All About Blockchain Scalability Solutions
Blockchain is a decentralized and distributed ledger that focuses on powering decentralized transaction management. With decentralized transaction management, any node can independently initiate a transaction as per the terms set by a smart contract with no third-party interference. Thus, with an increase in the number of users adopting Blockchain, there is a subsequent rise in scalability issues, resulting in transaction latency. To address these issues, there are various blockchain scalability solutions. This article will unfold blockchain scalability and its fundamental solutions to eliminate latency in the Blockchain.
- What is blockchain scalability?
- What is the problem of blockchain scalability?
- Why is scalability in blockchain important?
- What are the various blockchain scalability solutions?
What is blockchain scalability?
Scalability refers to a computer system’s ability to manage an increasing quantity of work (e.g., a database or search engine). A blockchain network does not scale effectively or has low scalability with a huge amount of data. Blockchain lacks sufficient efforts to alter the system to cope with the increasing workload, data and resources (e.g., computing power, servers, or bandwidth).
However, the term “scalability” has a far larger variety of implications in the context of Blockchain. Surprisingly, the word “blockchain” has not been thoroughly defined academically. For example, in one of the most influential papers on blockchain scalability, any enhancement to Bitcoin in terms of throughput, latency, bootstrap time, or cost per transaction was referred to as “scaling,” and the ensuing blockchain system was referred to as scalable.
Although their throughputs vary substantially, several blockchain systems can be deemed “scalable”. It is important to note that the term “scalable” is a comparative phrase in the Blockchain. When a blockchain system is said to be scalable, it achieves a greater TPS than other current systems by tweaking its consensus method and adjusting specific system characteristics.
What is the problem of blockchain scalability?
The inability of public blockchains to scale is impeding the supply of optimal solutions to enterprises and industries. A centrally regulated system underpins many internet transactions between people or corporations (or controlled by a third-party organization). A bank or a credit card provider, for example, may operate as a third-party company in the execution of a digital payment or money transfer transaction between two entities (or individuals). The third-party vendor charges every successful transaction a fee.
The third-party controls and manages practically all of the stakeholders’ information participating in the online transaction in a consolidated way. This method necessitates the involvement of a third party to ensure the transaction’s security. On the other hand, Blockchain is an immutable distributed ledger of cryptographically signed transactions maintained by a peer-to-peer network, where no third party is necessary to handle the information and trust among network users is no longer a problem.
Scalability has been identified as the most significant barrier to establishing public blockchains in many real-world commercial situations. The scalability issue with Blockchain emerges mostly when the number of nodes and transactions increases. This problem exists in major public blockchain systems (Bitcoin and Ethereum) since each node must store and execute a computational activity to validate each transaction.
As a result, public blockchains constantly need immense processing power, high-speed internet connectivity, and vast storage space. Transaction throughput and latency are the two commonly debated blockchain performance measures, and both have yet to achieve a sufficient Quality-of-Service (QoS) level in many notable recent public blockchains.
Why is scalability in blockchain important?
Scalability refers to a network’s capacity to sustain larger transaction throughput and is a key criterion in blockchain networks. As a result, scalability is critical for Blockchain’s future growth. The increasing number of use cases and the adoption of blockchain technology cannot impair the performance of a completely scalable blockchain. Blockchains with decreased performance due to increased use may demonstrate a lack of scalability.
Furthermore, the blockchain trilemma dilemma suggests that obtaining increased scalability would come at the expense of decreased security and decentralization. At the same time, it is critical to remember that only scalability can enable blockchain networks to compete successfully with traditional, centralized platforms. So, is it feasible to create Blockchain scaling solutions that do not compromise security or decentralization?
Let’s explore the various Blockchain Scalability Solutions in the next section.
What are the various blockchain scalability solutions?
Considering scalability being the most significant barrier to mainstream blockchain adoption, effective Blockchain scaling solutions are required. Currently, many sorts of solutions are being developed to solve the issue of blockchain scalability. Surprisingly, answers to blockchain scalability difficulties can be categorized into four distinct ways. Each solution category provides distinct strategies for addressing the Blockchain’s scalability issues.
First layer scalability solutions
The most common answer to the question “how do you address a scalability problem in the blockchain?” would lead you to layer-1 solutions. The first layer, or layer 1 solutions, necessitate changes to the core blockchain network’s software. As a result, layer 1 solutions are often known as on-chain scaling solutions.
Layer 1 solutions enhance the blockchain network’s essential characteristics and attributes, such as increasing the block size limit or decreasing the block verification time. Sharding, segregated witness (SEGWIT), and hard forking are three prevalent layer 1 blockchain scaling options.
