The Blockchain Trilemma: The Unsolved Puzzle of Scaling Networks?


May 9, 2023

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Today, the world is abuzz about blockchain. Yet, this technology still faces many problems. While not all blockchains are created equal, they all face the same problem.

Meet the blockchain trilemma — the fundamental problem that could unlock blockchain's true potential.

What is the "Blockchain Trilemma?"

In simple terms, the blockchain has three main features: Security, decentralization, and speed. Many people believe different blockchains only meet two of these three criteria. Although everything may work well on the surface, one of the three elements could be compromised when the network is tested.

Let's first talk about security. The security of a blockchain is its resistance to attacks. The more participants a network has, the lower the 51% chance of attack. No bad actor could alter the record if a blockchain is robust enough.

Next, we have the speed or scalability factor. This factor is often one of the most problematic for older blockchains. How many operations can the network handle at the same time? The response time must be acceptable for users to be a real option. At the same time, it must be economically viable for the stakeholders. If a network is fast, but its fees are low, it may create hinderance for everyone.

Finally, there is the issue of decentralization. Decentralization is basically about delegating responsibilities to as many participants as possible. Some will be in charge of validating operations (mining or staking) and others storing information (nodes). The more participants there are, the more decentralized the network will be.

For example: Bitcoin is highly secure and decentralized, but it is not scalable. The same case with Ethereum — although Ethereum 2.0 promises to fix this. Solana is relatively fast and scalable but its decentralization is in question.

Many new blockchain networks have been working on solving this issue. But the truth is that they hardly reach the needed volume to stress the network and see the problems behind them.

The combination of decentralized data storage and peer-to-peer communication is part of what makes blockchain networks so powerful. So why is it so challenging to scale these networks?

Why is scaling a blockchain network so hard?

There are three main reasons scaling blockchain networks is a complex problem. The first reason is the consensus mechanism used in blockchain networks.

Blockchain networks have to reach consensus. Each node in the tangle has to agree on the state of the network. This also means they must agree on the order in which the network should execute events.

To do so, nodes are in constant communication. They are checking the actions of the other nodes. If everything looks good, they move on. This process makes processing significantly slower than in centralized systems. So, our network might be decentralized, but its latency can be a problem.

The high level of data redundancy is the second reason scaling is so tricky. By storing data on all nodes in the network, blockchain networks can achieve high levels of security and immutability.

Unfortunately, to achieve these high levels of redundancy, a significant amount of data is stored at each node in the network. This makes it difficult to scale the blockchain network beyond a certain number of nodes.

The third reason scaling blockchain networks is such a complex problem is that stored data may not be structured. For example, in some blockchain networks, the data being stored is raw source code. In other networks, it may be financial transactions.

Developers might need to restructure the information to scale a network beyond a certain point. This change could mean adding new rules or changing how data is processed in the system.

The problem with determining the right strategy

These are some challenges a network might face when trying to scale. Finding the right design for each blockchain network will likely take years. However, the strategy will depend on the network we are trying to scale. After all, there is no one-size-fits-all solution.

If the data is structured, the network can scale while maintaining the same level of security. If the consensus mechanism is changed, data redundancy will decrease. If we reduce the amount of processed data, the network will have to rely on more nodes to reach consensus.

Strategies for achieving network scalability

Blockchain networks can adopt several strategies to achieve this desired scalability. The first strategy is to increase the processing power of individual nodes in the network. The more powerful the nodes, the faster they will dispatch transactions. This can be done by building specialized hardware for the blockchain nodes.

The second strategy could be sharding. Sharding consists of splitting the blockchain network so that nodes process a subset of the network's data. This way, the nodes are not as cluttered and can do their job better.

The third strategy is reorganizing the network so that each node does not process all the network data. The network can achieve this by moving to a different consensus model.

These strategies are not mutually exclusive. Many blockchain networks can adopt a combination of these strategies. Ethereum, for example, will move from proof-of-work to proof-of-stake and add sharding to its network once "The Merge" is complete.

However, the blockchain network landscape is constantly changing. New blockchain networks are created periodically. These in turn feed into existing networks. We have more and more different governance models and protocols that could provide the solution.

Maybe an obscure blockchain has the trilemma solved, and it hasn't been put to the test. Perhaps it is Ethereum 2.0 that will win the race to the most optimal network. Polkadot might also be a dark horse with its parachains and its multichain build-up. Who knows? Only time will tell.