Many people wish they had more time to do a lot of things in their day, but in reality, many of us don’t find that time and we often need to prioritize some things over the rest.
For example you may find that it is really hard to balance work, sleep and having a good social life. Most of the time you need to prioritize only two of these three things.
You may be wondering what does this has to do with crypto? The thing here is that blockchains are also faced with the same problem: decentralization, speed and security. These are three very good characteristics we would want in a blockchain right? But the problem here is that most of the time developers of any blockchain need to favor or prioritize only two out of these three characteristics. This is known as the blockchain trilemma.
What Is The Blockchain Trilemma?
The blockchain trilemma is a problem that developers encounter when working on any blockchain — they often need to favor only two out of three key characteristics.
For example you might have a highly secure and decentralized blockchain but it’s slow in processing transactions.
Another blockchain might be secure and fast at processing transactions but it’s controlled by a small group of computers giving them too much power and making it less decentralized.
Lastly there’s the possibility of a fast decentralized blockchain but it may not be very secure.
Ethereum co-founder Vitalik Buterin introduced the term “blockchain trilemma” which is also sometimes referred to as the “scalability trilemma.”
Read: Solving The Blockchain Trilemma
Decentralization
Decentralization simply means that no single individual or entity has control over an asset. This is the opposite of traditional fiat currencies where your bank can freeze your funds at any time.
For a blockchain to be considered decentralized there should be no central authority or a group controlling the network’s important decisions — there must be a significant number of computers verifying users’ transactions to prevent any single group from controlling the network.
Bitcoin is an example of a decentralized blockchain using the proof of work consensus mechanism with thousands of computers worldwide verifying transactions.
Read: Blockchain And Crypto: Are They Heading Towards Centralization Or Decentralization?
Scalability
Scalability is simply the ability of a blockchain to process a lot of transactions per second and also how fast a transaction can get confirmed on the network.
This is one of the things stopping cryptocurrencies from mass adoption as a payment method – no one wants to use crypto as a payment method if they would need to pay thirty dollars as a transaction fee on an everyday purchase. Also, no store will accept crypto if they would need to wait for 50 to 60 minutes to make sure that their transaction is confirmed, which is the case with Bitcoin.
Bitcoin uses proof of work and can process only from five to seven transactions per second which is very slow compared to centralized networks like Visa that currently processes around 24,000 transactions per second.
So why is Bitcoin that slow? It is mainly due to the block size which is currently limited to around 1 megabyte — this block size means that a block on Bitcoin can only store around 3,500 transactions; a new block is added to the Bitcoin blockchain once every 10 minutes so that gives us around 5 transactions per second.
Now you may be thinking, “why not just increase the block size?” The Bitcoin community actually discussed this for a long time and many people see that it will hurt the decentralization of the network — this is because the cost of running a node to store and verify the Bitcoin blockchain will be higher as it will mean more storage and bandwidth. So these rising costs will make many people stop running these nodes as they do it just to help secure the network and they don’t make any money from doing this.
The same also happens with proof of State blockchains — when a PoS blockchain has a very large block size, the hardware requirements for running a computer to verify transactions will be high and this will reduce the number of validators on the network which will also hurt decentralization.
One way to improve scalability in proof of work is to reduce the difficulty of mining a block — this will allow the network to produce a block in less than 10 minutes so more blocks will be produced and more transactions will be verified in the same period of time. But the problem here is that it will hurt the security of the network as it will be easier or cheaper to get the mining power required to attack the network.
Read: Bitcoin Taproot Upgrade Brings Privacy, Scalability And Smart Contracts
Security
When we say a blockchain is secure that means it’s very hard for an attacker to actually exploit the network and be able to approve fraudulent transactions or steal coins from other users.
In Bitcoin for example, the more decentralized the network is and the more people participating in verifying transactions, the more secure the network is and the harder it gets for an attacker to attack the network.
That is because for an attacker to be able to exploit the network, he/she needs to control the majority of the computing power on the network which means he/she would need to control more than 50% of all the computing power on the network. So the more people participating in verifying transactions, the higher the computing power on the network and the more expensive it is to try and attack the network.
So decentralization and security are connected most of the time and Bitcoin is very secure and almost impossible to attack, and also is decentralized; but it is not scalable and very slow so the trilemma still works here.
So what is the solution? When you try to research any crypto project these days you will probably hear that it is trying to solve the blockchain trilemma but then you will find that the solution many blockchains go for is reducing the number of computers verifying transactions — but this still gives a small group of individuals and companies control over the network.
Final Thoughts
By the time blockchain technology is fully developed we will have a workable blueprint of how blockchains can be secure, scalable and decentralized all at the same time. This can then be used by other blockchain projects as well to create more advanced technologies that will include all three benefits in their design, and could be the point when we start seeing massive global adoption.
Frequently Asked Questions (FAQs)
The blockchain trilemma is a long term problem by blockchain developers working on projects where they must prioritize only two out of three pillars of blockchain: scalability, decentralization and security.
Bitcoin has a limited block size of a megabyte that can only house 3,500 transactions per block housing only 5 to 7 transactions per second.
Reducing the mining difficulty will allow more blocks to be produced in a short span of time. But the network may be less secure because it becomes cheaper for attackers to orchestrate the mining power needed to attack the network.