.0, which might fix the issue, Ethereum is shifting to a proof-of-stake consensus method.

Third Generation Blockchain

Cardano and Polkadot are both good examples of third-generation cryptocurrencies that are already making noise in the cryptocurrency world. However, Solana, Terra, Avalanche, and several other cryptocurrencies, along with a number of other projects, would most likely fall into that category as well.



Cardano is the first blockchain platform based on peer-reviewed science and evidence. It’s a proof-of-stake blockchain aiming to tackle scalability, interoperability, and sustainability.

The platform’s Ouroboros mechanism solves Ethereum’s difficulties. Ouroboros is a peer-reviewed proof-of-stake (PoS) blockchain protocol. PoS enables Cardano to utilize a fraction of the energy used by Bitcoin and Ethereum.

Cardano is four million times more energy efficient than Bitcoin. It accomplishes so without losing security or decentralization, since its blockchain employs encryption and math game theory. Cardano’s energy efficiency (a lower power consumption computer) and Raspberry Pi compatibility contribute to Cardano’s energy efficiency.

Cardano (ADA) can execute thousands of transactions per second with its Hydra node system (and can grow to millions) and runs on a proof of stake consensus method, so you may stake your ADA and receive interest.


Sending and receiving thousands of dollars costs less than 30 cents and takes minutes. Smart contracts and decentralized applications are coming. Cardano also improves interoperability. Cardano seeks to let users freely transfer assets across several chains and attach information to transactions for improved interoperability with banks and governments.

Cardano represents itself as the perfect answer to today’s cryptocurrency concerns, but this platform is still extremely young. Cardano is on stage 2 of its 5-step plan. Before these anticipated benefits materialize, much more must happen.


The Polkadot platform is a new kind of blockchain that facilitates interoperability across various independent blockchains. The coin that is native to the Polkadot platform is called Polkadot. Interoperability is a notion that exists within the ecosystem of blockchain technology that has been discussed for a significant amount of time, but it has not yet come to fruition in any significant way.

To put it another way, interoperability has been accomplished in small-scale settings, such as laboratories, but it has not yet been accomplished on a large scale and use. This is something that Polkadot hopes to change by introducing the world’s first blockchain platform that is highly interoperable. The platform’s native currency is called DOT, and it is responsible for driving the fundamental functions of the blockchain.


In the realm of cryptocurrencies, Solana is vying to be the solution that is both the quickest, most secure, and most scalable. To be more precise, Solana wants to replace Ethereum in the worlds of decentralized finance, gaming, and non-fungible tokens. Scalability and transaction throughput are two areas in which third-generation cryptocurrencies are all striving for improvements. This is a common thread that runs across all these cryptocurrencies. Solana beats all other cryptocurrencies in terms of transaction speed thanks to its capacity to generate a block once every 400 milliseconds and to handle around 50,000 transactions per second.


Solana’s platform enables users to conduct transactions is equivalent to that of the internet. In addition to this, the Solana blockchain scales well as a layer 1 system. This indicates that it does not need any off-chain solutions to assist in the processing of transactions or to get around congestion (solutions Bitcoin and Ethereum are currently implementing). Instead, Solana can increase its processing speeds by a factor of two every two years as it grows. If new developers do not want to be cut off from people working on the main blockchain, this may be a more appealing option for them.


The price of Solana is much lower than that of Ethereum. Now, it costs around $10 for one million transactions, but on the Ethereum chain, one would have to spend over $2 for each transaction. These ground-breaking scaling solutions are made possible by Solana’s development team, which is responsible for eight fundamental advancements. The proof-of-history (PoH) mechanism is often regarded as the most significant of these developments. 

It is possible for the system to validate the sequence of transactions by using PoH in combination with PoS. This eliminates the need for the nodes in the network to independently interact with one another. This brings to a reduction in the overall node message overhead, in addition to a reduction in the bulk of other computations, which enables incredibly fast speeds and cheaper gas expenses.

The Bottom Line

It is not unduly optimistic to expect that the next step for blockchain is to see widespread acceptance of the technology because of the incremental advances that have been achieved from one generation to the next. Projects using third generation blockchains are developed with this consideration in mind, and the technology is built to automatically fix scalability concerns should they arise. In practice, more cake is automatically purchased when it is required to ensure that no one is kept waiting for their piece. 


Collaboration is essential in today’s environment and having mechanisms in place through which knowledge and data can be exchanged across different platforms is essential. Interoperability functionalities were programmed into the blockchains of projects like Cardano and Polkadot from the very beginning, which means that these blockchain generations are compatible with and can operate flawlessly alongside those of other blockchains.