Blockchain technology has induced a major revolution in the conventional approaches to financial transactions and data storage. On the other hand, it has also gained attention for a prominent challenge in the form of blockchain trilemma. The definition of blockchain trilemma explained by Ethereum co-founder Vitalik Buterin, reflects on the problems it causes.
Most importantly, it embodies the necessity of a trade-off between the three distinct aspects of blockchain technology: decentralization, security, and scalability. Security is the collection of robust safeguards for blockchain networks. Scalability emphasizes the power of blockchain networks to accommodate more users and transactions without increasing transaction time and fees. The final element, decentralization, is a basic trait of blockchain and ensures equal distribution of power among all participants in the network.
You might wonder about the importance of blockchain trilemma for developers and how the trade-offs can affect the future of blockchain technology. The interplay between the three elements plays out dangerously as enhancing one of them diminishes the effect of another aspect. Most developers believe that achieving the desired balance between the three elements simultaneously is extremely difficult. Let us learn more about blockchain trilemma and discover the potential solutions to resolve the setbacks due to blockchain trilemma.
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Definition of the Blockchain Trilemma
The blockchain trilemma serves as one of the major obstacles to adoption of blockchain and web3. The answers to “What is the blockchain trilemma?” reflect on the struggle to achieve optimal levels of scalability, security, and decentralization at the same time. Blockchain developers have to make compromises or trade-offs between the three elements to achieve desired results for their applications.
The general assumption in the blockchain landscape suggests that public blockchains could only achieve two of the three elements simultaneously. Blockchain developers have to choose the elements they want to prioritize to achieve the desired goals of their applications. Therefore, an in-depth understanding of the blockchain trilemma can help determine the unique value proposition for blockchain developers.
Security
The most important aspect of any blockchain network is the security it offers. Security is one of the cornerstones of blockchain trilemma and commands significant attention in the domain of blockchain. Any blockchain trilemma guide would emphasize the fact that a blockchain network must have the essential safeguards required for protection against malicious entities. It is a complex issue in blockchain networks, which are inherently decentralized and don’t have any central authority for supervising and protecting the system.
You can refer to the example of Bitcoin blockchain to understand how security works in a blockchain network. The Bitcoin blockchain utilizes a combination of Proof of Work consensus mechanism and cryptography to ensure security. The consensus mechanism ensures interconnection of data blocks in a completely tamper-proof manner. Any type of modification in the data would be detected immediately by the network.
On top of it, the system becomes more secure with the participation of more users or nodes in the network. With more participants in the network, it would become difficult for a single user or entity to gain control. Therefore, the blockchain network can ensure safeguards against potential threats such as 51% attacks.
You can unravel the significance of blockchain trilemma explained for beginners with the example of Bitcoin blockchain. It showed how a secure blockchain network ensures immutability and resists attacks from malicious entities. However, security can be one of the major deterrents to decentralization as you would have to increase hash power in mining under Proof of Work consensus.
For example, the Proof of Work consensus can increase the cost of mining alongside forcing the exit of smaller and less efficient mining setups. It can lead to centralization of miners, thereby leading to a trade-off with decentralization.
Scalability
The next element in the blockchain trilemma is scalability. It is one of the prominent highlights in responses to “What is blockchain trilemma?” as it has become a major requirement for emerging blockchain solutions. Scalability is a major element that you have to emphasize in the development of blockchain networks. Scalability points to the ability of blockchain networks to manage continuously increasing volumes of transactions and the number of users without compromising transaction fees or speed.
The web3 revolution has increased the demand for new blockchain projects. On top of it, every blockchain project wants to achieve global reach, thereby emphasizing the need to manage billions of users simultaneously. Scalability can be a major challenge for projects, especially when you want the other two elements of the trilemma in security and decentralization.
Developers come across troubles in the process of improving security and decentralization when they have to focus on scalability. For example, the Bitcoin blockchain can process only seven transactions per second. It is significantly inferior to the performance of centralized payment systems such as Visa, which has the capability to manage 24,000 transactions per second.
The stark contrast draws attention to the importance of blockchain trilemma and the inherent design of blockchain networks. For instance, the consensus mechanism in blockchain networks, such as Proof of Work or Proof of Stake, creates limitations. In the case of Proof of Work, you would have a secure but slow network. On the other hand, Proof of Stake requires processing of transactions by multiple participants, thereby slowing down the network.
Scalability is an important requirement for blockchain technology to complete its promises and serve as a viable alternative to centralized platforms. The existing throughput of blockchain networks is a major concern for achieving scalability. You can refer to a blockchain trilemma guide to understand how scalability can lead to significant trade-offs.
One of the proven methods to increase the processing speed and scalability of a network involves reducing the number of network validators responsible for verifying the transactions. However, such an approach stands against decentralization and reduces the trait of censorship resistance in blockchain.
