Summary

The number of transactions the blockchain can process per second is limited. For example, the Bitcoin network can handle approximately seven transactions per second. After blockchain technology is widely adopted, data processing capabilities and speeds will be greatly improved, and the increase in the number of users will not slow down the network or increase costs. However, the basic design principles of many decentralized networks focus on improving scalability, often at the expense of decentralization or security. This is the so-called "Blockchain Trilemma". Developers are experimenting with different consensus mechanisms, as well as scalability solutions such as sharding, sidechains, and state channels, in hopes of solving this problem.

Introduction

In short, blockchain is distributed Digital database. Data chunks are organized in chronological order. Blocks are connected through cryptographic proofs and secured. Implemented across industries, this technology is already changing the way we work and live.

This concept means that after the advent of secure decentralized blockchain, people do not need to rely on third-party networks or markets. That keeps the world going. However, experts generally believe that if this technology is to be popularized on a large scale, a core problem must first be solved, namely the much-discussed "Blockchain Trilemma" problem.

Ethereum co-founder Vitalik Buterin made this term widely known. To understand this concept, you need to first know the three major elements in blockchain: Decentralization, Security and Scalability. The concept of "Blockchain Trilemma" refers to the difficulty of blockchain in achieving the optimal level of these three attributes at the same time. An increase in one attribute often leads to a decrease in another attribute.

This article will study the three major elements in the ternary paradox and explain them in detail one by one. An in-depth discussion of each element and how it combines with each other will help deepen our understanding of how and why the blockchain trilemma exists. This article will also highlight several solutions suggested by developers.

What is decentralization?

Bitcoin and other similar blockchain networks are decentralized by design. The overall architecture of this type of network is not managed by an individual or a single organization, but is decentralized. The network level is open to all participants. As a result, control is completely decentralized rather than in the hands of a single entity. Everyone has access to the same data. If someone attempts to cheat the system by tampering with the records to their own will, other participants can reject the erroneous data.

This operation is highly technical. Let us take the Bitcoin network as an example, which does not involve third-party control. We compare this to the reliance on banks in the financial system. Banks enhance trust between parties to transactions and ensure that all records are properly maintained. However, the Bitcoin blockchain shares data with everyone in the network to ensure that the data is verified before being added to the digital database. The result is a system that does not require third-party intervention.

Decentralization provides the possibility for the so-called Web3. Our current Internet is in the Web2 stage. Websites and applications in Web2 are all controlled by major companies, but users create the content. Web3 is the next development trend. In the Web3 Internet, people control their own data and online life with the help of decentralized blockchain technology.

However, it is important to note that the way these distributed systems operate requires a large number of participants to agree on the validity of all data Consistent, which requires information to be shared and processed, thus resulting in slower transaction times. Therefore, blockchain needs to scale, i.e. be able to process more data at a faster speed. We’ll continue this when we discuss scalability.

In addition, in order to achieve decentralization, the security of the underlying blockchain must first be ensured. If the blockchain lacks security, criminals will have the opportunity to tamper with the data. This leads to the second part of the trilemma: security.

What is blockchain security?

No amount of decentralization in a blockchain will help if it lacks security. A robust blockchain network must be resistant to attacks by malicious entities. Centralized systems are closed, thus ensuring security. The controller can ensure that the data is not disturbed. But how to achieve security in a decentralized system where everyone can participate?

This is a complex topic. Let’s go back to Bitcoin and its decentralized blockchain security as an example. The Bitcoin blockchain uses a combination of cryptography and a network consensus mechanism called Proof of Work (PoW). From a cryptographic perspective, each block has a digital signature, or "hash". Any modification changes the block's hash, so each block of data is connected in a way that cannot be tampered with. Any attempt to alter data is quickly recognized by the rest of the network.

The proof-of-work consensus mechanism also plays a role in this, effectively ensuring the security of the cryptocurrency ledger. Understanding Proof-of-Work is a big deal in itself, but for the purposes of this article, just remember that network members can only validate new transactions and add them to the ledger through the activity of “mining.” This involves using computing power to solve difficult mathematical problems. The calculation process requires these computers to perform a large number of hashing functions. Although the proof-of-work mechanism is secure, it is relatively slow, which raises scalability issues.

Also note that the more participants (nodes) in the network, the more secure the network is. The greater the number of participants, the harder it is for bad actors to gain control of the system. This involves the so-called "51% attack". The general meaning of this concept is that if a single entity (or a group of criminals) controls more than 50% of the hash rate of the entire blockchain network, they can arbitrarily overturn the consensus and tamper with the data on the chain, such as double-spending tokens. .

