Understanding Blockchain Trilemma

CrossFi_Official
5 min readDec 12, 2022

Blockchain projects rotate around three fundamental concepts: decentralization, scalability, and security. The idea behind this great innovation is to create a financial hemisphere where we don’t need to rely on third parties for the functionality of networks or markets at large. But there are a host of challenges put up against its quest for mainstream adoption.

Some blockchain projects can only handle a limited number of transactions — for example, Bitcoin can only process around seven transactions per second (which is, in every way, a low number in comparison to its users’ sporadic growth). This is awfully bad for their global image. Solid attraction has always been a product of convenience and consistency; and since such a kind of limitation exists, perhaps in an unusually glaring means, people are often skeptical about joining the wave, thereby causing slack in their widespread adoption.

That’s why blockchain trilemma exists in the first place: a high-rising theory that each fundamental design of decentralized networks cannot be simultaneously strengthened without weakening another. That’s to say: increased scalability tends to weaken decentralization or security. To solve this problem, developers are experimenting with different consensus mechanisms and scalability solutions including sharding, sidechains, and state channels.

What is the Blockchain Trilemma?

As previously stated, blockchain trilemma refers to the concept that the three desirable elements in a blockchain — decentralization, security, and scalability — can’t be achieved simultaneously at optimal levels. Reinforcing one puts a weak ring around another.

Blockchain trilemma, as a concept, was popularized by Vitalik Buterin, Ethereum co-founder. This proposition was due to his experiences working on Ethereum, one of the most popular cryptocurrencies on the internet. He found out that Ethereum faces problems similar to those of the Bitcoin network. One is that both networks aren’t as scalable and decentralized as many people would love.

Understanding the Elements in Blockchain Trilemma

Decentralization

The core value of blockchain networks is decentralization. The whole structure is built to eliminate the interference of middle-men souvenirs so that the network layer remains open and welcoming to anyone who wants to participate. That’s the major reason why people prefer digital currencies to fiat currencies.

Once your assets are controlled by a single entity, as seen in centralized financial systems, you are prolly at the mercy of that entity. Think about banks and their strict regulatory and stress-filled measures; or the most likely one: the monopolistic control by U. S. government over U. S. dollar; they can freeze your account if you are unlucky enough to get blacklisted or sanctioned. Blockchain decentralization eliminates this problem by ensuring that individuals have custodial authority over their assets.

Large-scale blockchain decentralization poses a big problem due to network management. Most blockchain networks still have to moderate every single transaction run over their network. This way, blockchain decentralization negatively impacts the network’s security and scalability.

Scalability

Blockchain scalability has always been an imperative problem in the cryptocurrency space, and this puts a stop limit to the global adoption of cryptocurrencies.

Bitcoin, for example, is a great innovation. No doubt, Bitcoin has one of the most secure and decentralized platforms on the internet. But its network has a scalability problem since it can only allow up to seven transactions per second. And this, too, has gone ahead to gather a poor reputation before the public face, coupled with its low transaction speed.

Technically, most projects would want their blockchain to be more scalable so that it can process millions of transactions per second. Hence the reason why Visa and Mastercard are used on a mass scale, around the world. To solve the problem of scalability, blockchain developers need to figure out how to make it work for specific use cases rather than just looking at transactions per second.

Security

Security is an important feature in every blockchain network; no matter how decentralized a blockchain is, it’s useless if it doesn’t have tight-proof security, one that makes it highly resistant to external attacks from malicious entities. Centralized financial systems can maintain their security via their closed system; since they are in control of your funds, they are guarantors of your data’s safety.

Oftentimes this is not a simple case when it comes to a decentralized blockchain. The Bitcoin blockchain makes use of two combined facilities: cryptography and a network consensus mechanism known as Proof of Work. Each block, in relation to cryptography, has a type of digital signature and is quite distributed, such that the block (or hash) cannot be altered. That way, any altercation from any member will alert other participants.

One of the notable downsides to maintaining blockchain security is that it demands higher processor power. This might pose a problem once blockchain is brought into the picture. Combining the workabilities of blockchain decentralization and scalability allows for the expansion of processing power, which helps to improve the transaction-per-second rating. Blockchain developers must figure out when trying to build a network.

A Few Solutions to Blockchain Trilemma

There’s not a single golden solution to the trilemma. It’s not possible. Many approaches, however, have brought interesting results to the fore. We’ll be looking at some of these popular approaches.

1. Sharding

Sharding refers to the concept of splitting blockchains into the smaller, siloed blockchain that manage specific data segments. This takes the cumulative workload off a single chain that deals with all transactions on a network. These shards process their transactions and therefore serve as a Layer 1 scalability advancement.

2. Different consensus mechanism

There’s a need for developers to find a different way to secure consensus to solve the trilemma. The reason behind the trilemma stems from the Proof-of-Work model that exists on a blockchain network. This is one of the reasons behind Ethereum’s move from Proof of Work (PoW) to Proof of Stake (PoS). PoS allows participants to validate transactions by staking tokens. Adding more validators to the network, in this case, becomes simpler and more accessible.

3. Layer-2 solutions

Layer-1 solutions include sharing and different consensus mechanisms since they look to change the fundamental design of the existing network. To solve the trilemma, developers must build on top of these existing networks. What can be termed Layer-2 solutions. They include side chains and state channels. Sidechain refers to a separate blockchain connected to the main chain, while state channels are another way of taking transactions off the main chain and reducing the workload of layer-1 solutions.

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