The emergence of blockchain can boldly be called a technological revolution, which has been in development for almost 15 years. It aims to bring as many beneficial changes as possible to the prevailing technological reality. With the dynamics of change, the decentralized registry faces more and more technical challenges. The creator of the Ethereum network - Vitalik Buterin, created the concept of the so-called blockchain trilemma. It assumes that developers' problems boil down to three areas - security, scalability, and decentralization. We invite you to an article in which we will tell you the problems associated with them and the solutions that engineers propose. 

Scalability

Let's start with scalability. Blockchain can handle an increasing number of transactions. Networks are trying to revolutionize and speed up the way payments and contracts are made, but there are many limitations in this area. A common problem is low network throughput - the number of transactions that can take place per minute or second. This is affected by block size and the speed at which new blocks are added to the chain. Adding to the scalability problem are long transaction confirmation times. For example, bitcoin processes about 7 transactions per second, while Ethereum (after the transition to PoS) processes about 30. 

Security

Another pillar is security. Although blockchains are based on cryptography, the growing computing power of devices poses a threat that networks must always be ready for. Without security, no other area matters. It is achieved through block hashing, which makes the blockchain immutable. Users of the system would immediately notice that there have been changes. The number of nodes is also an important issue. The more participants operating within the consensus algorithm, the better. This helps prevent one bad participant from taking control of the system. 

Decentralization

The third element of the blockchain trilemma is decentralization. This means distributing the decision-making process among the nodes of the system. Everyone has access to the same data, and the other participants in the network can quickly identify any attempts at manipulation. As a result, blockchain is described as trustless. This means that abuse due to human nature has no right to occur there. It also eliminates a single point of failure. Each participant has a copy of the system, and if there is a problem with one node, the others will take over anyway. 

Mutual influence of blockchain foundations

The blockchain trilemma is the interplay of the aforementioned scalability, security, and decentralization. Some argue that blockchain can only develop in selected two of the three areas. However, research is ongoing all the time on how to improve all three elements. Suppose we reduce the number of participants confirming and adding data to the network to increase speed and scalability. In that case, decentralization and security will suffer through greater control in the hands of fewer participants. Various solutions have been proposed to improve the situation so far. Here are some of them:

Layer-2 solutions

Among the solutions that take advantage of existing blockchain infrastructure are, for example, the Lightning Network for Bitcoin or the Raiden Network for Ethereum. They allow more transactions to be processed outside the main blockchain. They use so-called sidechains and state channels. Sidechains are some chains connected to the catching blockchain. State channels are the use of smart contracts to alleviate pressure on the layer-1 blockchain by using private communication channels between parties to a transaction.  

Sharding

That is a method of dividing the blockchain into smaller partitions that manage specific segments of data. A shard is a fragment or part of the blockchain that contains its own transaction history, account status, and smart contract execution logic. Each shard can process and store a specific range of transactions. It allows the blockchain to process a larger number of them. Shards operate independently of each other but are interconnected to form a consistent whole and the integrity of the network.

Developing new consensus algorithms

The Proof-of-Work mechanism is an efficient and secure system, but unfortunately slow and consumes large amounts of energy. That is prompting blockchain developers to move to other consensus algorithms, such as Proof-of-Stake, where there is no need for high-powered machines, and the condition for participation is staking tokens. This is just one of the approaches used. Many different consensus algorithms are economical and efficient. Among them are Proof of Authority (PoA), Delegated Proof of Stake (DPoS), and many others. 

Summary

Efforts to create a blockchain that maximizes the performance of decentralization, scalability, and security are ongoing. While it is difficult, some chains will certainly succeed in getting close to the ideal. Consensus algorithms are improving all the time. Certainly, in 10 years, blockchain will be much more developed than today, so it is worth keeping a close eye on this technology area.

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