The Blockchain Trilemma

It turns out that when building a blockchain network - you have to make some tough choices.

There are three main features a blockchain network needs to have: decentralisation, security, scalability. 

  • Decentralisation - Decentralisation is kind of the whole point of this blockchain thing. The idea is to give people across the world the power to govern a network, through a system of interconnected nodes, rather than relying on one central authority.

  • Security - As recent events have shown, the safety of a blockchain network is of utmost importance. Blockchain networks are meant to be secure but they are not immune to hacking. If one party controls more than 50% of the nodes in a network, they are able to manipulate transactions and steal from that network.

  • Scalability - As the network grows, blockchains should be able to hand thousands of concurrent transactions.

Vitalik Buterin - the creator of Ethereum and our lanky king - caused a stir when he said that if a blockchain wants to be really good at two of these three aspects, it will have to sacrifice the other one. Here's what he meant..

Decentralisation and Security go hand in hand

The more decentralised a network is, the harder it is for one party to control the 51% of the nodes needed to hack the network. In the Bitcoin network for example, there are more than 10,000 nodes. Hacking the network to the point where one person controls 51% of the nodes would be a herculean task. On the other hand, when it came to the recent hack of the Ronin network, there were only 9 nodes in total. So the hacker only had to control 5 to have enough power to manipulate the network. 

So a lot of nodes means a higher degree of decentralisation and a more secure network. And these are both things we want. Great! The Problem? It can lead to the network becoming really, really slow. 

But then comes Scalability

As soon as a new node is added to a network, there is now more data and information moves around the network a little bit slower. As more and more users join this distributed network with lots of nodes, more information is moving around the network, more verification work needs to be done by the nodes to make sure the blocks being added to the chain have not been tampered with and as a result, transactions become very slow. The more people that join the network, the slower it gets. Bitcoin can only handle 7 transactions a second, and Ethereum can handle 15 per second. This is nowhere near good enough given the number of people using these networks. 

Solutions

Sharding

Sharding is not a new concept. In the non-blockchain world, it means splitting up one huge database into smaller manageable chunks which can be queried much faster. In the blockchain world, sharding is the process of breaking up transactions into smaller, easier to handle sets of data that can be processed by the network quicker. This allows more transactions to take place at the same time and eases congestion in the network. 

State Channels: The Lightning Network

State channels are an additional layer that sits over the main blockchain network, which is why it is described as a "layer 2 solution". State channels allow participants many times off-chain, while only submitting one transaction to the main chain. These off-chain transactions could each submitted to the blockchain, but instead they are held on to and packaged into one bigger change, that is submitted to the main blockchain. 

Bitcoin is the classic example of a safe, decentralised network where transactions are slow and costly. The Lightning network offers a way to transact with having to interact with Bitcoin's main chain. 

Relay Chains and Parachains

This is the idea of blockchains collaborating with other blockchains, and has been popularised by the Polkadot network. The "relay chain" serves as the backbone of the whole network. It takes care of things like security and transaction settlements. "Parachains" are independent blockchains that connect to the main relay chain. 

So is the Blockchain Trilemma still a big deal?

This is a hot topic right now because of the improvements currently being made to the Ethereum network. Vitalik did not just coin the term, he is thinking up ways to solve the Trilemma. Then improvements to Ethereum mean that the network will make use of sharding and side chains. So in theory, this should create a blockchain network that is secure, scalable and decentralised. However, it will still be a while before developers can actually add all of these features to the Ethereum network. 

There are alternative solutions that seek to solve this Trilemma before Ethereum does, but most seem to think that Ethereum has the best chance of success. There are other Proof of Stake blockchains that use sharding, but none of them are anything close to being as big as Ethereum. 

In order for Crypto to reach a level of adoption where millions across the world are using blockchain networks, the Trilemma must be solved. For now, we can only wait and see if Ethereum's grand vision is achieved.