Is Blockchain Inevitable? –

Blockchains could handle limited transactions in one second. For example, the Bitcoin network can process about 7 transactions per second. The world is looking forward to adopting Blockchain technology in mainstream applications, and this transaction limit is hindering global adoption, as it should be much more capable. For example, if Blockchain technology is adopted globally, it should allow more people to access the network without slowing down. However, decentralized networks are fundamentally designed so that the scalability of a network tends to weaken the security or decentralization of the network. This is known as the Blockchain Trilemma, and developers worldwide are experimenting using different scalability solutions and consensus mechanisms, including sharding and state channels.

Introduction

Blockchain is a distributed digital database consisting of blocks of data organized in chronological order. These blocks of data are secured with cryptographic evidence and linked together. Blockchain technology has been implemented across multiple industries to transform conventional data management and storage solutions with better security. The basic idea of ​​secure and decentralized blockchains is to create an infrastructure that does not depend on intermediaries for third parties to function properly. Regarding the global use of Blockchain technology, experts believe that it is impossible to create a Blockchain network that offers all three elements: security, decentralization and scalability. This term was coined and popularized by Ethereum co-founder Vitalik Buterin. This article will highlight some of the best solutions created by Blockchain developers worldwide to solve this Blockchain trilemma and create a Blockchain network that offers optimal security, scalability and decentralization in its architecture.

What is organizational decentralization?

Blockchain networks like Bitcoin are designed in a decentralized nature so that there is no central authority, organization or body in charge of the network function. The network layer is available to anyone who wants to participate in Blockchain. Thus, control over the network is completely distributed among the participants instead of a single entity. Everyone on the Blockchain has access to the data in the chain, and if someone tries to change the function or the records to cheat, the participants have a vote to reject the data found wrong. Let’s take the example of the Bitcoin network to avoid technical details in understanding decentralized architecture. No third party controls the Bitcoin network, unlike the traditional financial system of conventional banks. Third-party controllers register to ensure that data is properly managed and that transaction parties keep their transaction records secure.

On the other hand, the Bitcoin Blockchain allows everyone in the chain to access the data and cross-check transaction records before those records are added to the digital database. In this way, Blockchain technology creates a system without intermediaries to control the network and enforce trust between participants. However, transaction time in Blockchain networks increases as all participants in the chain do data validation, and sometimes it can be slow due to how data is processed and shared on Blockchain. Let’s try to understand how Blockchain offers best-in-class security and why Blockchain security is at risk if we scale the network.

How does Blockchain offer best-in-class security?

In terms of security, it doesn’t matter if a Blockchain is decentralized; if it does not provide good security. A Blockchain network is considered a good network if it is resistant to malicious entities and attacks on data available on the chain. In contrast to the centralized system which obtains the system security by closing the system and restricting the data access only to central authority, a Blockchain network gives access to everyone in the chain. Blockchain developers’ biggest challenge is to create a decentralized system with optimal security when everyone in the chain participates in the decision-making process. Let’s go back to the Bitcoin Blockchain example to understand how Blockchain offers best-in-class security with decentralized systems. Bitcoin Blockchain works on a combination of cryptography and consensus mechanism known as proof of work. If we talk about the technical side of cryptography, each block of data has its unique digital signature known as a hash. These blocks of data are linked, so if a participant tries to tamper with them, it changes the block’s digital signature. The rest of the participants on the network would quickly identify the change. The proof-of-work consensus mechanism helps secure the cryptocurrency’s ledger.

If you are wondering what a consensus mechanism is, look for our Blockchain Expert Certification, which offers a technical and in-depth understanding of Blockchain fundamentals.

You must note that a network becomes more secure by increasing the number of participants on the network and distributing power between them. The more participants, the more difficult it becomes for one participant to take control of the operation. This brings us to the 51% attack. It refers to a state where a single entity or a group of participants has control over more than 50% of the chain’s total hashing rate, they will be able to take control from the consensus mechanism, and it is known as overarching consensus to take benefits such as dual use of tokens. In summary, we can say that security is still the basic requirement for a successful Blockchain, since it would be useless if someone in the chain could change the chain data to take advantage of it.