Developers can also lower the block time, which requires a reduction of the difficulty of the consensus protocol. In the example of Bitcoin blockchain, you would have to reduce the mining difficulty. For Ethereum blockchain, you have to lower the requirements for two-thirds consensus on the network. However, these trade-offs can lead to security problems.
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Decentralization
Decentralization is the most prominent trait of any blockchain network and differentiates it from conventional centralized systems. Discussions around queries like “What is blockchain trilemma?” focus on decentralization as it represents one of the core themes of blockchain and web3.
Decentralized blockchain networks are known for even distribution of control among different participants, thereby removing the need for central authorities. The distribution of control plays a vital role in enhancing transparency and fairness in a blockchain network. On top of it, the distribution of control also ensures resistance of blockchain networks to external manipulation and censorship.
It is also important to note that you cannot achieve decentralization without formidable challenges. For example, increasing the number of participants in a blockchain network improves decentralization in the network. On the other hand, it can lead to time-consuming processes to reach a consensus that can influence the scalability of the network.
On top of it, highly decentralized networks could also have to compromise on security as malicious entities could join the network easily and launch attacks. Therefore, decentralization can turn into a major weakness of a blockchain network rather than serving as its strength.
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Impact of Blockchain Trilemma Trade-offs
You can understand the importance of blockchain trilemma with better clarity by reflecting on examples of the impact of trilemma. For example, Bitcoin is a popular blockchain network that utilizes the Proof of Work consensus. It can offer a significantly unparalleled level of security. However, the design of Bitcoin blockchain creates difficulties for scalability. With the creation of Bitcoin Cash in 2017 through forking, the Bitcoin community aimed to increase the block size and solve the scalability issues.
Bitcoin Cash turned out to be a successful initiative for increasing the transaction speed and lowering the transaction fees. On the contrary, Bitcoin Cash also led to another pitfall in the form of larger blocks, which require a complex mining process. Therefore, miners with advanced computing resources could only participate in Bitcoin mining, thereby sacrificing decentralization.
Another prominent example of a blockchain trilemma guide draws attention to Ripple blockchain. It is a useful platform to ensure efficient and faster cross-border payments. On the other hand, the Ripple blockchain network is more centralized than other blockchain networks.
Therefore, it is more vulnerable to censorship control. Ripple managed the scalability problem through adoption of a different consensus mechanism. As compared to Ethereum or Bitcoin, Ripple blockchain works with a limited number of validators for verifying and confirming transactions. Therefore, Ripple has to sacrifice decentralization to achieve security and scalability.
What are the Solutions for Blockchain Trilemma?
The most crucial aspect that you can find in an account of blockchain trilemma explained for beginners is the outline of solutions for the trilemma. General approaches to solving the blockchain trilemma involve implementation of changes at layer 1 or base layer or through tools on layer 2 or on top of the base layer. Here is an overview of the important solutions to blockchain trilemma in each category.
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Layer 1 Solutions
The two most prominent layer 1 solutions to the blockchain trilemma include consensus protocol enhancements and sharding. One of the proven techniques to solve the blockchain trilemma revolves around changing the consensus mechanism of the network. The answers to “What is blockchain trilemma?” must also draw your attention towards the impact of changes in consensus mechanisms. For example, changing from Proof of Work to Proof of Stake consensus can remove dependence on miner nodes. Ethereum is one of the biggest examples of such transition, as it announced ‘The Merge’ in 2022.
Sharding is also a viable layer 1 solution for addressing the blockchain trilemma problem. It is a type of horizontal partitioning or database management approach in which you can break data into shards or different pieces. You can store the shards in different locations, thereby freeing up more space for parallel transaction processing.
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Layer 2 Solutions
The insights into importance of blockchain trilemma also point to the possibilities for using layer 2 solutions to resolve the trilemma. Some of the proven layer 2 solutions include nested blockchains, sidechains, and state channels. Each approach provides a distinctive solution to improve scalability alongside safeguarding security and decentralization on the main network.
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Final Words
The definition of blockchain trilemma revolves around the three elements of security, decentralization, and scalability. It is important to use a blockchain trilemma guide before approaching any blockchain or web3 development project. The three elements in blockchain trilemma can have a significant influence on the functionality of your project.
For example, if you choose scalability for your app, then you might have to compromise the security of sensitive user information. On the other hand, democratization of control over the app can lead to scalability challenges. Explore the significance of blockchain trilemma with more practical examples and find the ideal solutions now.
*Disclaimer: The article should not be taken as, and is not intended to provide any investment advice. Claims made in this article do not constitute investment advice and should not be taken as such. 101 Blockchains shall not be responsible for any loss sustained by any person who relies on this article. Do your own research!
