What is the Blockchain Trilemma?

What is the Blockchain Trilemma?

The Blockchain trilemma refers to the popular belief that a blockchain can only offer two of scalability, decentralisation, and security at the same time. This means a public blockchain with many decentralized nodes can’t display resilience to attacks while maintaining high speed. 

The pioneer blockchain, the Bitcoin blockchain, can only process seven transactions per second. Also, some blockchains are secure and have high transaction processing speed but face scalability problems.

For instance, while Solana or BSC blockchain has a higher TPS than Ethereum and Bitcoin, they can only accept a limited number of nodes compared to the blockchain giants. Decentralized and fast blockchains may also be insecure and vulnerable to hacks and threats.

In relation to the different blockchain limitations mentioned above, any blockchain that offers the three features simultaneously will be a breakthrough in Blockchain technology. Developers are developing both Layer-1 and Layer-2 solutions to solve these challenges. 

Layer-1 refers to the blockchain base structure, while Layer-2 refers to the technological development and optimizations built on Blockchains to enhance their network.

Developing a blockchain that will balance both Layer 1 and Layer 2 is the solution developers have been looking to provide. 

Explaining the Pillars of Blockchain Trilemma

Decentralisation

This is the primary fundamental feature of blockchain technology. Decentralization removes intermediaries in all blockchain activities. For example, it eliminates banks in the traditional financial system while transferring governance and management systems to the users. 

Security

Blockchain security, the critical aspect that cannot be compromised, is a risk management system that includes best practices to mitigate threats while incorporating assurance services. To increase the transaction processing in a blockchain, the number of nodes must be limited.

It will reduce the security of PoW (Proof of Work) consensus mechanisms, making them liable to 51% attack. This happens when hackers acting as miners accumulate at least 51% of the mining power to manipulate transactions for financial gain. 

Scalability

Scalability refers to the Blockchain’s ability to offer fast transaction speed. It is the only protocol that will allow blockchain platforms to compete squarely with centralized platforms. Achieving scalability is the challenge most decentralized networks face, more than decentralization and security.

So how do we solve the Blockchain Trilemma? 

The solution comes from both Layer-1 and Layer-2 structures.

Layer-1 solutions

Consensus Protocol Change

Since PoW is slow but secure, switching to a more secure, fast, and scalable protocol will solve the problem of the trilemma problem. PoS (Proof of Stake) is a consensus mechanism that selects transaction validators based on their stakes in the network.

This mechanism will increase the node capacity while ensuring decentralization and security.

Sharding

Sharding entails breaking each transaction into smaller shards and distributing it across different nodes in the network simultaneously for easy validation.

It was introduced to provide solutions to the scalability issue and security challenges in a blockchain. 

Layer-2 solutions

Nested Blockchains

It refers to a decentralized network infrastructure that uses the main blockchain to switch the parameters on a network. It hosts a web of secondary chains, thereby serving as the parent chain that does not participate in any network functions but only delegates operations to the secondary chains.

The delegation of functions in this model will improve the scalability of the main chain since it has lessened its burden.

Sidechain

This is an independent transactional chain that is adjacent to the main blockchain and used for large transactions. It optimizes the main chain for speed and scalability. The function of the main chain is only to ensure security and dispute resolution.

Wrap up

The Blockchain Trilemma, an existing limitation in the blockchain ecosystem, can be solved through the solutions listed above.

The solutions are to find the balance between scalability, decentralization, and security. Implementing Layer-1 and Layer-2 solutions will facilitate easy adoption and better utilization of this cornerstone technology!

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