Blockchain Scalability Trilemma: A Solution that is Not So Simple?

What is a blockchain trilemma?

The blockchain trilemma refers to the exchange of scalability, decentralization, and security. The idea behind this is, "For any blockchain network, there will be a point at which increasing any of these particular elements will result in a decrease in the other two." For example, if you increase the speed of a blockchain network, the number of nodes required to verify and secure the network will increase; this would, in turn, decrease the degree of decentralization within the network. A blockchain trilemma exists because blockchains are inherently restricted by design. This is because they operate as a distributed system maintained and verified by a network of individual computers. In other words, blockchains are created to be decentralized and secure by nature.

Confirming Transactions is Slow and Expensive.

The first problem with scalability is that transactions take a long to be confirmed. Confirmation times are defined by the consensus mechanism of the given blockchain network. For example, Bitcoin transactions take 10 minutes to be approved. 

Newer blockchain networks, such as Ethereum, take an average of 15 seconds to confirm a transaction. The confirmation time is a function of the number of nodes in a given blockchain network. Blockchain consensus mechanisms use nodes to verify transactions and create new blocks in the blockchain. 

The more nodes there are in a given blockchain network, the faster it will be able to confirm transactions. This is important because transaction fees are directly related to the number of nodes in a blockchain network. The higher the cost, the more nodes are incentivized to verify a given transaction. This is important because the number of nodes directly influences the speed at which transactions are confirmed.

The maximum block size is

Another problem with scalability is that block size is limited. To understand this, we first need to understand how blocks are created and added to the blockchain. Whenever a blockchain network is used to complete a transaction, these details are added to a block. 

The block is added to the blockchain using cryptography. This means that once the block is added to the blockchain, it is immutable and cannot be altered. This process is known as mining and rewards miners for their services by issuing newly created tokens as a transaction fee for their work. The issue with block size relates to how much information can be included in a single block. 

Both Bitcoin and Ethereum have a 1MB block size limit. This means that the number of transactions that can be included in a single block is limited. This can cause significant issues when the number of transactions being made exceeds the number the blockchain can process per second.

Decentralization is at the cost of speed and cost.

The last component of the blockchain scalability trilemma is that decentralization is at the cost of speed and cost. The more decentralized a blockchain network is, the more secure it is. This is because it requires the consensus of a higher number of nodes to verify transactions and add blocks to the blockchain. 

However, the more decentralized a blockchain network is, the slower it will be and the higher the transaction fees will be. So, if you want a blockchain network to be fast and cheap, it will not be very decentralized.

On the other hand, if you want a blockchain network to be decentralized, then the security and speed of the network will be slower. This means there will be a trade-off between the three components of the trilemma. This is because you cannot simultaneously have high speed, low costs, and high decentralization.

How to solve the Blockchain Trilemma?

There are various approaches to solving each aspect of the blockchain trilemma. These solutions are aimed at improving one aspect at the cost of another. For example, you might increase the block size to improve the network's speed. 

However, this would result in a decrease in the number of nodes that are required to verify transactions. This would undermine the security and decentralization of the network. The ideal solution would be to increase the network's speed while keeping the costs and decentralization of the network the same as they are now.

Lightning Network: A more expensive but faster alternative

The first solution is the Lightning Network. The idea behind the Lightning Network is that transactions can be executed between two parties off the blockchain. This means that these transactions don't need to be verified by the blockchain and can be completed instantly. The only challenge with this approach is that you must trust the other party to complete the transaction as expected. 

Once the transaction is complete, the transaction details can be added to the blockchain. The Lightning Network is a great solution for improving the speed of the blockchain, but it is not suitable for all businesses. This is because you need to be able to trust the party you are transacting with. This is because the transaction details cannot be added to the blockchain immediately.

Sharding: Solving Scalability at the Cost of Decentralization

The second approach is sharding. Sharding is an approach to increasing the scalability of a blockchain network by creating smaller networks that work together to create a single blockchain network. Sharding aims to solve the problem of a single blockchain network being too slow due to the large number of transactions being processed by the network. 

It does this by creating sub-networks or shards. Sharding is one of the more radical solutions to the scalability trilemma. It is a scalability solution that sacrifices the inherent decentralization in blockchain technology.

Conclusion

Blockchain's trilemma issues are a problem that many blockchain networks are facing. Bitcoin, the first blockchain to make a difference, is designed to be decentralized, secure, and slow. As a result, efforts to improve blockchain scalability often affect speed, security, or decentralization. 

This is why the blockchain trilemma is important to consider when approaching blockchain scalability issues. With a better understanding of the trilemma, it is possible to explore solutions that improve one aspect of blockchain scalability issues without jeopardizing the others.