In short, security is the foundation for the success of blockchain. Without security and attackers taking control at will, the blockchain is worthless.

What is scalability?

Scalability refers to the goal of building a blockchain to increase the speed of transactions per second. If blockchain technology is to serve the wider society or billions of users, expansion is imperative. However, this is something that many blockchains still struggle with.

The reason is that decentralization and security are fundamental issues of the blockchain, so they always receive priority attention. Decentralization is core to the philosophy and goals of blockchain. Most well-known blockchains stick to this core. As mentioned above, security is the core requirement for the success and value of blockchain.

However, prioritizing decentralization and security, scalability becomes a problem. The number of transactions a single chain can process is severely limited. Centralized payment systems such as Visa claim to be able to process 24,000 transactions per second because the network is closed and is not affected by public nodes and consensus. Let’s compare various well-known blockchains.

According to Bloomberg in 2022: “As of September, Bitcoin was struggling to process more than 7 transactions per second, and the second largest The popular Ethereum network is limited to about 15 transactions per second. Compared with traditional trading platforms, this is incredibly slow."

As mentioned previously, the transaction speed of these blockchains is limited due to the way participants in a decentralized network must process information, as well as the nature of the proof-of-work consensus mechanism itself. If more and more people start to use blockchain technology in society, the network's transaction processing capacity will be limited, which will lead to network congestion.

Why does the blockchain ternary paradox exist

In view of the above The most obvious and basic solution to the problem is to expand the network and increase speed by reducing the number of participants confirming and adding data to the network. However, doing so reduces decentralization and puts control in the hands of a few participants. Fewer participants means increased chances of being attacked, which can also lead to weaker security.

The ternary paradox is thus formed: in the basic design of the blockchain operating principle, decentralization and security are The two necessary properties are closely linked, making scalability difficult to achieve. The three are in a state of ebb and flow. How can we advance scalability without compromising decentralization, security, or both?

Resolving the ternary paradox of blockchain

For the ternary paradox In theory, there is no one-size-fits-all solution. Given the importance of solving this problem, the community has come up with a variety of different solutions, with promising results. Let us outline the top trends to give everyone an idea of the latest developments in this field.

1. Sharding

This is A way to manage specific segments of data by splitting a blockchain or other type of database into smaller partitions of the blockchain. This setup relieves the pressure on a single chain to handle all network transactions and interactions. Each partition of the blockchain is called a "shard" and has its own specific ledger. These shards can then process transactions on their own, but the beacon chain or main chain manages the interactions between shards. This is a change to the blockchain mainnet, so sharding becomes a scalability upgrade for Layer 1 networks.

2. Various consensus mechanisms

One of the reasons why the ternary paradox exists in the Bitcoin network is the way proof-of-work works to ensure security. To achieve system security, miners, cryptocurrency algorithms and huge decentralized computing power are indispensable, but they also lead to a slow system. Finding other ways to ensure consensus is also a way to resolve the trilemma. This is one of the reasons why Ethereum moved from Proof-of-Work to Proof-of-Stake (PoS).

In the proof-of-stake blockchain, participants must pledge (lock) their own tokens in order to participate in transaction verification, but No highly specialized mining rigs are required. It is easier and more convenient to add more validators to the network. Proof-of-stake consensus mechanisms are just one of many ways to address scalability.

3.Layer-2 solution

Sharding and various consensus mechanisms are so-called Layer-1 solutions that aim to change the basic design of the underlying network. However, other developers are looking into building solutions on top of existing network structures in an attempt to solve the trilemma problem. In other words, they believe the solution lies in Layer 2 networking, or “Layer 2.” Relevant examples include sidechains and state channels.

A sidechain is essentially an independent blockchain connected to the main chain. With this setup, assets can flow freely between the two chains. Importantly, sidechains can operate under different rules to achieve speedup and scalability. Likewise, state channels are another way to relieve Layer 1 by removing transactions from the main chain. Instead of using a separate chain, state channels use smart contracts that allow users to interact with each other without publishing transactions on the blockchain. The blockchain only needs to record the start and end of the channel.

Summary

The trilemma of blockchain hinders the potential of blockchain technology to help change the world. If a blockchain network can only handle a small number of transactions per second to remain decentralized and secure, it will be difficult to achieve mass adoption. However, judging from the latest solutions proposed by developers to solve this problem, blockchain networks can only hope to achieve a leap in data processing capabilities in the future if they continue to advance current technological advances.