Sharding is a well-known on-chain scalability technique. It focuses on breaking down the blockchain network into smaller, more manageable chunks known as shards. The network would then execute the shards in parallel with one another. The network’s processing output would increase with each shard handling a portion of the group’s transaction processing. By dividing the network into smaller bits, it can act as the sum of its parts. Sharding effectively eliminates the need to rely on the performance of individual nodes to achieve quicker and more efficient transaction throughput.
- Segregated Witness
Segregated Witness, or SEGWIT, is another important contribution among first layer options for blockchain scalability. SEGWIT is a protocol enhancement in the Bitcoin blockchain network that focuses on changing the way and structure of data storage. It aids in eliminating signature data linked with each transaction, resulting in increased capacity and storage space for transactions. It is vital to note that the digital signature for validating the sender’s ownership and availability of cash takes up around 70% of the total space in a transaction. The removal of the digital signature may free up additional space for the addition of new transactions.
- Hard Forks
A hard fork is a procedure that focuses on making structural or fundamental changes to a blockchain network’s properties. Hard forking, for example, might imply raising the block size or decreasing the time necessary to create a block. While hard forking is a prerequisite for layer 1 blockchain scalability solutions, a contentious hard fork is the most productive option. The problematic hard fork essentially suggests a split in the larger blockchain network, with a certain segment of the community contradicting the core community on specific topics. In such instances, a subset of a blockchain community may elect to make fundamental modifications to the underlying source.
Second layer scalability solutions
The viability of first-layer or on-chain scaling methods is heavily dependent on changes to the main blockchain network. However, research into how to solve a scalability challenge in a blockchain network has resulted in the emergence of off-chain scaling methods.
The second layer or layer 2 scalability solutions are off-chain scaling options. Layer 2 solutions are supplementary protocols built on top of the primary Blockchain, and secondary protocols would be used to ‘offload’ transactions from the primary Blockchain.
As a result, layer 2 solutions can play a significant role in tackling space and network congestion challenges. State channels and off-side chains are popular examples of second-layer solutions.
- State Channels
State channels are a typical inclusion among layer 2 solutions for blockchain scalability. State channels enable two-way communication between off-chain transaction channels and blockchain networks through various approaches. As a result, it has the potential to significantly boost transaction speed and capacity. It is crucial to note that state channels do not need the immediate participation of miners to validate transactions. On the other hand, state channels function as resources near to the network that is integrated with the assistance of a smart contract or multi-signature method. When a transaction or series of transactions on a state channel is completed, the relevant Blockchain records the final ‘state’ of the ‘channel’ and any related transactions.
Sidechains are also a popular choice among layer 2 solutions for determining how to solve a scalability issue in the Blockchain of your choosing. The sidechain operates as a transactional chain next to the Blockchain in big batch transactions. In comparison to the primary chain, sidechains use distinct consensus techniques.
In the layer 2 scaling solutions area, Plasma is also a prominent blockchain scalability solution. It primarily focuses on utilizing child chains that begin with the parent blockchain, with each child chain functioning as a separate blockchain. As a result, Plasma may be created for use cases involving processing a certain type of transaction while assuring execution in a comparable environment with enhanced security.
- Lightning Network
The Lightning Network is another famous example of an off-chain approach to blockchain scalability. It exploits smart contract functionality through private, off-chain channels over the main blockchain network. Off-chain channels might provide speedier transactions with lower costs. Most significantly, by shifting transactions away from the mainchain, Lightning Network reduces the burden on the mainchain. Consequently, users no longer have to pay mining fees or wait for prolonged periods for block confirmation.
Scalable consensus mechanisms
Your search for solutions to the question “how do you address a scalability problem in the blockchain?” would lead you to scalable consensus techniques. There are several consensus techniques available that are designed to streamline reaching consensus. As a result, scalable consensus algorithms may provide greater scalability and transaction throughput. The following are some significant examples of scalable consensus processes that act as effective blockchain scalability methods:
- Delegated Proof-of-Stake
DPOS, or Delegated Proof-of-Stake, is a consensus technique analogous to the democratic process of controlling a country. In this instance, token holders get to choose validators for network transactions. According to the system, the number of delegated validators might range from 10 to 100 and varies regularly.
You might also consider Proof-of-Authority as a viable option among blockchain scalability options. It’s a scalable consensus method with a reputation-based consensus algorithm. The chosen nodes are in charge of validating network transactions using the Proof-of-Authority consensus technique.
- Byzantine Fault Tolerance
Byzantine Fault Tolerance (BFT) consensus techniques have been one of the most reliable tools for dealing with the Byzantine Generals Problem. BFT generally refers to a distributed system characteristic that suggests the necessity for continual consensus, despite multiple antagonistic participants in the network.
Scalable distributed ledgers
Blockchain technology is only part of the larger distributed ledger technology (DLT) environment. Other forms of distributed ledgers can be found in addition to Blockchain. The intriguing truth is that such distributed ledgers do not use the same data structure as Blockchain to organize information into a succession of blockchains.
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