The Blockchain Trilemma: How Can it be Solved?
In basic terms, a blockchain is a distributed digital database. Blocks of data are organized in chronological order. The blocks are linked and secured by cryptographic proofs. The implementation of this technology across different industries is already changing how we work and live.
The idea is that decentralized and secure blockchains allow for a world where we don’t need to rely on third parties for networks or markets to function. However, experts generally agree that if this tech is to be more widely adopted there’s a core problem that needs solving. The problem in question is known as the “blockchain trilemma”.
What Is the Blockchain Trilemma?
The blockchain trilemma is the concept that decentralization, security and scalability can’t all be represented in one blockchain.
The term blockchain trilemma was coined by Vitalik Buterin, co-founder of Ethereum. He proposed this term because of his experience working on Ethereum, the second most popular cryptocurrency on the internet, which suffers from problems similar to those of the Bitcoin network.
The main issue with Bitcoin is that its network isn’t as scalable as many people would like. The blockchain trilemma is all about the three things that developers want — decentralization, scalability and security — and the vexing need to choose two out of the three.
Three pillars of blockchain technology
1. What Is Decentralization In Blockchain?
Decentralization is arguably the most important promise of cryptocurrency. Decentralized crypto is a ledger without a central authority. If a person transacts via a bank, they are operating through a centralized system that can approve or deny their transaction.
In the Bitcoin whitepaper, Satoshi Nakamoto (the inventor of Bitcoin), stated that Bitcoin is fully “trustless” — meaning there no trust is required in a central authority or a third party in order to transact on the Bitcoin network. As such, nodes can’t reject a payment as long as the transaction is valid i.e. the user has the funds.
2. Scalability in a Blockchain
Unfortunately, blockchain scalability is a significant problem that has kept many cryptocurrencies from being used on a mass scale. For a blockchain to be practical, it needs to progress to a stage where it’s subjected to thousands of transaction requests and can process them rapidly.
Ideally, projects would want their blockchain to scale to millions of transactions per second (TPS). This is one of the many reasons why Visa and MasterCard are used all over the world. After all, no one would use these cards if you needed to wait 20 minutes or more for your transaction to be processed — and no store would want to use this network if they had lengthy lines because it took so long to process transactions.
Blockchain scalability needs to be built in because developers need to figure out how to make it work for specific use cases, rather than just looking at transactions per second.
3. Security in a Blockchain
Blockchain security is the third feature many networks might choose to relax when it comes to the blockchain trilemma. Good blockchain security means that everything should be robust so that no one can take over the network — for example, capitalizing on network vulnerabilities to insert transactions into a network.
The major downside to maintaining blockchain security is that it takes a lot of processor power to achieve it. This might be a problem if blockchain decentralization goes into effect as well. Combining this necessity with the realities of blockchain decentralization and scalability means you have to expand processing power tremendously to achieve a small improvement in your TPS rating.
These are the things that blockchain developers must balance out when trying to build a network. They must figure out which of the three they want to sacrifice.
Why the blockchain trilemma exists
The most obvious and basic solution to the problem outlined above is to reduce the number of participants confirming and adding to the network data in exchange for greater scale and speed. But doing so would weaken decentralization with control handed to a smaller number of participants. And it would also lead to a weakening of security as fewer players mean a higher chance of attacks.
So here lies the trilemma: given the connection between the desired properties of decentralization and security, blockchain's fundamental design makes it hard to scale. Increase one, and you weaken another. How do you push scalability without damaging decentralization, security, or both?
Potential Solutions to the Blockchain Trilemma
a). Relay Chains
Polkadot’s Relay Chain allows multiple blockchain networks to connect to each other quite easily because they can connect to plenty of networks without the downsides inherent to the blockchain trilemma. Parachains run in parallel to the Polkadot blockchain. They use the Polkadot Relay Chain to achieve maximum scalability, security and governance.
b). Layer 1
The main consideration for Layer 1 is figuring out how to scale. That means tweaking the blockchain's consensus mechanism or other aspects that can increase scalability. Layer 1 provides the foundation needed in order to ensure the network works at its proper capacity. Networks that don’t have a solid Layer 1 invariably end up having problems down the road.
c). State Channels
A state channel essentially has delegated transaction processing and capacity. Its nodes don’t require validation, meaning it’s like an adjacent resource that does what it needs. The Layer 1 network only requires that the final state of the channel be recorded into the blockchain.
d). Sidechains
A sidechain is a separate blockchain that connects to the main blockchain using a two-way peg. It increases the existing blockchain’s interoperability and processing power. For example, Bitcoin’s network can use sidechains to process transactions even faster. This is one of the many ways people are getting more performance out of Bitcoin, even when technically it shouldn’t be possible.
Conclusion
Is Blockchain Trilemma Solved? There are no projects that, as of now, fully solve the blockchain trilemma; with each approach, None were designed with that promise in mind (except Ethereum, which ultimately became a victim of its success).
