Blockchain Trilemma

In basic terms, a blockchain is a distributed digital ledger. Data blocks are organized in chronological order secured with cryptographic evidence. The implementation of this technology across various industries is already changing how we work and live.

The idea is that decentralized and secure blockchains allow a world where we don’t need intermediaries to function. However, for more use of blockchain, there is a core problem that needs to be solved called the “blockchain trilemma”.

For the term to make sense, you need to be aware of three different elements that are desirable in a blockchain: decentralization, security, and scalability. The blockchain trilemma refers to the idea that it is difficult for blockchains to achieve optimal levels of all three properties simultaneously. Increasing one usually leads to a weakening of another.

In today’s article, we will examine all three elements of the trilemma and explain what each one is in more detail.

What is decentralization?

Bitcoin and similar blockchain networks are decentralized by design. The whole structure is such that there is no one person or organization in charge which removes the central point of failure. Rather, control is spread over many participants. The network team is open to anyone who wants to participate. As a result, control is fully distributed rather than held by a single entity. Everyone has access to the same data. If someone tries to cheat the system by changing the records in their favor, the rest of the participants will reject the incorrect data.

What is blockchain security?

To increase network throughput on a blockchain network, there is an incentive to reduce the distribution of blockchain nodes either geographically, in number, or both. However, this shift towards greater centralization reduces the security of PoW networks. When consensus is achieved on an open network with limited nodal distribution, a 51% attack is more likely as hackers can gather the necessary hash power with greater ease. By overwhelming a network, hackers can hijack the network and manipulate transactions for financial gain. Blockchain security is a critical network aspect that cannot be compromised. Overall, security is a fundamental requirement for a blockchain to succeed, because without it, attackers can take control of the chain.

What is scalability?

Scalability refers to the goal of building a blockchain that can support multiple transactions per second. Scale is necessary if blockchain technology is to serve potentially billions of users. But this is where many blockchains still struggle.

This is because decentralization and security are so fundamental to blockchain that they tend to be focused on first. Decentralization is so central to the ethos and goals of blockchains that it lies at the heart of most recognized blockchains. Security, as we have discussed, is a core requirement for a blockchain to be successful and useful.

Why does the blockchain trilemma exist?

The most obvious and basic solution to the problem outlined above is to reduce the number of participants verifying and adding network data in exchange for greater scale and speed. But doing so would lead to a weakening of decentralization. And it will also lead to a weakening of security as fewer players means a higher chance of attack.

So here lies the trilemma: given the connection between the desired properties of decentralization and security, the basic design of how blockchain works makes it difficult to scale.

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