Introduction to scalability

Scalability can be defined as the goal of building a Blockchain network that can support many transactions per second. Scalability is a fundamental requirement for Blockchain technology to serve society and billions of users worldwide. However, this is the part where many blockchains struggle. While developing a Blockchain network, developers have security and decentralization as the basic requirements and neglect scalability to achieve optimal security and decentralization. If we compare Blockchain network with conventional financial architecture, the leading Blockchain, Ethereum, is limited to process 15 transactions per second due to decentralized architecture. At the same time, leading centralized payment systems such as Visa can process up to 24,000 transactions per second. The difference is huge and it is a must for Blockchain technology and Blockchain developers to overcome this Blockchain trilemma and achieve better processing capabilities.

Learn blockchain technology with the course designed and curated by subject matter experts at the Blockchain Council. Register for the Certified Blockchain Expert course with a lifetime certification.

How do I solve the Blockchain Trilemma?

Blockchain developers are working hard to solve the Blockchain trilemma by using various consensus mechanisms on the Blockchain network. The community has seen several approaches taken by Blockchain developers that yield interesting results. Let’s look at some of the most popular techniques used by Blockchain developers to deal with the Blockchain trilemma.

Sharding

Sharding refers to a method of dividing databases into partitioned blockchains that manage some specific data segments. It reduces the stress on a single Blockchain that handles all interactions and transactions that occur on a network. These partitioned blockchains are known as Shards. These shards have individual ledgers to record transactions and interactions that occur on the network. Smaller partitioned blockchains or shards can process their transactions, but they are managed by the main blockchain, also known as a Beacon Blockchain. It is also known as a Layer-1 network scalability solution that does not solve the problem completely, but provides a breakthrough to Blockchain developers working to solve the Blockchain trilemma.

Different consensus mechanism

Consensus mechanisms are the reasons why the Blockchain trial exists in the first place. The proof-of-work consensus mechanism used on a Blockchain network to ensure the best security limits the scalability of a Blockchain network. Crypto algorithms, the need for miners and largely decentralized computing power combine to produce a secure decentralized system with slow processing speed. Blockchain developers developed a secure consensus to solve the Blockchain trilemma. This new consensus mechanism is known as Proof of Stake, and Ethereum is the first Blockchain to shift from Proof of Work to Proof of Stake consensus mechanism. PoS does not completely solve the Blockchain trilemma. Still, keeping the system’s scalability in mind is one of many approaches Blockchain developers are taking to change the consensus mechanism.

Layer-2 solutions

Various consensus mechanisms and sharding are layer-1 scalability solutions of Blockchain technology. Both are trying to change the basic Blockchain design to achieve better scalability goals. However, some Blockchain developers are working on solutions built on existing network structures. These solutions include stateful channels and sidechains known as layer 2 scalability solutions. A side chain can be defined as a separate chain connected to the main blockchain and set up so that it does not create obstacles in the free flow of assets between the two blockchains. A sidechain can work with different rules designed to work according to the requirement. It can work with rules designed for better processing speed and scalability. Stats channel is also similar to easing the pressure by taking transactions off the main chain. It uses a smart contract instead of creating a separate Blockchain to allow users to trade and interact with each other without publishing the interaction and transaction on the chain.

Conclusion

Blockchain technology is still in the initial stage of development and several aspects need to be addressed before its global adoption as a mainstream technology. However, the demands on Blockchain developers have increased exponentially in recent years, and it is expected to skyrocket in the coming time. If you are looking for the best Blockchain certification to upgrade yourself, Blockchain Council offers best-in-class Blockchain courses that provide an in-depth understanding of Blockchain technology concepts.