What Is the Blockchain Trilemma?

The blockchain trilemma is one of the issues that the blockchain industry has been dealing with for a while. The notion that decentralized platforms can only achieve two out of the following three objectives—security, scalability, and decentralization—at a time is known as the “blockchain trilemma” that is also known as the “scalability trilemma”.

Vitalik Buterin, the creator of Ethereum, originally used the word. According to him, when developing blockchains, developers often have to give up one of the three objectives in order to accomplish the other two. Even the top two cryptocurrencies by market capitalization, Bitcoin and Ethereum, have not been able to accomplish all three objectives because this trilemma is so deeply ingrained in blockchain technology.

You can also read: What is a limit order?

What is blockchain security?

Blockchain is a distributed ledger technology (DLT) created to foster an atmosphere of trust and confidence. It is a network of computer systems that duplicates and disseminates a decentralized ledger system. All of the designated nodes or members that can record, share, and view encrypted transactional data on their blockchain have access to the information.

Blockchain technology collects and stores data in sets, often referred to as “blocks,” with each block having limited storage space. The term “blockchain,” which is witty, refers to a chain of data that is created as a block reaches capacity and connects to the previous complete block.

Blockchain Security is a comprehensive risk management system for blockchain networks, combining assurance services, cybersecurity standards, and best practices to reduce the risks of fraud and cyber-attacks.

Since they are founded on consensus, cryptography, and decentralization principles, the data structures used by blockchain technology have intrinsic security properties. It is nearly impossible to meddle with how each new block of information connects to all the older pieces.

 Additionally, a consensus mechanism (approved users) validates and approves each transaction in a block, ensuring the truth and accuracy of every transaction. Since a user cannot alter transaction records, there is no single point of failure. Blockchain security, however, goes above and beyond its built-in security features.

What is scalability?

Building a blockchain that can sustain an increasing number of transactions per second is known as scalability. If blockchain technology is to benefit a larger society and potentially billions of users, scale is necessary. But many blockchains are still having trouble in this area.

This is due to the fact that decentralization and security are so essential to blockchain that they frequently receive the most attention. Decentralization is so fundamental to the principles and objectives of blockchain that it forms the basis of the majority of well-known blockchains. As we’ve already covered, security is a crucial component of a blockchain’s success and utility.

Decentralization and security are prioritized, but scalability suffers as a result. A chain’s capacity for transactions may be severely constrained.

According to Visa, a centralized payment system, the capacity is 24,000 transactions per second. This is due to the closed nature of the network and the absence of factors like consensus and public nodes. Compared to some of the most well-known blockchains, this.

In comparison to traditional exchanges, Bitcoin and Ethereum were only able to process roughly seven and fifteen transactions per second, respectively, as of September 2022.

As previously established, the PoW consensus mechanism and the way the information needs to be processed by the various users that make up the decentralized network are what limits the speed of blockchain transactions.

Due to the finite number of transactions that blockchain networks can support, if more and more members of society start using it, the networks will get congested.

Why the blockchain trilemma exists

The Bitcoin network’s usage of PoW to maintain security is one of the reasons the trilemma occurs. It takes a lot of decentralized processing power, encryption algorithms, and miners to create a secure yet slow system. One method for resolving the trilemma is to find a different means to reach agreement. This was one of the factors that led to Ethereum switching from Proof of Work to Proof of Stake (PoS).

Participants in PoS blockchains who validate transactions must stake (lock) their tokens. Highly sophisticated mining equipment is not required. It is simpler and easier to add new validators to the network. With scalability in mind, PoS is merely one of many various strategies for consensus methods.

Solving the blockchain trilemma

The most notable solutions to the blockchain trilemma include layer-2, random delegation, side chains, and sharding/rollups.

1. Sharding

Sharding is a term borrowed from the realm of databases. The fact that this innovation is one of several ways to expand over multiple servers makes it significant for databases. If not, you would have to keep the whole database on a single server. A blockchain has the same properties. It is inefficient if each validator must hold the complete blockchain because multiple validators would maintain the same data even when they weren’t using it. As a result, reaching consensus is challenging because it requires participation from every validator chain node.

The blockchain is sharded into many validators, dividing it up. It’s a dangerous method because there’s a chance that all validators holding a specific shard could crash.

In this scenario, the entire blockchain fragment would be lost. One of the many methods to improve the process is to use one of the various algorithms to stop this from happening. For example, Ethereum provides shard chains as a means to increase scalability.

Sharding allows validators to process the data faster, freeing up new space for transactions, and providing faster finality. This is how Ethereum plans to solve the crypto trilemma.

2. Side chains

A side chain is the concept of several chains operating simultaneously. The goal is to spread out transactions throughout numerous chains in order to lighten the load on the mainnet. Kadena approaches the crypto trilemma in this way.

3. Random delegation

Some blockchains designate random validators as super-validators and permit them to process blocks in place of running super-validators round-the-clock. Algorand’s (ALGO) approach to resolving the crypto trilemma is as follows.

4. Layer-2 solutions

Any scaling solution that is erected on top of an already-existing blockchain system is referred to collectively as layer 2 in this context.

These Layer 2 solutions operate apart from the parent chain and frequently have unique consensus algorithms. Layer 2 solutions like Polygon, StarkNet, Gnosis Chain, Avalanche Subnets, BNB Sidechains, and others are solid examples of how to boost TPS and throughput while maintaining the security norms essential to blockchain technology.

5. Different consensus mechanism

A consensus algorithm, also known as a consensus mechanism, model, or protocol, is a system that is employed to arrive at a consensus regarding the real-time state of the blockchain.

The Bitcoin network’s usage of PoW to maintain security is one of the reasons the trilemma occurs. It takes a lot of decentralized processing power, encryption algorithms, and miners to create a secure yet slow system. One method for resolving the trilemma is to find a different means to reach agreement. This was one of the factors that led to Ethereum switching from Proof of Work to Proof of Stake (PoS).

Participants in PoS blockchains who validate transactions must stake (lock) their tokens. Highly sophisticated mining equipment is not required. It is simpler and easier to add new validators to the network. With scalability in mind, PoS is merely one of many various strategies for consensus methods.

Conclusion

One of the most important challenges that must be overcome for blockchain technology to become widely used is the blockchain trilemma, which addresses decentralization, scalability, and security.

Although today’s blockchains can handle a sizable user base, security problems persist, and there are intense discussions regarding decentralization, particularly the relative benefits of Proof-of-Work versus Proof-of-Stake.

While the sector is still in its infancy and there are still many obstacles to overcome, it is undeniable that tremendous progress has already been accomplished.