Why the blockchain trilemma exists.
The most obvious and basic solution to the problem outlined above is to reduce the number of participants confirming and adding to the network data in exchange for greater scale and speed. But doing so would lead to a weakening of decentralization with control handed to a smaller number of participants. And it would also lead to a weakening of security as fewer players means a higher chance of attacks.
So here lies the trilemma: given the connection between the desired properties of decentralization and security, the fundamental design of how blockchain works makes it hard to scale. Increase one, and you weaken another. How do you push scalability without damaging decentralization, security, or both?
Solving the blockchain trilemma
There is no one golden solution to the trilemma. But given the importance of solving this problem, there have been a number of different approaches within the community with interesting results. Let’s run through an overview of some of the most popular developments to give you an understanding of what’s happening in the space:
1. Sharding
This is a method of splitting blockchains (or other types of databases) into smaller, partitioned blockchains that manage specific data segments. This setup takes the stress off a single chain dealing with all transactions and interactions on a network. Each partitioned blockchain is known as a shard and has its specific ledger. These shards can then process their own transactions, but a beacon blockchain or main chain manages interactions between shards. This makes sharding a Layer 1 network scalability upgrade, as it’s a change to the mainnet of a blockchain.
2. Different consensus mechanism
One of the reasons the trilemma exists in the Bitcoin network is because of the way PoW works to ensure security. The need for miners, crypto algorithms, and huge amounts of decentralized computing power leads to a secure system, but a slow one. Finding a different way to secure consensus is one approach to solving the trilemma. This was one of the reasons behind Ethereum's move from PoW to Proof of Stake (PoS).
In PoS blockchains, participants involved in validating transactions must stake (lock) their tokens. There’s no need for highly specialized mining machines. Adding more validators to the network is simpler and more accessible. PoS is just one of many different approaches to consensus mechanisms with scalability in mind.
3. Layer-2 solutions
Both sharding and different consensus mechanisms are what are known as Layer-1 solutions. They look to change the fundamental design of the underlying network. But other developers seeking to solve the trilemma have been working on solutions that build on top of an existing network structure. In other words, they think the answer lies in a second layer, or Layer 2. Examples of this include sidechains and state channels.
A sidechain is basically a separate blockchain connected to the main chain. It’s set up in a way that assets can flow freely between the two. Importantly, the sidechain can operate under different rules, allowing for greater speed and scale. Similarly, state channels are another way of taking transactions off the main chain and easing pressure on Layer 1. A state channel uses a smart contract, rather than a separate chain, to enable users to interact with each other without publishing their transactions to the blockchain. The blockchain only records the start and end of the channel.
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